Atlas Securities Co. v. Commissioner of Internal Revenue, 8839.

• Decision Date: 13 April 1932
• Docket Number: No. 8839.,8839.
• Citation: 58 F.2d 214
• Parties: ATLAS SECURITIES CO. v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Eighth Circuit

58 F.2d 214 (1932)

ATLAS SECURITIES CO. v. COMMISSIONER OF INTERNAL REVENUE.

No. 8839.

Circuit Court of Appeals, Eighth Circuit.

April 13, 1932.

Alton Gumbiner, of Kansas City, Mo. (Joseph T. Owens and Winger, Reeder, Barker, Gumbiner & Hazard, all of Kansas City, Mo., on the brief), for appellant.

Norman D. Keller, Sp. Asst. to Atty. Gen. (G. A. Youngquist, Asst. Atty. Gen., Sewall Key, Sp. Asst. to Atty. Gen., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and May Eastman, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., on the brief), for appellee.

Before STONE and KENYON, Circuit Judges, and CANT, District Judge.

STONE, Circuit Judge.

This is a petition to review an order of the Board of Tax Appeals redetermining a deficiency in the income and excess profits taxes of petitioner for the year 1918.

The tax return was filed June 9, 1919, and the tax as returned was then paid. On October 15, 1925, and more than a year after the applicable statute of limitations as to assessment, the petitioner and the Commissioner executed a waiver as follows:

"Income and Profits Tax Waiver October 15, 1925 (For taxable years ended prior to March 1, 1921.)

"In pursuance of the provisions of existing Internal Revenue Laws Atlas Securities Company, a taxpayer of Kansas City, Missouri, 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 years 1917 and 1918, 1919 and 1920, under existing revenue acts, or under prior revenue acts. This waiver of the time for making any assessment as aforesaid shall remain in effect until December 31, 1925, and shall then expire except that if a notice of a deficiency in tax is sent to said taxpayer by registered mail before said date and (1) no appeal is filed therefrom with the United States Board of Tax Appeals then said date shall be extended sixty days, or (2) if an appeal is filed with said Board then said date shall be extended by the number of days between the date of mailing of said notice of deficiency and the date of final decision by said Board."

May 14, 1926, the Commissioner issued his letter stating a deficiency of $6,942.59. The petitioner promptly appealed to the Board of Tax Appeals. On December 8, 1928, a written stipulation was filed with the Board which stipulated "* * * that there is a deficiency for the year 1918 in the amount of $3,851.80 * * *. The Board may enter its order accordingly * * * the Commissioner may assess and collect the said deficiency immediately upon the issuance by the Board of its order of redetermination * * *." The Board entered the order on the stipulation. Thereafter, petitioner filed its motion to set aside this order. This motion was denied.

There is no dispute as to facts nor as to the amount found in the redetermination order. The question here is one of law and is whether section 1106 (a) of the Revenue Act of 1926 (44 Stat. 9, 113 26 USCA § 1249 note) has operated to extinguish this liability. That section is as follows: "The bar of the statute of limitations against the United States in respect of any internal-revenue tax shall not only operate to bar the remedy but shall extinguish the liability; but no credit or refund in respect of such tax shall be allowed unless the taxpayer has overpaid the tax. The bar of the statute of limitations against the taxpayer in respect of any internal-revenue tax shall not only operate to bar the remedy but shall extinguish the liability; but no collection in respect of such tax shall be made unless the taxpayer has underpaid the tax."

Petitioner argues ten points which, in our view of the case, may be disposed of under two propositions.

I. Meaning of the Waiver. Petitioner argues that the waiver includes, by its terms, only "assessment" and entirely omits "collection" of the tax and that, since the language of the waiver was selected by the Commissioner, it must be confined to "assessment" and should not be construed to be, also, a waiver of "collection." This position is unsound. The obvious and only purpose which the waiver could have or was intended by both parties thereto to have was to extend the time within which the Commissioner might legally determine and, thereafter, realize any deficiency. The utter futility of an assessment which could not possibly ripen into a collection is obvious. There could be no purpose in extending time for ascertaining a tax which was uncollectable. Such would be the reasonable construction of the waiver if there were no governing statutory provisions (compare Stange v. U. S., 282 U. S. 270, 277, 51 S. Ct. 145, 75 L. Ed. 335). However, this is a waiver made in pursuance and accordance with statutory authority and, therefore, is to be construed in accordance with such statute. This statute provides for a waiver of the "assessment of the tax" and defines the effect of that waiver both upon assessment and upon collection. The effect as to collection is that "such tax may be collected by distraint or by a proceeding in court, begun within six years after the assessment of the tax." 43 Stat. 253, 300, § 278 (d), 26 USCA 1061 note. The collection so provided is thus made as much a consequence of the waiver as is the "assessment" provided for in the waiver itself. In this connection, see Stange v. U. S., 282 U. S. 270, 275, 51 S. Ct. 145, 75 L. Ed. 335, and Aiken v. Burnet, 282 U. S. 277, 282, 51 S. Ct. 148, 75 L. Ed. 339; Brown and Sons Co. v. Burnet, 282 U. S. 283, 287, 51 S. Ct. 140, 75 L. Ed. 343.

II. Effect of Section 1106 (a). Petitioner contends that it cannot be held to have waived the protection of section 1106 (a) because it did not know of the existence of that right when the waiver was made and, at any rate, the section extinguished the liability in...