Ardbern Co. v. Commissioner of Internal Revenue, 4751.

• Citation: 120 F.2d 424
• Decision Date: 10 June 1941
• Docket Number: No. 4751.,4751.
• Parties: ARDBERN CO., Limited, v. COMMISSIONER OF INTERNAL REVENUE.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

120 F.2d 424 (1941)

ARDBERN CO., Limited, v. COMMISSIONER OF INTERNAL REVENUE.

No. 4751.

Circuit Court of Appeals, Fourth Circuit.

June 10, 1941.

J. Sterling Halstead, of New York City (Ludlow S. Fowler, of New York City, on the brief), for petitioner.

Samuel H. Levy, Sp. Asst. to the Atty. Gen. (Samuel O. Clark, Jr., Asst. Atty. Gen., and Sewall Key, Sp. Asst. to the Atty. Gen., on the brief), for respondent.

Before PARKER and NORTHCOTT, Circuit Judges, and MOORE, District Judge.

NORTHCOTT, Circuit Judge.

This is a petition for review of a decision of the United States Board of Tax Appeals determining deficiencies in petitioner's income tax liability, and penalties, for the years 1929, 1930, 1931, and 1932, in the total sum of $24,727.34. The decision of the Board is reported in 41 B.T.A. 910.

The petitioner, The Ardbern Company, Limited, was, during the years in question, a corporation organized under the laws of the Colony of Newfoundland. It was formed in the year 1929 as a personal holding company by one B. T. Feustman. Upon its organization Feustman transferred to it certain shares of stock and some money and in return he received all of the petitioner's capital stock, except two qualifying shares issued to his nominees. Petitioner had an office in St. John's Newfoundland, but such limited business transactions as it had were conducted by Feustman, its sole stockholder and president, from his office in New York.

There were a number of complicated transactions in which the petitioner and Feustman were involved, which are set out in detail in the findings of fact and the opinion of the Board. It is not necessary to repeat them here.

In the year 1929, Feustman agreed to sell 586 shares of stock of the Bank of America, held by petitioner, at a certain price. The agreement for the sale and purchase of the stock was entered into and fully agreed upon in the City of New York but an agent was sent from New York to Montreal, with the stock certificates, and the money to pay for the stock was also sent from New York to Montreal. The stock and the money to pay for it were both in New York and both the stock and money, for some reason as to which there is no satisfactory explanation given in the record, were sent to Montreal for the purpose of a perfunctory transfer.

Whatever was done in Canada was not a part of the sale itself, but merely a detail of a transaction already completed. Commissioner v. East Coast Oil Co., 5 Cir., 85 F.2d 322, certiorari denied, 299 U. S. 608, 57 S.Ct. 234, 81 L.Ed. 449.

The Board's conclusion that the sale of this bank stock took place in New York and that the petitioner was properly charged with the profits from such sale, in its income tax for the year 1929, is correct.

The petitioner made no return as to its income during the years in question and it was not until a Revenue Agent called on Feustman and informed him that he thought some tax was due that he (Feustman) consulted a lawyer as to the matter. Feustman's explanation for not filing any income tax returns was that he thought no tax was due and that therefore it was not necessary to file any returns.

Upon being advised that it was necessary to file returns they were prepared and petitioner's lawyer attempted to file them with a representative of the Internal Revenue Bureau, named Muller, early in June, 1937. Muller refused to accept the returns on the ground that they had not been properly executed but did not advise petitioner's lawyer that the returns should be filed with the Collector of Internal Revenue at Baltimore, Maryland, as was provided by Sec. 233 of the Revenue Act of 1928, 45 Stat. 791, 26 U.S.C.A. Int.Rev. Code, § 233.

On July 3, 1937, the Commissioner mailed a deficiency notice to the taxpayer, and on July 9, 1937, corporation income tax returns for the taxable years involved were prepared pursuant to Section 3176 of the Revised Statutes, as amended, 26 U.S.C.A. Int.Rev.Code, § 3612, and thereafter, were signed by the Commissioner of Internal Revenue. The taxpayer received no notice that this return had been prepared.

The original petition for review by the Board of Tax Appeals was filed September 29, 1937, and the Commissioner's original answer was filed December 7, 1937. On November 12, 1937, Fowler, representing the taxpayer at a conference with one Marsh, of the Bureau of Internal Revenue in Washington, again tendered the returns verified by Feustman on June 7, 1937, and Marsh received them subject to a settlement being made of the case. The documents were not returned to the taxpayer prior to the Board's hearing in January, 1939.

On October 28, 1938, the taxpayer filed with the Collector of Internal Revenue at Baltimore, Maryland, United States income tax returns for the years 1929, to 1932, inclusive. These returns showed no tax due for any of these years, and were filed after the taxpayer learned that the Commissioner took the position that the prior returns received by Marsh had not been properly filed.

In taxing the income of foreign corporations derived from sources from within this country, Congress has permitted these companies deductions and credits corresponding to those allowed domestic corporations. One additional condition has been imposed. The foreign corporation may receive the benefit of the deductions and credits "only by filing or...