True Bros. v. United States, Civ. A. No. 8747.

• Decision Date: 25 September 1950
• Docket Number: Civ. A. No. 8747.
• Parties: TRUE BROS., Inc., v. UNITED STATES.
• Court: U.S. District Court — District of Massachusetts

93 F. Supp. 107

TRUE BROS., Inc., v. UNITED STATES.

Civ. A. No. 8747.

United States District Court D. Massachusetts.

September 25, 1950.

Hale, Sanderson, Byrnes & Morton and Bennett Sanderson, all of Boston, Mass., for plaintiff.

George F. Garrity, U.S.Atty., W. Arthur Garrity, Jr., and Philip T. Jones, Asst.U. S.Atty., all of Boston, Mass., for defendant.

FORD, District Judge.

This is an action by True Bros., Inc., a Massachusetts corporation, to recover an alleged overpayment of the company's excess profits tax for its financial year ending January 31, 1944. The facts have been stipulated, and the question to be decided is whether or not plaintiff has sufficiently complied with the provisions of section 322 (b) (1) of the Internal Revenue Code, 26 U.S.C.A. § 322(b) (1),¹ providing that a refund of an overpayment shall not be made unless a claim therefor is filed within the applicable period of limitations.

Plaintiff properly filed its excess profits tax return for the year in question on April 15, 1944, and the tax due as shown by the return was paid in full by January 25, 1945. The return thus filed, as well as the company's returns for previous tax years, showed its paid in capital as $100,000. In fact the figure which should have been shown, and which has now been determined by the Commissioner of Internal Revenue to be correct, was $133,158.54.

On October 17, 1946 the plaintiff filed with the Collector of Internal Revenue at Boston a formal claim, on the form prescribed by Treasury Regulations,² for a refund of one dollar "or such other amount as is proper" of its excess profits tax paid for the year ending January 31, 1944. The ground on which the refund was claimed was stated to be, "True Bros., Inc., was incorporated June 3, 1929 with a paid in capital of approximately $134,000. On April 14, 1933 the stockholders donated one-half of their holdings to surplus. In preparing Form 1121, money paid in for stock was incorrectly shown as $100,000."

Thereafter a revenue agent examined the books of the plaintiff and filed a report of his investigation, dated November 8, 1946 and submitted to the plaintiff on June 20, 1947. In this report the agent allowed the increase in the amount of paid in capital from $100,000 to $133,158.54. This had the effect of increasing the plaintiff's excess profits credit for 1944, and thus reduced the amount of tax due. The agent also allowed a carry-over to the 1944 tax of an unused excess profits credit from plaintiff's tax year ending January 31, 1942, which arose as a result of the recomputation of the excess profits credit for 1942 using the corrected figures for paid in capital. This report showed an overassessment of $4,848.56 on plaintiff's excess profits tax for 1944, as well as overassessments for the years 1943 and 1945. These overassessments resulted in corresponding deficiencies in plaintiff's income tax for those years. As to these deficiencies plaintiff executed and filed on November 5, 1946 a Waiver of Restrictions on Assessment and Collection, Form 874, in accordance with the provisions of 26 U.S.C.A. § 272(d). This form, which had been prepared and submitted to plaintiff by the revenue agent in charge, contained also an acceptance of the overassessment as found by the agent, including the 1944 overassessment of $4,848.56.

On January 27, 1947 the agent in charge sent to plaintiff a letter suggesting that since the figures on Form 874 as executed by plaintiff were tentative and might not be finally determined until after the three year period provided in 26 U.S.C.A. § 322(b) (1), plaintiff to protect its rights should file a formal claim for the overassessments. A copy of Form 843 was enclosed to be filled out by the plaintiff.

No formal claim was filed by plaintiff until October 18, 1947 when plaintiff submitted on Form 843 a claim for refund of excess profits taxes for the year ending January 31, 1944 in the amount of $5,442.99. In the statement of grounds for refund this claim incorporated computations showing all the allowances made by the investigating agent. This claim was admittedly filed after the three year period of limitations had expired, but recited that it was made as an amendment to an informal claim filed on Form 874 on November 5, 1946.

On November 12, 1947 the Commissioner sent to plaintiff a supplemental report in which the carry-over of unused excess profits credit from 1942 to 1944, previously allowed by the agent, was disallowed on the ground that such carry-over had not been claimed by plaintiff either in its original return or in its claim for refund filed on October 17, 1946. On March 31, 1949 the Commissioner sent to plaintiff a certificate of overassessment for the year ending January 31, 1944 in the amount of $1,824.98. On April 14, 1949 both formal claims submitted by plaintiff were disallowed to the extent not previously allowed. The overassessment of $1,824.98 has been repaid to the plaintiff.

This action is concerned solely with plaintiff's contention that a further refund is due based on the carry-over to 1944 of the unused 1942 credit arising from application of the corrected figure for paid in capital to the computation of the 1942 credit. Defendant's refusal to pay this refund appears to be based solely on its contention that plaintiff failed to make timely application for this refund. Plaintiff argues (1) that the claim filed on October 7, 1946 was a sufficient and timely claim for the whole amount by which the 1944 tax was overpaid and (2) that even if this is not so, that either the 1946 claim or the 1947 waiver was an informal claim that could be perfected by the claim filed on October 18, 1947.

Plaintiff's 1946 claim was sufficient to cover not only the refund which it has already received, but the further refund which it now seeks to recover. The applicable Treasury Regulations 111, § 29.322-3 requires that "* * * The claim must set forth in detail and under oath each ground upon which a refund is claimed and facts sufficient to apprise the Commissioner of the exact basis thereof." The sufficiency of the claim must be judged in the light of the purpose for which it is required, that is, to give the agents of the government notice of existence of the demand, and such information as to its nature and grounds as...