Helvering v. Continental Oil Co.

• Decision Date: 27 November 1933
• Docket Number: No. 5863.,5863.
• Parties: HELVERING, Commissioner of Internal Revenue, v. CONTINENTAL OIL CO.
• Court: U.S. Court of Appeals — District of Columbia Circuit

63 App. DC 5, 68 F.2d 750 (1933)

HELVERING, Commissioner of Internal Revenue, v. CONTINENTAL OIL CO.

No. 5863.

Court of Appeals of the District of Columbia.

Argued October 11, 1933.

Decided November 27, 1933.

Rehearing Denied January 22, 1934.

G. A. Youngquist, Sewall Key, John H. McEvers, and C. M. Charest, all of Washington, D. C., for petitioner.

Arthur B. Hyman, of New York City, for respondent.

Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, HITZ, and GRONER, Associate Justices.

GRONER, Associate Justice.

This is a tax case in which the Commissioner is the petitioner. The respondent is the Continental Oil Company, and the proceeding involves its tax liability as transferee of the assets of Mutual Oil Company of Maine, Mutual Oil Company of Arizona, Mutual Refining & Producing Company, and Northwestern Oil Refining Company.

During the period January 1, 1920, to March 15, 1920, Mutual Oil Company of Maine owned all the capital stock of the three last above-mentioned companies. On March 15, 1920, Continental Company (respondent) acquired the entire capital of Maine, and the following March 15 (1921) Continental filed a consolidated return for itself and the other four companies for the entire calendar year 1920. Some time after the acquisition by Continental of the stock of Maine, the former caused all of the assets of Mutual Oil Company of Arizona, Mutual Refining & Producing Company, and Northwestern Oil Refining Company to be transferred to it, and dissolved these corporations. The value of the property so transferred by each company was sufficient over and above its liabilities to cover income and profits taxes due at the time of the transfer. The assets of Maine were transferred to Continental March 15, 1920, but it owed no tax, and therefore the transfer is of no consequence in this proceeding. The Commissioner rejected the consolidated return filed by Continental for itself and the other four companies for the calendar year 1920. The ground of rejection was that, since Continental did not acquire the entire capital stock of Maine until March 15, 1920, the latter company, or the Continental Company for it, should have filed a consolidated return for the period January 1, 1920, to March 15, 1920. He said that two consolidated returns (to cover the calendar year) should have been filed instead of one — the first for the period January to March; the other for the period March to December 31. He determined the consolidated invested capital and the income for each company for each of the two periods, and mailed Continental a notice of a proposed assessment against it in the sum of $56,113.14 for the period January 1, 1920, to March 15, 1920, as its liability as transferee of the assets of the four companies mentioned. Inclosed with the notice was a statement in which, under the title "Tax Liability," the transferor was shown to be Mutual Oil Company of Maine; the year, 1920; and the deficiency, $56,113.14 — and the transferee, Continental Oil Company; the year, 1920; and the deficiency, $56,113.14.

The Board of Tax Appeals held that this deficiency notice covered only the liability of Continental for the tax, if any, owing by Maine, and, since that company owed no tax, there was no transferee liability, and it accordingly determined no deficiency. We are asked to review and reverse this decision of the Board.

Section 274 (a) of the Revenue Act of 1926 (44 Stat. 55, tit. 26 USCA § 1048) makes it the duty of the Commissioner to send a notice of deficiency to a taxpayer by registered mail. The statute in this respect is sufficiently complied with if the form adopted by the Commissioner shall notify the taxpayer of the proposed deficiency. The statute apparently contemplates nothing more than that the notice, where a deficiency in respect of tax is determined, shall be sent to the taxpayer of "such deficiency." In the case we are considering the Board was of opinion that the heading or summary of the statement, which we have set out in full above, was a notice to the effect that the deficiency in tax claimed was owing from Continental as transferee of Maine, and, as Maine owed no tax, no deficiency could be found. In reaching this conclusion, the Board regarded the Commissioner's deficiency letter as an assertion of liability only against Maine as the holder of the shares of stock of its controlled companies and against Continental as transferee of the assets of Maine. But the quoted part of the Commissioner's notice, which apparently was the basis of the Board's conclusion, was a mere summary or caption, and was followed by the further statement: "The records of this office indicate that the Mutual Oil Company of Maine transferred its assets, which consisted of the capital stock of the Mutual Oil Company of Arizona, the Mutual Refining and Producing Company, and the Northwestern Oil Refining Company as of March 15, 1920, and was dissolved January 12, 1921. The Mutual Oil Company of Arizona transferred its assets to you on December 31, 1921, and was dissolved January 23, 1922. The Mutual Refining and Producing Company and the Northwestern Oil Refining Company transferred their assets on April 30, 1921, to the Mutual Oil Company of Arizona and were dissolved on July 12, 1921, and August 7, 1922, respectively." This in turn was followed by detailed statements of liability as to each of the companies named.

We have examined the deficiency letter filed by the Commissioner, together with an attached summary and schedules, and we have likewise examined the findings of fact. The deficiency letter notified Continental that the Commissioner proposed to assess liability for taxes against it not only as transferee of Maine but likewise as transferee of Mutual Oil Company of Arizona, Mutual Refining & Producing Company, and Northwestern Oil Refining Company, in respect to alleged deficiency in income and excess profits taxes for the period January 1, 1920, to March 15, 1920. Except for the caption to which we have referred, the notice is plain and unambiguous as to the purpose of the Commissioner and the grounds on which he relied to sustain it. Continental refused to consent to the proposed assessment, appealed to the Board, and in its petition stated the controversy to be its liability for taxes as transferee of all of the companies just above named, and in the findings of fact, which was by stipulation, the Board found that "the deficiency letters propose to assess the liability * * * of the petitioner as transferee of the assets of" the four companies named, for the period January 1, 1920, to March 15, 1920. The findings also fixed the amount of the tax covering the period January 1, to March 15, 1920, as $56,113.14 and as due from the four companies, viz., Mutual Oil Company of Maine, Mutual Oil Company of...