McCarthy Co. v. Commissioner of Internal Revenue
| Decision Date | 09 December 1935 |
| Docket Number | No. 7638.,7638. |
| Citation | 80 F.2d 618 |
| Parties | McCARTHY CO. v. COMMISSIONER OF INTERNAL REVENUE. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Raymond R. Hails and John A. Jorgenson, both of Los Angeles, Cal., for petitioner.
Frank J. Wideman, Asst. Atty. Gen., and Sewall Key, Norman D. Keller, and Ellis N. Slack, Sp. Assts. to Atty. Gen., for respondent.
Before WILBUR, GARRECHT, and DENMAN, Circuit Judges.
According to a formal stipulation of facts filed before the Board of Tax Appeals in the instant case, the petitioner, within the time required by law, filed income tax returns for the years 1923, 1924, 1925, and 1926, and paid the income taxes shown to be due by such returns. Only the taxes for 1924, 1925, and 1926 are here in question.
On or before February 1, 1929, the petitioner executed a waiver extending the time within which any income taxes found to be due for the years 1924-1925 might be assessed to December 31, 1929.
During the year 1929, the internal revenue agent in charge at Los Angeles, Cal., caused an audit to be made of the income tax returns filed by the petitioner for the years 1923, 1924, 1925, and 1926, and, as a result of such audit, determined that there were deficiencies in the taxes for those years as follows:
1923 ......................... $ 5,881.91
1924 ......................... 11,266.32
1925 ......................... 1,247.73
1926 ......................... 270.73
Subsequently to such audit, and on or about October 23, 1929, the petitioner executed a waiver of right to file a petition to the United States Board of Tax Appeals and executed a consent to the assessment and collection of the deficiencies above set forth, and delivered such waiver and consent to the internal revenue agent in charge at Los Angeles.
Under date of November 25, 1929, the Commissioner directed a letter to the McCarthy Company, 1031 South Broadway, Los Angeles, making reference to the report of the internal revenue agent in charge at San Francisco, covering the examination of the petitioner's books for the years 1922 to 1926, inclusive, indicating deficiencies in taxes of $18,666.69, pointing out that the statutory period of limitations for the years 1924 and 1925 would expire December 31, 1929, and that the Bureau would be compelled to issue a final notice of deficiency for those years unless agreements extending the statutory period for assessment were executed and filed.
On December 27, 1929, the respondent mailed a registered letter to "McCarthy & Co., 1031 South Broadway, Los Angeles, Cal.," a copy of which letter was attached to the petitioner's pleadings before the Board. The letter was delivered to the petitioner herein, and accepted by it. It was intended for the petitioner, and the directing of the letter to "McCarthy & Co." was an error of the respondent.
The petitioner's correct taxable net income for the year 1924 is $243,821.60, and the tax computed thereon is $30,477.70, of which sum the petitioner has paid $19,211.38.
The correct taxable net income for 1925 is $152,837.51, and the tax computed thereon is $19,868.87, of which the petitioner has paid $18,621.14.
The correct taxable net income for 1926 is $113,736.77, and the tax computed thereon is $15,354.46, of which the petitioner has paid $15,083.73.
Pursuant to the determination of the Board, as set forth in its memorandum opinion, there was handed down a decision declaring deficiencies as follows: 1924, $11,266.32; 1925, $1,247.73; 1926, $270.73.
From that decision by the Board, the taxpayer has filed a petition for review before this court.
In its brief, the petitioner relies upo the following specifications of error:
1. The Board erred in failing to hold that there was no valid extension of time for the assessment of deficiencies for 1924 and 1925, because the record fails to show that any such extension was delivered to the respondent or accepted by him in writing, at any rate before the limitations had expired; in failing to hold that, if the extension was valid, the time for assessment expired in any event on December 31, 1929; and in failing to hold that the statute of limitations had run as to both 1924 and 1925 deficiencies.
2. The Board erred in failing to hold that the petitioner had executed and delivered to the respondent valid consents to the assessment of the 1924 and 1925 deficiencies prior to December 31, 1929, and therefore that the right to make deficiency assessments for those years expired, in any event, December 31, 1929, so that no deficiencies could be found or assessed for those years; and the Board erred in failing to hold that since the petitioner had consented to the 1926 deficiency on October 23, 1929, or, in any event, on November 25, 1929, the statute of limitations prevented a finding or assessment of deficiency for 1926 after March 15, 1930.
3. The Board erred in failing to hold that notice of deficiency sent to "McCarthy & Co." was not notice to the petitioner, "the McCarthy Company," and that such notice was ineffectual for any purpose; and in failing to hold that therefore the statute of limitations had run as to all deficiencies, and that the Board was without jurisdiction to find any deficiency.
We will consider each of the petitioner's propositions seriatim.
The first specification of error involves only the taxes for 1924 and 1925. As the petitioner points out, the statutory limitation for the assessment of income taxes for 1924 is four years. Since the return in question was filed on March 15, 1925, the limitation, but for the waiver of February 1, 1929, would have expired on March 15, 1929. The period of limitation for 1925 is three years from the date on which the return is filed, which in this case was on March 15, 1926. Therefore, but for the waiver, the period of limitation for the tax for 1925 would likewise have expired on March 15, 1929. Section 200 (a) and section 277 (a) (1, 2) of the Revenue Act of 1926, 44 Stat. 10, 58, 26 U.S.C.A. §§ 48, 275 notes.
The question therefore turns on the validity of the waiver of February 1, 1929.
The petitioner contends that "there was no stipulation or evidence that the extension was delivered to or filed with the Commissioner or any other agency of the Government, or that the Commissioner `consented in writing', as required by law."
We are not impressed with the petitioner's objections to the waiver. In the first place, the stipulation sets forth that the petitioner "executed" the waiver. In California, as elsewhere, it is settled that "execution" includes "delivery." Section 1933 of the Code of Civil Procedure of California reads as follows:
"The execution of an instrument is the subscribing and delivering it, with or without affixing a seal."
See, also, Le Mesnager v. Hamilton, 101 Cal. 532, 539, 35 P. 1054, 40 Am.St. Rep. 81 (mortgage); Williams v. Kidd, 170 Cal. 631, 151 P. 1, 8, Ann.Cas.1916E, 703 (deed); Van Valkenburgh v. Oldham, 12 Cal.App. 572, 579, 108 P. 42 (note and mortgage); White v. Hendley, 35 Cal. App. 267, 275, 169 P. 710 (deed); Washington Finance Corporation v. Glass, 74 Wash. 653, 661, 134 P. 480, 46 L.R.A.(N. S.) 1043 (note); Aldrich v. Public Opinion Pub. Co., 27 S.D. 589, 132 N.W. 278, 282 (appeal bond).
As to the necessity for the Commissioner's consent in writing, in this Circuit it is settled that such consent is not necessary in order to give validity to a taxpayer's waiver of the statute of limitations. In Commissioner v. Hind, 52 F. (2d) 1075, 1078, we said:
"It seems that, since the provision relative to the Commissioner's signature, as held by the Supreme Court, was for `purely administrative purposes,' his failure to sign the waiver of February 25, 1926, did not render such waiver invalid."
It should be borne in mind that, when there is a prima facie showing that the statute of limitations has not expired, the burden is upon the taxpayer to come forward with proof to satisfy the court that the taxing arm of the government should be stayed. As was said by Mr. Justice Sutherland in DuPont De Nemours & Co. v. Davis, 264 U.S. 456, 462, 44 S. Ct. 364, 366, 68 L.Ed. 788, "Statutes of limitation sought to be applied to bar rights of the government, must receive a strict construction in favor of the government." See, also, Jones v. Commissioner, 18 B.T.A. 1225, 1227; J. Friedman & Co. v. Commissioner, 16 B.T.A. 1119, 1122; Nicholson v. Commissioner, 22 B.T.A. 744, 746; Loewer Realty Co. v. Anderson, 31 F.(2d) 268, 269 (C.C.A.2) certiorari denied 280 U.S. 558, 50 S.Ct. 17, 74 L.Ed. 613; Bowers v. N. Y. & Albany Lighterage Co., 273 U.S. 346, 347, 349, 47 S.Ct. 389, 71 L.Ed. 676.
Next, the petitioner argues that "the extension, if any, agreed only to assessment before December 31, 1929," and that "there is no evidence or stipulation that the taxpayer consented to a mere determination of deficiency within such time, and assessment afterward."
The courts, however, repeatedly have held contrary to the petitioner's contention. In Stange v. United States, 282 U.S. 270, 277, 51 S.Ct. 145, 148, 75 L.Ed. 335, where a similar waiver was under consideration, Mr. Justice Brandies said:
See, also, Aiken v. Burnet, 282 U.S. 277, 282, 51 S.Ct. 148, 75 L.Ed. 339; Brown & Sons Lumber Co. v. Burnet, 282 U.S. 283, 287, 51 S.Ct. 140, 75 L.Ed. 343; United States v. Southern Lumber Co. (C. C.A.8) 51 F.(2d) 956, 961, certiorari denied 284 U.S. 680, 52 S.Ct. 197, 76 L.Ed. 574; Washington Coal & Coke Co. v. Heiner (D.C.) 42 F.(2d) 681, 684, 685, affirmed 55 F.(2d) 229 (C.C.A.3); Sabin v. United States (Ct.Cl.) 44 F.(2d) 70, 77; Atlas Securities Co. v. Commissioner (C.C.A.8) 58 F.(2d) 214, 215; Crucible Steel Casting Co. v. Commissioner (C. C.A.7) 66 F.(2d) ...
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