Robinette v. COMMISSIONER OF INTERNAL REVENUE, Docket No. 104200.
| Decision Date | 13 May 1942 |
| Docket Number | Docket No. 104200. |
| Citation | 46 BTA 1138 |
| Parties | LENORE S. ROBINETTE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Board of Tax Appeals |
T. G. Thompson, Esq., for the petitioner.
W. W. Kerr, Esq., for the respondent.
The petitioner is the transferee of the transferee of the assets of the taxpayer, who died in 1931. The respondent has determined that petitioner is liable to pay income and excess profits tax deficiencies of the taxpayer as follows:
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Year | Income tax | Excess profits
| | tax
---------------------------------|--------------|----------------
1917 ___________________________ | $1,408.83 | $1,389.01
1918 ___________________________ | 27,914.38 | _______________
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The principal questions presented for our consideration are (1) whether the taxpayer was liable to pay such taxes and (2) whether the statute of limitations is a bar to assessment at this time.
FINDINGS OF FACT.
The taxpayer, Charles C. Cohn, resided in Manila, Philippine Islands, from 1903 until July 1919. He was engaged in the practice of law in the city of Manila and his income as an attorney was derived exclusively from services performed in the Islands. During the years 1917 and 1918 he was a citizen of the United States. He was a married man at that time, the head of a family, and had one child, a minor.
Cohn was a member of successive law partnerships in the Philippines Islands. In 1917 he was a member of the partnership of Cohn & Fisher until November 17, 1917, when Fisher left the firm to serve on the Supreme Court of the Philippine Islands. During 1917 neither the partnership nor Cohn himself was engaged in any other trade or business than the practice of law. Neither Cohn individually nor the partnership had more than a nominal amount of invested capital, which was represented entirely by law books and office equipment in Manila. The law partnership of Cohn & Fisher kept its books on the basis of cash receipts and disbursements. Cohn's distributive share of partnership income for the year 1917 was 34,645.02 pesos, equivalent to $17,322.51 in United States currency. His income from his law practice as an individual in 1917 was $6,040.13, making a total income from the practice of law in 1917 of $23,362.64. In addition, he received income in the form of interest and dividends.
On February 4, 1918, Cohn executed and filed with the collector of internal revenue for the Philippine Islands, at Manila, an income tax return of his income from all sources for the year 1917. The return was provided for by the Revenue Act of 1916, approved September 8, 1916. In June 1918 he paid the tax shown to be due upon the return in the amount of 812.94 pesos, equivalent to $406.47 in United States currency.
On February 20, 1919, the taxpayer executed and filed with the collector of internal revenue for the Philippine Islands, at Manila, an income tax return of his income from all sources for the year 1918. The return for 1918 was provided for by the Revenue Act of 1916, as amended by the Revenue Act of 1917, approved October 3, 1917. In June 1919 Cohn paid the tax shown to be due upon the return in the amount of 3,314.12 pesos, the equivalent of $1,667.06 in United States currency. In September 1920 Cohn paid an additional assessment for the year 1918 in the amount of 3,271.26 pesos, equivalent to $1,635.63 in United States currency.
Cohn filed no excess profits tax return for the year 1917. He filed no tax returns with respect to his income for 1917 and 1918 except as set forth above.
In July 1919 Cohn returned from the Philippine Islands to the United States and thereafter until his death he was a resident of San Francisco, California. He legally changed his name to Charles C. Cole on October 20, 1919. The collector of internal revenue at Baltimore, Maryland, was duly notified of the change of name on or about August 28, 1923.
Charles C. Cole (formerly Cohn) died on September 27, 1931. His son, Creswell C. Cole, received from his estate assets having a value in excess of $30,712.22. Immediately after the final distribution by the executors of the estate of Charles C. Cole to his son the estate had no assets and the executors were duly discharged.
Creswell C. Cole died on September 30, 1935. Final distribution of his estate was made in November 1936. At that time his widow, the petitioner, received assets from his estate having a value in excess of $30,712.22. Immediately after the distribution made to the petitioner the estate of Creswell C. Cole had no remaining assets and the executrix was discharged.
The deficiencies which respondent now proposes to assess against the petitioner were never assessed against Charles C. Cole or Creswell C. Cole or their estates.
The respondent contends that the taxpayer, Charles C. Cole, formerly Charles C. Cohn, failed to file any income tax and excess profits tax returns as a citizen of the United States in 1917 and 1918 and has determined deficiencies for those years. He proposes to assess and collect the taxes from the petitioner as transferee of a transferee of the taxpayer, who is now deceased. The petitioner's primary contention is that Charles C. Cole filed all the returns which he was required to file and paid all taxes which he was required to pay in the years in question. Second, the petitioner argues that the returns which Cole did file started the running of the statute of limitations in his favor and that no tax liability of his may now be assessed against the petitioner. The respondent claims that the statute of limitations was tolled by the failure of Cole to file the required returns and that the filing of returns with the Philippine Government is immaterial.
With respect to the taxable year 1918 it is clear that the respondent's determination must be approved, upon the authority of Lawrence v. Wardell, 273 Fed. 405. The Revenue Act of 1918 imposed an income tax for the calendar year 1918 upon the income of every citizen of the United States. Section 1400 of the 1918 Act expressly repealed the Revenue Act of 1916, as amended by the Revenue Act of 1917, except with respect to any taxes which became due thereunder on or before December 31, 1917, and except with respect to the Philippine Islands. Section 1400 (b) of the 1918 Act provides in part as follows:
Title I of the Revenue Act of 1916 as amended by the Revenue Act of 1917 shall remain in force for the assessment and collection of the income tax in Porto Rico and the Philippine Islands, except as may be otherwise provided by their respective legislatures.
In addition to the above exception to the repeal provisions of section 1400, section 261 of the 1918 Act specifically provides in part:
That in Porto Rico and the Philippine Islands the income tax shall be levied, assessed, collected, and paid in accordance with the provisions of the Revenue Act of 1916 as amended.
* * * * * * *
The Porto Rican or Philippine Legislature shall have power by due enactment to amend, alter, modify, or repeal the income tax laws in force in Porto Rico or the Philippine Islands, respectively.
Thus, the 1916 Act as amended remained effective in the Philippine Islands as a local income tax law similar to the income tax law enacted by any one of the states in order to tax its citizens or residents, or those having income received from sources within the state. The only return filed by the taxpayer for the calendar year 1918 was that filed under the Revenue Act of 1916 as amended by the 1917 Act and in accordance with the provisions of section 261 of the 1918 Act. The taxpayer was required to file this return because he was a resident of the Philippine Islands. The filing of the return with, and the payment of a tax to, the Philippine Government, however, did not relieve him of his liability under the 1918 Act as a citizen of the United States to pay a tax to the United States Government. Lawrence v. Wardell, supra; Emil Peterson, 45 B. T. A. 624.
In the Lawrence case the taxpayer was a United States citizen residing in the Philippine Islands during the taxable years in question. He filed a return for the year 1918 with the Philippine Government in accordance with the provisions of the Revenue Act of 1916, as amended, and as required by section 261 of the 1918 Act, and paid the tax to that Government. This return was similar to the one filed by the taxpayer in the instant case. The court held that the payment of the tax to the Philippine Government was a payment made under a local law equivalent to the income tax law of any state and that a tax was also due to the United States Government, against which tax a credit was allowable for the amount paid in the Islands. We followed the Lawrence case in the Peterson case, which involved precisely parallel facts. The taxpayer in the instant case did not file an income tax return with or pay a tax to the United States Government for the year 1918.
No return having been filed for 1918, the Commissioner would nevertheless be prohibited from attempting to assess and collect the tax if the period of limitation provided in the 1918 Act were effective here. Section 250 (d) of the 1918 Act provides that no suit or proceeding for the collection of any tax shall be begun after the expiration of five years after the date the return was due. Section 250 (d) of the Revenue Act of 1921, however, contains the period of limitation which is applicable in the instant case. Emil Peterson, supra; Helmuth Heyl, 34 B. T. A. 223; Eli Kirk Price, Executor and Trustee, 23 B. T. A. 1192. In the Peterson case it was held that the filing of the return with the Philippine Government did not start the running of the statute of limitations on assessment and...
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