*2090 1. The respondent mailed to the petitioner a notice of deficiency for the years 1922 and 1923. Before the expiration of the 60-day period within which a petition could have been filed with the United States Board of Tax Appeals, the petitioner waived the right to file such petition and none was filed. The additional tax asserted in said deficiency notice was assessed. Subsequently the respondent mailed to the petitioner a second deficiency notice for the year 1922 and a second deficiency notice for the year 1923, asserting further deficiencies. Held, that the second deficiency notices are valid.
2. The petitioner, as the beneficiary of the trust involved herein, is not entitled to any deduction from gross income for depletion of the trust property.
*283 This proceeding is for the redetermination of deficiencies in income tax asserted by the respondent in the amounts of $2,493.07 for the year 1922, $5,516.78 for the year 1923, and $4,618.02 for the year 1924. The facts have been stipulated by*2091 the parties and we find them to be as follows:
FINDINGS OF FACT.
The petitioner is an individual residing at Saginaw, Mich.
The petitioner is, and was during the years 1922, 1923, and 1924, a beneficiary under a certain declaration of trust made by his father, Gilbert B. Goff, Sr., on March 9, 1911. Said declaration of trust is in part in the words and figures following, to wit:
THIS INDENTURE, Made this 9th day of March, in the year of our Lord one thousand nine hundred and eleven, BETWEEN GILBERT B. GOFF, a widower of *284 the City and County of Saginaw, State of Michigan, of the first part, and Ernest A. Goff of the same place of the second part,
WITNESSETH, that the said party of the first part, for and in consideration of the sum of One Dollar and other good and valuable consideration to him in hand paid by the party of the second part, the receipt whereof is hereby acknowledged, does by these presents grant, bargain, sell, remise, release, alien and confirm unto the said party of the second part, in trust, however, and to his successors in trust for the uses and purposes and with the powers hereinafter set forth, an undivided one-ninth interest in and to all*2092 mineral deposits of whatever kind or nature, now known or hereafter discovered contained within the limits of the following described land, situated in the County of St. Louis and State of Minnesota, viz:
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Excepting and reserving, however, unto the said party of the first part the right to the use and occupation of said premises and estate, together with the right to all of the rents, issues, profits, income and royalties of said property accruing and arising for and during the natural life of the said party of the first part, together with the right and power to collect, have receive and use all such rents, issues, profits, income and royalties as his own during his natural life. The said party of the first part intending by said exception and reservation to retain in himself for and during his natural life the right to the use and occupation of said premises and the right to collect, have and receive as his own all of the rents, issues, profits, income and royalties of every kind arising or accruing from said property.
Subject to the foregoing exceptions and reservations and said life estate this conveyance is made by first party to second party, and his successors in*2093 trust together with all and singular the hereditaments and appurtenances thereunto belonging or in anywise appertaining: TO HAVE AND TO HOLD the said premises as herein described with the appurtenances, unto the said party of the second part, and his successors in trust, but in trust, however, for the following uses and purposes, and with the following powers, viz: -
(a) From and after the termination of said life estate second party and his successors in trust shall have the right to use and occupation of said premises together with the right and power to collect, receipt for, have and receive all of the rents, issues, profits, income and royalties accruing or arising out of or from the premises hereby conveyed during the existence of the trust estate and trust hereby created.
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(c) After the deduction of the items provided for in the preceding paragraph (b) party of the second part and his successors in trust shall pay and turn over to Gilbert B. Goff, Jr., of Hope, Midland County, Michigan, son of first party, one-half of the residue of all rents, issues, profits, income and royalties collected, had or received from the premises hereby conveyed as soon as the same is*2094 so collected, had or received by such trustee. Such payments to the said Gilbert B. Goff, Jr., shall continue during the continuance of the trust hereby created or during his life if he died before the termination of said trust.
(d) One-quarter of the residue of all rents, issues, profits, income and royalties so collected, had and received by second party and his successors in trust (the said residue being what is left after the payment of the items provided for in preceding paragraph (b)) such trustee shall pay and turn over to Amelia A. Goff, wife of said Gilbert B. Goff, Jr., as soon as the same is collected, had or received by such trustee. Such payments to Amelia A. Goff shall continue during the continuance of the trust hereby created or during her life, if she die before the termination of said trust: Provided that if said Amelia A. Goff *285 shall become the lawful wife of some other man than the said Gilbert B. Goff, Jr., before the termination of the trust hereby created then and in that event the payments provided to be made to her under this paragraph shall thereupon cease.
(e) The other one-quarter of the residue of all rents, issues, profits, income and*2095 royalties so collected, had and received by second party and his successors in trust (the said residue being what is left after the payment of the items provided for in preceding paragraph (b) such trustee shall invest and re-invest and keep invested together with the profits, income and increase thereof in good safe investments of such character as the law sanctions and authorizes trust funds to be invested in for the use and benefit of the children of the said Gilbert G. Goff, Jr., and the said Amelia A. Goff now in being or that may hereafter born to them as husband and wife, in equal shares and portions as hereinafter provided: Provided that the living issue of any deceased child shall be entitled to the same share or portion that the parent would have been entitled to under this instrument if living.
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(f) When the youngest surviving child now in being or hereafter born to the said Gilbert B. Goff, Jr., and Amelia A. Goff as husband and wife, shall have attained age of twenty-one years, but in no event at a date later than twenty years after the death of the survivor of such children now in being, the said trustee and his successors in trust shall pay and turn over to*2096 the children born to the said Gilbert B. Goff, Jr., and Amelia A. Goff, as husband and wife, then living and to the then living issue of any such deceased child the rest and residue of all the rents, issues, profits, income and royalties collected, had and received by such trustee together with the income, increase and profits thereof, and all property acquired therewith, then in his hands, possession, custody and control in such portions and amounts so that the aggregate amount received by each such child and the living issue of any deceased child hereunder, including all prior payments and advances made shall be equal as near as may be; and in figuring and ascertaining the amount that shall be so paid and turned over to each such child, and the living issue of any such deceased child, interest shall be charged at the rate of 3% per annum on all payments and advances theretofore made to them or on their account respectively. The living issue of any deceased child under this paragrph shall take the same share or portion that the parent would have taken if living; and such trustee shall at the same time deed and convey to said Gilbert B. Goff, Jr., if then living an undivided one-half*2097 of the property, real estate and interest in real estate and minerals hereby conveyed to party of the second part, and an undivided one-quarter thereof he shall at the same time deed and convey to the said Amelia A. Goff if living, provided she is not at that time the lawful wife of some other person than the said Gilbert B. Goff, Jr., and the other undivided one-fourth thereof he shall at the same time deed and convey to the then living children now or hereafter born to the said Gilbert B. Goff, Jr., and Amelia A. Goff, as husband and wife, and to the then living issue of any such deceased child in equal shares and portions; Provided that the then living issue of any such deceased child shall take the share or portion that the parent would have taken if living; but if the said Gilbert B. Goff, Jr., is not then living, then his undivided one-half thereof as above provided shall be so deeded and conveyed to the then living children born to him and the said Amelia A. Goff, as husband and wife, and the then living issue of any such deceased child in the shares and portions above provided: Provided further that if the said Amelia A. Goff is not then living or shall at the time be the lawful*2098 wife of some other man than the said Gilbert B. Goff, Jr., then and in that event her undivided one-quarter *286 thereof shall be deeded and conveyed by such trustee to the then living children and the then living issue of any deceased child born to the said Gilbert B. Goff, Jr., and Amelia A. Goff, as husband and wife, in the shares and portions above provided, but if no such children or issue are then living, then to the said Gilbert B. Goff, Jr., if living; Provided further that if all of the children born to the said Gilbert B. Goff, Jr., and Amelia A. Goff, as husband and wife, shall die without leaving issue living and the said Gilbert B. Goff, Jr., shall then be living, before the termination of the trust hereby created, then and in that event, the said trustee and his successors in trust shall also deed and convey, pay, turn over and assign to the said Gilbert B. Goff, Jr., the shares and portions of the trust estate hereby created then on hand and in his possession, custody and control that would have gone to such child or children, and the issue of any such deceased child had they been living at that time: Provided further that if it so happens that there shall be*2099 an entire failure by reason of death of all beneficiaries under this paragraph as hereinbefore provided before the trust estate has been divided and wound up under this paragraph, then and in that event the said trustee and his successors in trust shall deed and convey, pay and turn over all the rest, residue and remainder of the trust estate hereby created then in the hands, possession, custody and control of such trustee to the legal heirs of the said Gilbert B. Goff, said party of the first part, in the shares and portions as fixed by the laws of inheritance of the State of Michigan then in force.
* * *
Ernest A. Goff, the trustee named in said declaration of trust, died prior to the year 1922 and was succeeded as trustee by the Detroit Trust Co., a corporation organized and existing under the laws of Michigan with authority to act as trustee, which it did during the years 1922, 1923, and 1924, and still does act as such trustee in the place and stead of the said Ernest A. Goff.
During each of the years 1922, 1923, and 1924, the said trustee received income in the form of royalties and made distributions to the petitioner on the basis of his interest under the declaration*2100 of trust. During the year 1922 there was distributed to the petitioner the amount of $26,047.55, during the year 1923 the amount of $50,373.08, and during the year 1924 the amount of $44,650.07, which amounts were included in the petitioner's income for said years. The petitioner's returns of income were made on the basis of cash receipts and disbursements.
In his income-tax returns for the years 1922, 1923, and 1924, the petitioner claimed deductions for depletion of ore lands held under said declaration of trust and from which royalties were received. The respondent disallowed the deductions.
On June 15, 1926, the respondent mailed a letter to the petitioner asserting deficiencies in tax in the amounts of $1,235.58 for the year 1922, and $1,777.14 for the year 1923. Before the expiration of the 60-day period indicated in said deficiency letter a conference was held by the petitioner's attorney with a proper official of the Bureau of Internal Revenue, and as a result thereof the petitioner waived *287 the right to file a petition with the United States Board of Tax Appeals and no petition was filed during said 60-day period. The said deficiency asserted for 1922*2101 was reduced to the amount of $926.24, which was assessed on September 25, 1926. Said additional tax for 1923 was assessed prior to September 1, 1927.
On February 23, 1927, the respondent determined that there is a further deficiency in the petitioner's tax liability for the year 1922 in the amount of $2,493.07, and on that date he mailed to the petitioner a notice thereof. On September 1, 1927, the respondent determined that there is a further deficiency in the petitioner's tax liability for the year 1923 in the amount of $5,516.78 and on that date he mailed to the petitioner a notice thereof. Said letter of September 1, 1927, also asserted a deficiency in tax against the petitioner in the amount of $4,618.02 for the year 1924.
OPINION.
MARQUETTE: Two issues are raised herein - (1) whether the respondent had the right to send a second deficiency notice for the years 1922 and 1923, the petitioner not having filed a petition with this Board from the first notice for those years, and (2) whether the petitioner is entitled, in computing his net income for the years 1922, 1923, and 1924, to deduct any amount for depletion of the property held under a trust created by his father, *2102 Gilbert B. Goff, Sr. The issues will be discussed in the order named.
Under the Revenue Act of 1924 the Commissioner had the right, unless precluded by a written agreement of final determination or by the statute of limitation on assessment and collection, repeatedly to redetermine and reassess a tax and to issue notices thereof. . But the notices herein were issued subsequent to the effective date of the Revenue Act of 1926, which provides:
SEC. 274. (a) If in the case of any taxpayer, the Commissioner determines that there is a deficiency in respect of the tax imposed by this title, the Commissioner is authorized to send notice of such deficiency to the taxpayer by registered mail. Within 60 days after such notice is mailed (not counting Sunday as the sixtieth day), the taxpayer may file a petition with the Board of Tax Appeals for a redetermination of the deficiency. Except as otherwise provided in subdivision (d) or (f) of this section or in section 279, 282, or 1001, no assessment of a deficiency in respect of the tax imposed by this title and no distraint or proceeding in court for its collection shall be made, begun, or prosecuted*2103 until such notice has been mailed to the taxpayer, nor until the expiration of such 60-day period, nor, if a petition has been filed with the Board, until the decision of the Board has become final. Notwithstanding the provisions of section 3224 of the Revised Statutes the making of such assessment or the beginning of such proceeding or distraint during the time such prohibition is in force may be enjoined by a proceeding in the proper court.
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(e) *288 The Board shall have jurisdiction to redetermine the correct amount of the deficiency even if the amount so redetermined is greater than the amount of the deficiency, notice of which has been mailed to the taxpayer, and to determine whether any penalty, additional amount or addition to the tax should be assessed, if claim therefor is asserted by the Commissioner at or before the hearing or a rehearing.
(f) If after the enactment of this Act the Commissioner has mailed to the taxpayer notice of a deficiency as provided in subdivision (a), and the taxpayer files a petition with the Bard within the time prescribed in such subdivision, the Commissioner shall have no right to determine any additional deficiency in respect*2104 of the same taxable year, except in the case of fraud, and except as provided in subdivision (e) of this section or in subdivision (c) of section 279. If the taxpayer is notified that, on account of a mathematical error appearing upon the face of the return, an amount of tax in excess of that shown upon the return is due, and that an assesment of the tax has been or will be made on the basis of what would have been the correct amount of tax but for the mathematical error, such notice shall not be considered, for the purposes of this subdivision or of subdivision (a) of this section, or of subdivision (d) of section 284, as a notice of a deficiency, and the taxpayer shall have no right to file a petition with the Board based on such notice, nor shall such assessment or collection be prohibited by the provisions of subdivision (a) of this section.
* * *
SEC. 279. (c) The jeopardy assessment may be made in respect of a deficiency greater or less than that notice of which has been mailed to the taxpayer, despite the provisions of subdivision (f) of section 274 and whether or not the taxpayer has theretofore filed a petition with the Board of Tax Appeals. The Commissioner shall notify*2105 the Board of the amount of such assessment, if the petition is filed with the Board before the making of the assessment or is subsequently filed, and the Board shall have jurisdiction to redetermine the entire amount of the deficiency and of all amounts assessed at the time in connection therewith.
It is clear from the sections of law just quoted that the Congress intended thereby to require the Commissioner, where he had issued a notice of deficiency and the taxpayer had filed a petition with this Board, to assert any additional taxes that he might determine to be due from the taxpayer by a claim or answer in the nature of a cross petition and not by a separate proceeding. This intent is also evidenced by the Report of the Ways and Means Committee of the House of Representatives. It may safely be assumed that the object of Congress was to avoid a multiplicity of proceedings for the same taxable year. But we find no reason for holding that the Commissioner may not issue a second deficiency notice for the same taxable year where the taxpayer has failed or declined to appeal from the first notice. The Commissioner can not institute a proceeding before this Board if the taxpayer*2106 fails or declines to institute such proceeding from the first deficiency notice and in such a case obviously he can not assert his claim for additional taxes "at or before the hearing or rehearing." Under these circumstances the only *289 way he can assert any additional tax that he may find to be due, in excess of the tax covered by the first deficiency notice, is to send a second deficiency notice, and in so doing he not only does not deprive the taxpayer of any right, but preserves and protects the rights of the Government. We are of opinion that the respondent was not precluded by law from issuing the deficiency notices herein; that they are valid and that appeals therefrom lie to this Board.
The petitioner contends that as a beneficiary of the trust created by his father, Gilbert B. Goff, Sr., by the trust instrument set forth in the findings of fact, he is not only entitled to the income therefrom for a certain period but to an interest in the corpus, and is therefore entitled to deductions for depletion of the trust property. The question of the right of a beneficiary of a trust to deductions for depletion of the trust property has been repeatedly before this Board*2107 and in each instance we have held that the beneficiary is not entitled to such deduction. ; ; ; ; and , and we have reached the same conclusion where the beneficiary under the trust was also a remainder man. .
Reviewed by the Board.
Judgment will be entered for the respondent.