Shamrock Oil Co. v. Commissioner of Internal Revenue

• Decision Date: 19 June 1935
• Docket Number: No. 7607.,7607.
• Citation: 77 F.2d 553
• Parties: SHAMROCK OIL CO. v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Fifth Circuit

77 F.2d 553 (1935)

SHAMROCK OIL CO. v. COMMISSIONER OF INTERNAL REVENUE.

No. 7607.

Circuit Court of Appeals, Fifth Circuit.

May 14, 1935.

Rehearing Denied June 19, 1935.

John B. King, of Wichita Falls, Tex., for petitioner.

Frank J. Wideman, Asst. Atty. Gen., Arnold Raum and Sewall Key, Sp. Assts. to Atty. Gen., and Robert H. Jackson, Asst. Gen. Counsel, Bureau of Internal Revenue, and Shelby S. Faulkner, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., for respondent.

Before BRYAN, FOSTER, and HUTCHESON, Circuit Judges.

HUTCHESON, Circuit Judge.

This petition to review a Board of Tax Appeals decision questions not the amount, but the existence of the tax liability found. The points made are based on the fact that while the tax accrued not against Shamrock Oil Company, petitioner, but against Shamrock Oil Company, its predecessor, waivers were obtained from, the deficiency letter was sent to, and all proceedings in connection with the determination and collection of the tax, including the proceedings before the Board, were had with petitioner. The points are the two made before the Board: (1) That the Board was without jurisdiction because the appeal had not been prosecuted by the taxpayer; (2) that the determination and collection of the deficiencies are barred by the statute of limitations, because the waivers on which the Commissioner relies were not signed by, or by the authority of, Shamrock Oil Company, the taxpayer; and (3) the additional one, that the facts do not make out a case for transferee liability. The facts and the proceedings are in all respects accurately and in most respects fully stated in the opinion of the Board. 29 B. T. A. 910 We shall abstract and supplement, but not restate, them. They show that in 1920 there were two joint-stock associations,¹ Shamrock Oil Company and Chapman-Clark-Harbin, trustees engaged in the oil business, which had been organized, and were owned and controlled by substantially the same interests. Shamrock Oil Company filed timely income tax returns for the years ending December 31, 1919, and December 31, 1920, but filed none for the subsequent years. In the fall of 1920 these associations, pursuant to negotiations looking to that end,² were consolidated. The form chosen to effect this consolidation was a turnover of all of the Shamrock Oil Company's properties to Chapman-Clark-Harbin in exchange for shares of stock in Chapman-Clark-Harbin, trustees, to be issued by that association to the stockholders of Shamrock, share for share. Thereafter, even to the extent of taking its name, the consolidation assumed to be, acted as, and was Shamrock Oil Company. So complete was this merger of the two joint-stock associations, so absolute the assumption by the successor consolidation of the assets, the liabilities, the identity, even to the name, of the Shamrock Company, that neither Mr. Dunaway, its president, nor the counsel employed in connection with this tax matter ever knew or supposed, until the 1931 change of front, anything other than that the consolidation continued to be and was, the Shamrock Oil Company.³

In 1925 petitioner sold its assets to the Prairie Oil Company and quit business, but Dunaway remained in Wichita Falls to wind up the affairs of the association. Continuing for more than seven years, beginning in 1924, proceedings were conducted with the Commissioner and before the Board of Tax Appeals in complete recognition of the fact now sought to be denied, that Shamrock Oil Company, the petitioner, was, and continued after the consolidation to be, Shamrock Oil Company, the taxpayer, and that the tax liability asserted for the years in question was by reason of the consolidation the tax liability of the petitioner. In its petition to the Board for the redetermination of deficiencies filed January 22, 1927, a formal and lengthy one, all of the proceedings in connection with the organization of the two associations was set out and the claim was made that the two companies were so closely affiliated as to be entitled to make a consolidated return. Indeed, it was claimed that in 1919 and 1920 when the tax liability accrued, there was such a unity of operation of the two coupled with such ownership and control by the same interests of all of the stock of both associations as that the two were in effect one. Nothing was ever claimed to the contrary until in 1931, when this about face was made. Then it was that the claim was first tendered, that Shamrock Oil Company was not consolidated with Chapman-Clark-Harbin, but was sold out and dissolved, and that Shamrock Oil Company, the petitioner, was not a continuation of the taxpayer. In the long-drawn out proceedings and pleadings before the Board there was a claim to additional allowances for invested capital, but the main insistence was that the two concerns were affiliated, that the tax should have been figured on the basis of a consolidated return, and that since Chapman-Clark-Harbin had sustained net losses which Shamrock was entitled to take as deductions, the tax assessed was excessive. In January, 1929, there was an amendment to the petition setting up limitation, not on the ground of any want of authority on the part of Dunaway to sign waivers, but upon the ground that at the time the waivers were signed, the taxes had already become barred. In April, 1929, the petition was again amended to add certain claims for amortization, but still the main point made in this petition, as in the others, was that the two associations were affiliated most closely, in fact were identical, and should be so taxed. On February 18, 1931, by motion to dismiss for want of jurisdiction, it was for the first time claimed, that petitioner Shamrock Oil Company was not the taxpayer, and that all waivers had been signed and proceedings authorized and taken under the mistaken impression of petitioner's president, that it and the Shamrock Oil Company, which had incurred the tax, were one and the same. The Board was right in holding that the petitioner was for the purposes of the proceedings before it, the taxpayer, and that limitation had not run. We think, too, that there is no merit in the additional point the taxpayer seeks to make here, the point that petitioner is not liable as a transferee because the original Shamrock Oil Company was a partnership,⁴ and since partners may be looked to for...