*1332 Under the facts, the respondent acted within a reasonable time after the execution of a waiver, unlimited as to time, in mailing a notice of deficiency.
*601 This proceeding was brought to redetermine a deficiency in the income tax of the petitioner for the year 1920 in the sum of $363.21.
The following errors are alleged:
(1) The assessment of the proposed deficiency is barred by the statute of limitations in that the respondent did not propose the additional tax within a reasonable time after the execution of a waiver.
(2) The waiver dated September 25, 1925, executed by the petitioner was determined by the respondent to permit and authorize him to propose a deficiency and assess an additional tax attributable to causes other than the allowance of personal service classification to The American Lawyers Company, from which the petitioner received dividends and other income.
FINDINGS OF FACT.
The facts were stipulated, and are substantially as follows:
The petitioner filed his income tax return for the calendar year 1920 on or about*1333 the 15th day of March, 1921, reporting income upon which he paid, under date of March 15, 1921, an income tax in the amount of $828.40.
The petitioner's return included among other income certain income received by him from The American Lawyers Company, which company filed its return as a personal service corporation, the income reported by the taxpayer as having its source from The American Lawyers Company being as follows:
| Salary | $2,100 |
| Dividends | 2,990 |
| Other income | 2,100 |
In the preparation and filing of his return, and in the payment of the tax aforesaid, the petitioner assumed the said The American Lawyers Company to be a personal service corporation within the meaning of the revenue law then in force.
*602 On October 14, 1925, the respondent addressed and forwarded to the petitioner the following letter:
Reference is made to your income tax return filed for the year 1920 an audit of which indicates an overassessment of tax amounting to $271.35.
The records of this office show that as a result of the audit of the return filed by the American Lawyers Company of Cleveland, Ohio, classification as a personal service corporation has been denied; *1334 therefore the income received therefrom should be subject to surtax only in the hands of the individual.
The time provided in Section 281 of the Revenue Act of 1924 as amended by the Act of March 3, 1925 within which refund of an overassessment of income tax for the year in question may be made will expire at an early date. It is therefore suggested that you protect your rights by filing a claim for refund on Form 843 for such an amount which you consider legally refundable. Any such claim must be filed and acknowledged before an officer authorized to administer oaths and should be filed with the Collector of Internal Revenue for your district.
In order to perfect a claim based upon the denial of classification as of personal service corporation, it will be necessary to submit a certificate from the corporation that it has accepted the findings of the Bureau together with a certified copy of the receipt from the Collector of Internal Revenue in indication that the additional tax assessed against this corporation was paid. It is also necessary that you filed a waiver of the Statute of Limitations which will permit necessary that you file a waiver of the Statute of Limitations*1335 which will permit there is ever a reconsideration of the corporate tax status. Such waiver is enclosed.
You are requested to submit also a statement in affidavit form showing the amount of income which you actually received from the corporation during the year in question in the form of dividends or otherwise.
The return of income by The American Lawyers Company for the calendar year 1920, filed on the basis of classification as a personal service corporation, disclosed a net income distributable among its shareholders in the amount of $8,501.27. On October 5, 1925, the Commissioner sent a letter to The American Lawyers Company in which that company was granted 30 days within which to protest the deficiency in tax shown in said letter. The amount of income of The American Lawyers Company as shown in that letter was $9,160.40 and the deficiency in tax against The American Lawyers Company in the same letter was $1,381.37.
On December 4, 1925, The American Lawyers Company paid the deficiency. On September 18, 1931, however, this amount was refunded with interest to The American Lawyers Company, pursuant to a claim for refund which had been filed by the company on August 3, 1929. *1336 This refund to The American Lawyers Company was based upon the allowance of personal service classification.
Upon receipt of the respondent's letter dated October 14, 1925. the petitioner on or about October 23, 1925, filed a claim for refund of a portion of his income tax paid for the calendar year 1920, *603 which claim the respondent on or about January 23, 1926, rejected, stating as cause for the rejection the following:
The information necessary to perfect your claim as stated in office letter dated October 14, 1925, namely, a certificate from the above-named corporation stating that it has accepted the findings of the Bureau, together with a certified copy of the receipt from the Collector of Internal Revenue indicating that the additional tax assessed against the corporation was paid, has not been submitted.
Subsequently, on or about January 26, 1926, January 29, 1926, and February 19, 1926, the petitioner supplied the respondent with the documents requested by the respondent in his letter of January 25, 1926; and thereafter the Commissioner issued in favor of the petitioner a certificate of overassessment in the amount of $271.35, said certificate of overassessment*1337 being No. 906735, Schedule No. 19985; and subsequently, on or about the third day of July, 1926, the amount of the overassessment was refunded to the petitioner, the exact amount of said refund, including interest, being $353.60.
On or about November 11, 1925, the petitioner filed the following income and profits tax waiver:
INCOME AND PROFITS TAX WAIVER
For Stockholder of a Personal Service Corporation
September 25, 1925.
In pursuance of the provisions of existing Internal Revenue Laws Mr. Nathan Loeser, a taxpayer of 800 National Bank Building, Cleveland, Ohio, and the Commissioner of Internal Revenue hereby waive the time prescribed by law for making any assessment of the amount of income, excess-profits, or war-profits taxes due under any return made by or on behalf of said taxpayer for the year 1920 under existing revenue acts, or under prior revenue acts, provided that such assessments shall be attributable to the allowance of a personal service classification to any corporation from which the undersigned received dividends or other income.
(Signed) NATHAN LOESER
Taxpayer
Approved Mar 15, 1926
D. H. BLAIRCommissioner of Internal Revenue
The waiver*1338 bears date September 25, 1925, but was not actually filed by the petitioner with the respondent until November 11, 1925, and was approved by the respondent on March 15, 1926.
The waiver so filed by the petitioner was upon a form prepared and supplied by the respondent and enclosed in the respondent's letter of October 14, 1925, and was and is the waiver referred to in said letter.
*604 Subsequent to the filing of the refund claim and waiver by the petitioner, as well as the claim for refund filed by The American Lawyers Company, some time during the year 1931, but prior to July 17, 1931, the respondent determined that The American Lawyers Company was a personal service corporation within the meaning of the applicable revenue act. In a letter to The American Lawyers Company dated on or about May 19, 1931, the Commissioner advised the company that its claim for classification as a personal service corporation under section 218 of the Revenue Act of 1918 had been conceded for the year 1920 in accordance with the decision of the United States Board of Tax Appeals in its case for 1921 and referred to *1339 , promulgated November 18, 1930.
On July 17, 1931, the respondent issued and mailed by registered mail to the petitioner, a notice of deficiency of $363.21, based on his determination that the net income of The American Lawyers Company for the year 1920 was not $9,160.40 as theretofore determined by him, but was $16,851.17.
OPINION.
VAN FOSSAN: The petitioner contends (1) that the respondent delayed an unreasonable length of time before determining a deficiency after the filing of a waiver, and (2) that the waiver dated September 25, 1925, applied only to the allowance of a personal service classification to The American Lawyers Company and not to an increased amount of income of that corporation as determined by the respondent.
The waiver here involved was not limited as to time. We have frequently held that an unlimited waiver permits the Commissioner a reasonable time in which to act. ; ; affd., *1340 , certiorari denied, ; ; .
What is a reasonable time is not to be determined abstractly or solely by reference to the calendar. It depends on all the circumambient facts of the situation. The first question is, therefore, whether, under all the circumstances, the respondent acted within a reasonable time. In the instant case, judged solely by the calendar, a very considerable time elapsed between the signing of the waiver and the issuance of the notice of deficiency. But, viewed in the light of all the facts, each being related directly or indirectly to the other, we do not believe it can properly be said that respondent failed to act within a reasonable time.
*605 In the case at bar the question which the respondent had under consideration during the entire period was the right of The American Lawyers Company to personal service classification. If the corporation were so entitled the tax was to be paid by the stockholders; if not, the corporation itself was liable therefor. By reference to the case of such company, referred*1341 to in the stipulation, it is to be noted that petitioner was one of four stockholders and secretary of The American Lawyers Company. The petitioner filed his return and paid his tax on the theory that the corporation had a right to personal service classification. The respondent determined otherwise and refunded the petitioner's tax. The corporation, however, challenged the correctness of the respondent's action and appealed to the Board as to its 1921 tax. Obviously, the facts in that case must have been substantially the same as those in the 1920 case, since the respondent conceded personal service classification in the latter case on the basis of the Board's decision in the former. It is apparent that the 1920 case was being held in abeyance until the decision in the 1921 case was handed down by the Board.
The waiver in question was requested, executed and received only because of the controversy relating to the taxable status of the corporation. It specifically refers to the matter as did the forwarding letter. The action of both the petitioner and the corporation in filing claims for refund shows that they were continuously aware of the uncertainty of the outcome and*1342 sought to protect themselves by filing such claims. In order to avoid a multiplicity of proceedings the respondent refrained from taking action as to the 1920 tax until the identical issue should be decided by the Board. Under such circumstances we are of the opinion that the respondent acted within a reasonable time. The decision on this point would be the same were we to apply the rule laid down by the Circuit Court of Appeals for the Second Circuit in , that an unlimited waiver is effective for action until notice of impending termination. We have no evidence that petitioner gave such a notice.
The second contention of the petitioner is that the waiver signed by him contemplated only the taxability of The American Lawyers Company as a personal service corporation and did not apply to the additional tax resulting from increasing distributable income of that company, as proposed by the respondent in his deficiency letter. The respondent asserts that by the terms of the waiver itself only the personal service status of the corporation was involved and that the sole purpose of executing the waiver was to enable*1343 him to secure from the petitioner stockholder the tax due from him in case the *606 respondent's determination that the corporation was not entitled to personal service classification should be found to be erroneous.
The waiver which is presumed to embody the agreement between the petitioner and the respondent contained only one qualification:
* * * provided that such assessment shall be attributable to the allowance of a personal service classification to any corporation from which the undersigned received dividends or other income.
There can be no question that the only assessment which the respondent could make pursuant to that restriction was that of a tax upon such of the petitioner's income as might emanate from a corporation which received personal service classification. The waiver contains no reference or limitation, however, as to the amount of such income or the tax therefrom arising. If it had been the intent of the parties to limit it to the then found amount of income or tax, such a provision could readily have been incorporated in the waiver. We are unimpressed by the argument that the respondent was limited to the amount of the tax in issue at the*1344 time the waiver was given. The waiver clearly contemplated the assessment of all tax that might be found to be due from the granting of personal service classification to the company. The stipulated facts do not suggest that any part of the deficiency is due to causes other than the granting of such classification. The respondent was within the terms of the waiver and justified in his action. See .
In , we had before us a somewhat similar situation. In that case we held that the assessment and collection of increased income and excess-profits taxes were not barred by reason of the execution of a waiver which specified no definite amount to be assessed, although at the time of its execution representatives of the taxpayer and the Commissioner had understood and agreed upon a stated additional tax, much less than that named in the deficiency notice. See also .
Decision will be entered for the respondent.