Deakman-Wells Co. v. Comm'r of Internal Revenue
| Decision Date | 15 June 1953 |
| Docket Number | Docket No. 36865. |
| Citation | 20 T.C. 610 |
| Parties | DEAKMAN-WELLS COMPANY, INC., PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Increased deficiency claimed in amended answer more than 5 years after return filed held not barred by 5-year statute of limitations effective when more than 25 per cent of gross income is omitted from return, timely deficiency notice having been mailed within 5 years and petition for redetermination thereof duly filed. Edward E. Burke, C.P.A., for the petitioner.
Francis X. Gallagher, Esq., for the respondent.
Respondent determined deficiencies in income taxes against petitioner as follows:
+---------------------------+
¦Year ended ¦Deficiency ¦
+--------------+------------¦
¦ ¦ ¦
+--------------+------------¦
¦Apr. 30, 1947 ¦$506.51 ¦
+--------------+------------¦
¦Apr. 30, 1948 ¦24,959.08 ¦
+--------------+------------¦
¦Apr. 30, 1949 ¦27,304.91 ¦
+--------------+------------¦
¦Apr. 30, 1950 ¦41,232.06 ¦
+---------------------------+
In an amended answer respondent claimed an additional deficiency in the amount of $31,010.24 for the taxable year ended April 30, 1947. The sole question presented is whether the assessment of the increased deficiency for the taxable year ended April 30, 1947, is barred by the statute of limitations.
All of the facts were stipulated and are hereby found.
Petitioner, a corporation organized under the laws of the State of New Jersey, with its principal office in Jersey City, filed its corporation income tax returns for the taxable years involved with the collector of internal revenue for the fifth district of New Jersey. During each of the taxable years involved, petitioner was engaged in the business of constructing buildings.
Since its incorporation, petitioner has kept its books of account on an accrual basis and filed its Federal income tax returns on a cash basis. The accrual method of accounting clearly reflected the net income of petitioner for each of the taxable years involved and petitioner's net income should have been computed and reported in its returns in accordance therewith.
Petitioner's return for the taxable year ended April 39, 1047, was filed on July 15, 1947. The notice of deficiency was sent to petitioner on June 27, 1951. The only portion of such notice relating to the taxable year ended April 30, 1947, concerned the disallowance of a carryback loss from the taxable year ended April 30, 1948.
Petitioner's return for the taxable year ended April 30, 1947, did not contain any report on page 1 of items includible in gross income, but in a schedule entitled ‘Statement of Operations‘ attached to the inside portion of such return, petitioner reported and computed gross profit as follows:
If the gross profit had been computed by petitioner upon the accrual basis, such computation would have been as follows:
Petitioner omitted from gross income reported for the taxable year ended April 30, 1947, amounts properly includible therein which are in excess of 25 per cent of the gross income reported.
Petitioner did not file its returns and compute its tax in accordance with the accounting method employed in keeping its books. These are circumstances authorizing respondent to require that correct returns be filed. C. L. Carver, 10 T.C. 171, affd. (C.A. 6) 173 F.2d 29. As petitioner itself describes its action: ...
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