Farmers Feed Co. v. COMMISSIONER OF INTERNAL REVENUE, Docket No. 12398.
| Decision Date | 29 February 1928 |
| Docket Number | Docket No. 12398. |
| Citation | 10 BTA 1069 |
| Parties | FARMERS FEED CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Board of Tax Appeals |
Arthur B. Hyman, Esq., and Karl D. Loos, Esq., for the petitioner.
A. C. Baird, Esq., for the respondent.
Proceeding for the redetermination of income and profits taxes for the fiscal years and in the amounts as follows:
Fiscal year ended September 30, 1917, overassessment _____________ $61,861.24
1918, deficiency _________________ 107,650.01
1919, deficiency _________________ 118,965.32
1920, deficiency _________________ 4,228.32
The proceeding was heard on petitioner's motion for judgment on the pleadings on the ground that assessment and/or collection of taxes for the above years are barred by the statute of limitations, and the further motion that, in the event of the failure of the Board to so find, the case be set for hearing on the merits in due course.
FINDINGS OF FACT.
Petitioner is a New York corporation with its principal office in New York City.
For the fiscal year ended September 30, 1917, petitioner filed its income and profits-tax return on or about May 1, 1918. After the filing of the return the respondent assessed a tax of $35,348.98, which petitioner paid in full on May 3, 1918. On March 19, 1923, the respondent, after an examination and audit of petitioner's books, assessed an additional amount of $123,367.78. Petitioner filed a claim in which it asked the abatement of this assessment, which claim was allowed in the amount of $61,861.24 and rejected for $61,506.54.
Petitioner filed its income and profits-tax return for the fiscal year ended September 30, 1918, on or about May 13, 1919. After the filing of the return the respondent assessed a tax for that year in the amount of $21,856.41, which petitioner has paid in full, the last installment having been paid on or about May 13, 1919.
Petitioner filed its income and profits-tax return for the fiscal year ended September 30, 1919, on or about January 14, 1920. After the filing of the return respondent assessed a tax for that year in the amount of $20,706.87, which amount petitioner has paid in full, the last installment having been paid on or about September 15, 1920.
Petitioner filed its income and profits-tax return for the fiscal year ended September 30, 1920, on or about December 15, 1920. The return showed a net loss and no tax for that year was assessed by respondent or paid by petitioner.
On or about November 13, 1925, petitioner filed with the respondent a duly executed waiver for the years 1918 and 1919, the body of which reads as follows:
Treasury Department Internal Revenue Service Form 872A IT: CA: 2117
For Taxable Years Ended Prior to January 1, 1922
NOVEMBER 6, 1923.
In pursuance of the provisions of existing Internal Revenue Laws, Farmers Feed Company, a taxpayer of New York, N. Y., 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 year (or years) ending Sept. 30, 1918 and 1919 under existing revenue acts, or under prior revenue acts.
This waiver of the time for making any assessment as aforementioned shall remain in effect until December 31, 1926, and shall then expire except that if a notice of 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.
On or about December 6, 1925, petitioner filed with respondent a waiver for the fiscal year ended September 30, 1920, of the same tenor as that above set out except that the words and figures "September 30th, 1920" are inserted in the place of those reading "Sept. 30, 1918 and 1919" in the waiver set out at length.
On December 29, 1925, respondent mailed to petitioner a letter advising it of the results of a reexamination of its returns for 1909 to 1921, inclusive, to which a statement was attached showing the results for the years here involved as follows:
-----------------------------------------------------------------------------
| Deficiency | Overassessment
Year | in tax |
-----------------------------------------------|-------------|---------------
1917 _________________________________________ | ----------- | $61,861.24
1918 _________________________________________ | $107,650.01 | --------------
1919 _________________________________________ | 118,965.32 | --------------
1920 _________________________________________ | 4,228.32 | --------------
-----------------------------------------------------------------------------
From the letter of December 29, 1925, petitioner appealed to the Board.
To the proposed deficiencies the petitioner has interposed the bar of the statute of limitations. For the fiscal year 1917 the tax has been assessed and jurisdiction arises on the rejection in part of an abatement claim. For the fiscal years 1918, 1919, and 1920, the Commissioner has determined deficiencies from the notice of which this proceeding was brought. For the reasons which will hereafter appear, the proposed deficiency for the year 1917 will be treated separately from those for the later years.
In determining the question raised as it applies to the fiscal year 1917, we are confronted in the first instance with the necessity of determining whether the pleadings are sufficient on which to base a conclusion. It is alleged and admitted that the return was filed on May 1, 1918; that the additional tax of $123,367.78 was assessed on March 19, 1923, and that the notice of the rejection in part of the abatement claim filed in connection therewith was mailed to petitioner on December 29, 1925.
Section 250(d) of the 1921 Act, the one in effect when the assessment was made, provided for a period of five years from the date the return was filed within which to assess and collect the tax. Section 278(d) of the Revenue Act of 1924, the Act in effect when the notice of December 29, 1925, was mailed, provided, however, that a tax assessed within the period provided by the statute might be collected at any time within six years after assessment, provided, however, that this section was not to revive a claim already barred at the time of its passage on June 2, 1924. As more than five years had expired from the date of the filing of the return at the time of the passage of the 1924 Act, it appears that the collection of the tax for that year is barred unless there existed facts which would extend the period within which the tax might be collected.
This brings us to the real question that has been raised by the respondent, and that is, whether it is necessary for the petitioner to allege and prove facts which show that it is not within the exceptions set forth in the statute which may serve to extend the statutory period of assessment and collection. In reaching a correct conclusion we are confronted at the outset with the unusual character of the proceedings before the Board. A petitioner is in fact asking for a review of an affirmative action by the Commissioner. The hearing before the Board is in the nature of a trial de novo, and the taxpayer is the moving party and must sustain the burden of proof, and yet he is simply defending himself from a proposed action by the Commissioner. In one sense of the word he is a defendant and yet before the Board his position is that of a plaintiff. It is for that reason that it is difficult to apply the principles laid down in many of the decisions as to what must be alleged and proved by a defendant desiring to plead the statute of limitations or by a plaintiff who would avoid the running of the statute.
It is stated as a general rule (37 C. J. 1224), that the plea of limitations need not negative matters which might be set up in avoidance of the plea such as exceptions contained in the statute. As set forth on page 1231 of this same work, it is for the opposing party by appropriate pleading to set up matters in avoidance. The rule as laid down is (37 C. J. 1231):
Where one party pleads the statute of limitations, the opposing party may by reply or other appropriate pleading set up any exception to, or matter in avoidance of, the statute which is relied upon to take the case out of the statute of limitations, such as a part payment within the statutory period. But a replication or reply setting up such matter in avoidance must be responsive to the plea, and not allege a cause of action not relied on in the complaint. It is proper to deny a plea of limitations generally, and also to set up matters in avoidance, although, except where allowed by statute or code practice, a reply stating more than one exception to the statute, or more than one defense to the plea, is bad on account of duplicity.
* * * * * * *
Where a party against whom limitations has been pleaded attempts to bring himself within a particular saving or exception, he must state with distinctness and particularly all such facts as are essential to bring him within such exception, and the pleading in avoidance is ordinarily insufficient, if it consists of mere general allegations, or of statements of the evidence of facts, instead of the facts themselves, or presents mere matters of law. But it is sufficient to allege that the action could not be brought because the courts were closed by reason of war, where...
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