Intervest Enters., Inc. v. Comm'r of Internal Revenue
| Decision Date | 10 October 1972 |
| Docket Number | Docket No. 3936-68. |
| Parties | INTERVEST ENTERPRISES, INC., RAND AMERICAN FUND, INC., INTERVEST AND ASSOCIATES, INC., AND LITTLE THEATRE, INC., PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
John Anthony Smith and Ralph E. Lerner, for the petitioners.
Marlene Gross, for the respondent.
The fact that a corporation which joined in the filing of a consolidated return was found not to be a proper party to that return did not deprive this Court of jurisdiction in respect of a petition filed by such corporation in response to a notice from respondent asserting a deficiency against it.
SUPPLEMENTAL FINDINGS OF FACT AND OPINION
A question has arisen, in connection with the entry of decision under Rule 50, so as to the proper disposition to be made in respect of petitioner Little Theatre, Inc.
The deficiency notice herein was mailed to Intervest Enterprises, Inc. It reads in pertinent part as follows:
INTERVEST ENTERPRISES, INC.
In accordance with the provisions of existing internal revenue laws, notice is given that the determination of your income tax liability and that of your affiliated companies for the taxable years ended January 31, 1963 and January 31, 1964 discloses deficiencies in tax aggregating $121,038.55, additions to the tax for negligence under Code section 6653(a) of $6,005.20 and additions to the tax for delinquency under section 6651(a) of $233.64. The attached statement shows the computation of deficiencies and additions to the tax.
The attached statement reads in pertinent part as follows:
The tax liability of Intervest Enterprises, Inc. and each subsidiary company named above is stated as provided for by the regulations prescribed under Section 1502 of the Internal Revenue Code of 1954.
The above deficiencies are based on the adjustments and explanations set forth in detail below.
The deficiencies and additions to the tax will be assessed severally against each corporation named above in accordance with the regulations provided under section 1502.
The ‘Explanation of Adjustments' for the taxable year ended January 31, 1964, reads in pertinent part as follows:
+-------------------------------------------------------------------+
¦Taxable Year Ended January 31, 1964 ¦
+-------------------------------------------------------------------¦
¦ ¦ ¦ ¦
+------------------------------------------------------+------------¦
¦Consolidated taxable income disclosed by return (loss)¦($98,830.73)¦
+-------------------------------------------------------------------¦
¦Unallowable deductions and additional income: ¦
+-------------------------------------------------------------------¦
¦(a) Net operating loss deduction ¦ ¦ ¦
+----------------------------------------+-------------+------------¦
¦(Little Theatre Inc.) ¦$229,464.18 ¦ ¦
+----------------------------------------+-------------+------------¦
¦(b) Net operating loss deduction ¦ ¦ ¦
+----------------------------------------+-------------+------------¦
¦(Intervest Enterprises, Inc.) ¦9,644.00 ¦ ¦
+----------------------------------------+-------------+------------¦
¦(c) Cost of machinery ¦94,033.66 ¦ ¦
+----------------------------------------+-------------+------------¦
¦ ¦ ¦333,141.84 ¦
+------------------------------------------------------+------------¦
¦Consolidated taxable income adjusted ¦234,311.11 ¦
+-------------------------------------------------------------------+
Explanation of Adjustments
(a) It has been determined that the Little Theatre, Inc. does not qualify for the privilege of filing a consolidated return with Intervest Enterprises, Inc. pursuant to Section 1501 of the Internal Revenue Code of 1954 since 80% of all classes of its stock is not owned by Intervest Enterprises, Inc. or its other subsidiaries as defined in Section 1504 of the Internal Revenue Code. Therefore, taxable income is increased in the amount of $229,464.18.
Attached to the consolidated return for the taxable year ended January 31, 1964, was a Form 1122 entitled ‘Return of Information and Consent of Subsidiary Corporation Included in a Consolidated Tax Return.’ The form was signed by Little Theatre, Inc., designating Intervest Enterprises, Inc., as the ‘common parent corporation,‘ and contained the following:
The above-named subsidiary corporation hereby (1) authorizes the above-named common parent corporation to make a consolidated income tax return on its behalf for the taxable year for which this form is filed and (2) authorizes such common parent corporation (or, in the event of its failure, the Commissioner or the District Director of Internal Revenue) to make a consolidated income tax return on its behalf for each taxable year thereafter for which a consolidated return must be made by the affiliated group under the provisions of the consolidated return regulations.
The above-named subsidiary corporation, in consideration of the privilege of joining in the making of a consolidated return with the above-named common parent corporation, hereby consents to and agrees to be bound by the provisions of the above-mentioned regulations.
A timely single petition was filed by Intervest Enterprises, Inc., Rand American Fund, Inc., Intervest & Associates, Inc., and Little Theatre, Inc., which, among other things, alleged that respondent had erred in determining that Little Theatre, Inc., did not qualify for the privilege of filing a consolidated return with Intervest Enterprises, Inc., and the other corporations for the taxable year ended January 31, 1964.
In our opinion disposing of the substantive issues in this case (T.C. Memo. 1971-245), we sustained respondent's determination that Little Theatre, Inc., was not entitled to file a consolidated return with the other corporations involved herein for the taxable year ended January 31, 1964.
In his original computation submitted under Rule 50, respondent sought entry of decision against all of the petitioners in respect of deficiencies in income tax for the taxable years ended January 31, 1963, and January 31, 1964, and an addition to tax under section 6651(a)1 for the taxable year ended January 31, 1963. Petitioners countered with a proposed decision which accepted respondent's mathematical computations and the entry of decision in respect thereof against Intervest Enterprises, Inc., Rand American Fund, Inc., and Intervest & Associates, Inc., but requested entry of decision of no deficiency in income tax for either of the taxable years in question and no addition to tax for the taxable year ended January 31, 1963, in respect of Little Theatre, Inc. Respondent then filed a motion to dismiss for lack of jurisdiction as to Little Theatre, Inc., and to change the caption accordingly. In support of his motion, respondent asserted that, since we had held that Little Theatre, Inc., was not properly a member of the affiliated group, it necessarily followed that no statutory notice of deficiency could be considered as having been sent to Little Theatre, Inc. Neither petitioner nor respondent draws any distinction between the taxable year ended January 31, 1963, and the taxable year ended January 31, 1964.
The question before us concerns the jurisdiction of this Court. It is clear that such a question is fundamental and must be decided whenever it appears, even, as is the case herein, after the conclusion of the trial. Abraham Goldstein, 22 T.C. 1233, 1236 (1954); Accessories Manufacturing Co., 12 B.T.A. 467 (1928). See also Wheeler's Peachtree Pharmacy, Inc., 35 T.C. 177, 179 (1960).
The jurisdiction of this Court can be invoked only by the timely filing of a petition by a taxpayer to whom a notice of deficiency is addressed. Sec. 6213(a). See Cincinnati Transit, Inc., 55 T.C. 879, 882 (1971), affirmed per curiam 455 F.2d 220 (C.A. 6, 1972); National Committee to Secure Justice, Etc., 27 T.C. 837 (1957). At least three essential requirements are involved: (1) A notice, (2) the assertion of a deficiency in that notice, and (3) the sending of the notice to the taxpayer. There is, and can be, no dispute that the first of these requirements has been met. The critical problems arise from the remaining two requirements. We address ourselves, in the first instance, to the taxable year ended January 31, 1964, since our discussion will be dispositive of the taxable year ended January 31, 1963.
Clearly, if we had rejected respondent's contention and had held that Little Theatre, Inc., was a member of the ‘affiliated group’ within the...
To continue reading
Request your trial
-
Alumax Inc. v. Comm'r of Internal Revenue, 7779–95.
...not alter the agency relationship established under section 1.1502–77(c), Income Tax Regs. See Intervest Enterprises, Inc. v. Commissioner, 59 T.C. 91, 96–97, 1972 WL 2447 (1972). We reject petitioners' argument that section 1.1502–77(c)(2), Income Tax Regs., is invalid. We do not find that......
-
Naftel v. Comm'r of Internal Revenue
...v. Commissioner, 81 T.C. 879, 880-881 (1983); Midland Mortgage Co. v. Commissioner, 73 T.C. 902, 905 (1980); Intervest Enterprises, Inc. v. Commissioner, 59 T.C. 91, 94 (1972); Goldstein v. Commissioner, 22 T.C. 1233, 1236 (1954). 10 If we find that we do not properly have jurisdiction to c......
-
Peninsula Steel Prods. v. Comm'r of Internal Revenue
...not decide whether Monotech is also a petitioner in the instant case. Compare sec. 1.1502-77(a), Income Tax Regs., and Intervest Enterprises, Inc. v. Commissioner, 59 T.C. 91, 96-97 (1972), with Cincinnati Transit, Inc. v. Commissioner, 55 T.C. 879 (1971), affd. 455 F.2d 220 (6th Cir. 1972)......
-
H.H. Robertson Co. v. Comm'r of Internal Revenue, Docket No. 2587-70.
...dividends paid out of such accumulated profits. Any such result would be destructive of the statutory scheme, and certainly could not be [59 T.C. 91] reconciled with the basic theory of the General Foods case. We cannot find that Congress, either by design or inadvertence, provided for any ......