Burwell Motor Co. v. Comm'r of Internal Revenue, Docket No. 30459.

• Decision Date: 14 November 1957
• Docket Number: Docket No. 30459.
• Citation: 29 T.C. 224
• Parties: BURWELL MOTOR COMPANY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Tax Court

29 T.C. 224

BURWELL MOTOR COMPANY, PETITIONER,
v.
COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 30459.

Tax Court of the United States.

Filed November 14, 1957.

[29 T.C. 225]

Frederic D. Dassori, Esq., for the petitioner.

Arnold I. Weber, Esq., for the respondent.

Petitioner claimed relief under section 722(b)(1), (2), (3), (4), and (5). It asserted in its applications as a ground for relief under subsection (b)(4) that in the model year of 1934 or 1935 it had changed its product, from Ford to Chevrolet, ‘and various other factors.’ After the statute of limitations barred new claims, petitioner asserted for the first time that in 1939 it became the exclusive Chevrolet dealer in its area, changed from a conservative to a volume operation, and expanded its facilities. Held:

1. Since the original applications asserted a specific ground for relief, change of product, the new ground subsequently raised by petitioner is barred by the statute of limitations.

2. The new matters raised after the statutory period constituted new and barred grounds for relief under subsection (b)(4), and not merely new evidence.

3. The inclusion of a general phrase, ‘and various other factors,‘ does not make the claim any less specific.

OPINION. FORRESTER, Judge:

Respondent has disallowed claims by petitioner for relief under section 722(b) (4)¹ of the Internal Revenue Code of 1939 in respect of excess profits taxes for the taxable years 1941, 1943, 1944, and 1945. Petitioner requested and there was granted a severance of the statutory limitations question; consequently, the sole issue before us is whether respondent erred in determining that the relief sought, with a minor exception, is ,barred by the period of limitation set forth in section 322(b)(1)² of the Internal Revenue Code of 1939.

[29 T.C. 226]

All of the facts have been stipulated and are found accordingly.

Petitioner is a corporation organized under the laws of the State of Florida, with its principal place of business in Jacksonville, Florida. Its corporation income and declared value excess-profits tax return and corporation excess profits tax return for each of the calendar years 1941, 1943, 1944, and 1945 were filed on an accrual basis with the then collector of internal revenue for the district of Florida at Jacksonville. Its actual average base period net income for 1941 was in the amount of $13,914.65, and for each of the other foregoing taxable years in the amount of $15,834.92.

The amount of excess profits tax shown as due upon each of the foregoing excess profits tax returns and the date of final payment thereof are as follows:

+--------------------------------+
                ¦Year¦Amount ¦Date ¦
                +----+---------+-----------------¦
                ¦1941¦$3,936.40¦May 17, 1943 ¦
                +----+---------+-----------------¦
                ¦1943¦3,662.39 ¦June 14, 1945 ¦
                +----+---------+-----------------¦
                ¦1944¦14,615.50¦Dec. 19, 1945 ¦
                +----+---------+-----------------¦
                ¦1945¦21,514.04¦1 Dec. 20, 1946¦
                +--------------------------------+
                

On December 5, 1944, a consent was filed extending on June 30, 1946, the period within which assessments might be made in respect of income and excess profits taxes for the taxable year 1941. Subsequently, petitioner filed Form 991 applications for relief under section 722 as follows:

+-----------------------------+
                ¦Year¦Date filed ¦Refund ¦
                +----+--------------+---------¦
                ¦ ¦ ¦claimed ¦
                +----+--------------+---------¦
                ¦1941¦Mar. 14, 1945 ¦$3,936.40¦
                +----+--------------+---------¦
                ¦1943¦Mar. 7, 1947 ¦3,296.15 ¦
                +----+--------------+---------¦
                ¦1944¦Dec. 11, 1947 ¦11,836.08¦
                +----+--------------+---------¦
                ¦1945¦Dec. 11, 1947 ¦11,443.59¦
                +-----------------------------+
                

Each of the foregoing Form 991 applications made claim for relief under all paragraphs of subsection (b) of section 722, and claimed a constructive average base period net income (hereinafter sometimes referred to as CABPNI) in the amount of $30,406.88 (which was taxpayer's net income for the taxable year 1941).

Schedule B of Form 991 relates to taxpayers entitled to excess profits credit based on income. Petitioner is such a taxpayer. In provisions numbered 1 through 5, Schedule B sets forth in numerical order the various general grounds for relief set forth in section 722(b)(1) to (5), inclusive. A box is provided with respect to each provision, to be marked by a taxpayer claiming thereunder, and all five boxes were so marked. Provision 4 of Schedule B relates to section 722(b)(4) and reads as follows:

[29 T.C. 227]

4. The business of the taxpayer was commenced or there was a change in the character of the business immediately prior to or during the base period (section 722(b)(4)).

(a) On what date did commencement of business or change in character of business occur? —

(b) If change in character of the business has occurred, submit statement of:

(1) Nature of change in character of business.

(2) Portion of the definition in section 722(b)(4) within which such change is claimed to have occurred.

(3) Evidence supporting contention that average base period net income does not reflect normal operations for the entire base period.

(c) Did the business reach, by the end of the base period, the earning level it would have reached if the business had been commenced, of if the change in the character of the business had occurred, 2 years prior to the time the commencement or change occurred?— If answer is ‘no,‘ furnish particulars.

(d) Was change in capacity for production or operation of business consummated during a taxable year ending after December 31, 1939, as a result of a course of action to which taxpayer was committed prior to January 1, 1940?—

(e) If answer to (d) is ‘yes':

(1) State date upon which such change was consummated and extent to which income for such year reflects such change.

(2) Submit evidence of commitment to a course of action prior to January 1, 1940.

(3) Attach schedule showing net capital addition or net capital reduction (section 713(g)(1) or (2) and the amount of money or property expended after the beginning of the first excess profits tax taxable year under the Internal Revenue Code in changing the capacity for production or operation of the business.

Petitioner placed an ‘x’ in the box preceding the numeral ‘4,‘ and answered ‘No’ to the question propounded by (c). No further information with respect to the nature of petitioner's claim under section 722(b)(4) was set forth on the printed Form 991.

Additional sheets were attached to the application form for 1941. Most of such sheets contain matters purportedly justifying relief under provisions of section 722(b) other than 722(b)(4), and in no way relevant to the latter provision. The only information or statements related to the claim under section 722(b)(4) occur on ‘Page 1’ of such attached sheets, where petitioner merely repeated the language appearing immediately after the numeral ‘4’ on Schedule B of the printed form, and on ‘Page 9’ of such sheets where the following statement appears:

The amount of constructive average base period net income which is considered to be a fair and just amount representing normal earnings is $30,406.88 which represents the net income for the taxable year 1941. Taxpayer contends that due to the change of product, from Ford to Chevrolet, and various other factors a normal operation was not realized until the year 1941.

[29 T.C. 228]

The foregoing material was headed ‘Item 6, Schedule ‘A.“ Item 6 of Schedule A of the Form 991 reads as follows:

6. Amount of constructive average base period net income claimed for use in computing excess profits tax for taxable year. (Furnish particulars supporting amount claimed and details involved in computation.)— $—

Petitioner, in answer to the foregoing, stated its CABPNI to be $30,406.88, and noted ‘Schedule Attached.’ All information contained in the application with respect to 1941 was repeated or incorporated by reference in the applications filed with respect to all the other years in controversy herein. None of such applications contains any further material or information reasonable related to a claim for relief based upon the provisions of section 722(b)(4) of the Internal Revenue Code of 1939.

On March 8, 1947, petitioner filed a Form 843 claim for refund for its taxable year 1941. The claim refers to the application for relief filed for that year, and states that ‘(t)his claim filed to protect the...