United States v. Havner

• Citation: 101 F.2d 161
• Decision Date: 31 January 1939
• Docket Number: No. 11257.,11257.
• Parties: UNITED STATES v. HAVNER.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

101 F.2d 161 (1939)

UNITED STATES v. HAVNER.^*

No. 11257.

Circuit Court of Appeals, Eighth Circuit.

January 31, 1939.

Louise Foster, Sp. Asst. to Atty. Gen. (James W. Morris, Asst. Atty. Gen., Sewall Key, J. Louis Monarch, and Lester L. Gibson, Sp. Assts. to Atty. Gen., E. G. Moon, U. S. Atty., of Des Moines, Iowa, and C. I. Level, Asst. U. S. Atty., of Denison, Iowa, on the brief), for appellant.

B. J. Flick, of Des Moines, Iowa, for appellee.

Before SANBORN, WOODROUGH, and THOMAS, Circuit Judges.

SANBORN, Circuit Judge.

The Government, on September 24, 1936, brought this action at law to recover unpaid income taxes for the year 1920 and the years 1923 to 1927, inclusive, assessed against H. M. Havner. After the case was at issue, it was, on motion of the taxpayer, transferred to the equity docket. It was tried to the court upon a stipulation of facts on November 30, 1937. The amounts and the validity of the assessments were not challenged, and the only controversy was as to whether their collection was barred by the applicable statute of limitations. The court reached the conclusion that the 1920 tax was barred on April 11, 1937; that the 1923 tax was barred on January 24, 1938; that the 1924, 1925 and 1926 taxes were barred on September 16, 1936, and that the 1927 tax was barred on May 25, 1937. A decree was entered on December 18, 1937, providing as follows:

"It is Ordered, Adjudged and Decreed, as follows:

"That plaintiff have judgment against the defendant on Count 1 of its petition for the sum of $12,294.07 as of November 30, 1937; but that no proceedings shall be had in this court for the enforcement of this judgment.

"That the plaintiff have judgment against the defendant on Count 2 of its petition for the sum of $3,707.24, as of November 30, 1937; but that no proceedings shall be had in this court for the enforcement of this judgment from and after the 24th day of January, 1938.

"That plaintiff have judgment against the defendant on Count 6 of its petition for the sum of $458.13, as of November 30, 1937; but that no proceedings shall be had in this court for the enforcement of this judgment.

"That counts 3, 4 and 5 of plaintiff's petition are dismissed."

The effect of this decree was to give the Government unenforceable judgments for the taxes for the years 1920 and 1927, and a judgment for the taxes for 1923 unenforceable after January 24, 1938, and to dismiss the Government's petition as to the taxes for other years. The Government has appealed.

Stated briefly, the facts of this case are as follows: The taxes in suit were all assessed between July 13, 1929, and November 21, 1931. On December 17, 1931, the taxpayer submitted to the Government an offer in compromise of all of the assessments, which offer contained a waiver of the statute of limitations reading as follows:

"* * * the taxpayer hereby expressly waives —

* * * * * *

"2. The benefit of any statute of limitations affecting the collection of the liability sought to be compromised, and in the event of the rejection of the offer, expressly consents to the extension of any statute of limitations affecting the collection or the liability sought to be compromised by the period of time (not to exceed two years) elapsed between the date of the filing of this offer and the date on which final action thereon is taken."

This offer in compromise was rejected on June 27, 1932. On January 31, 1933, the taxpayer made another offer in compromise containing a similar waiver. This offer was rejected on August 4, 1933. On February 16, 1935, the taxpayer submitted a third offer in compromise which contained a waiver reading as follows:

"* * * the proponent hereby expressly waives:

* * * * * *

"2. The benefit of any statute of limitations applicable to the assessment and/or collection of the liability sought to be compromised, and agrees to the suspension of the running of the statutory period of limitations on assessment and/or collection for the period during which this offer is pending and for one year thereafter."

This offer was rejected on April 19, 1935.

The applicable statute of limitations is § 276(c) of Title 26, U.S.C., 26 U.S.C.A. § 276(c), which reads as follows:

"(c) Collection after assessment. Where the assessment of any income tax imposed by this chapter has been made within the period of limitation properly applicable thereto, such tax may be collected by distraint or by a proceeding in court, but only if begun (1) within six years after the assessment of the tax, or (2) prior to the expiration of any period for collection agreed upon in writing by the Commissioner and the taxpayer before the expiration of such six-year period. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon."

All of the waivers here involved were made before the expiration of the six-year period, and their validity is not challenged.

The Government contends that the effect of the three separate waivers was cumulative and served to extend the six-year period for the collection of the taxes by two years, two months, and seventeen days; the first waiver tolling the statute for six months and ten days; the second, for six months and four days; and the third, for fourteen months and three days.

The taxpayer, on the other hand, contends that the first and second waivers cannot be considered as having tolled the statute, because they were superseded by the third waiver which extended the period of limitation for fourteen months and three days beyond the six-year period.

The court below was of the opinion that the period of limitation was extended by the third waiver for the period of fourteen months and three days, and that the first and second waivers were superseded by the third. D.C., 21 F.Supp. 985. If the court was correct in that regard, the collection of the taxes for all of the years except 1920, 1923 and 1927 was barred when this action was begun. If the contention of the Government is correct that the statute of limitations was tolled during the three periods when the three offers of compromise were under submission and consideration, then the action was commenced in time.

We think that the Government's contention must be sustained. The purpose of giving a waiver in connection with an offer in compromise is to enable the Government to consider the offer without suffering prejudice because of the running of the statute of limitations against collection of the tax while the offer is being considered. The taxpayer, in submitting such an offer and waiver, in effect requests the Government to withhold attempts to collect the tax while the offer is pending, and, in consideration of this forbearance on the part of the Government, consents to forego the benefit of having the statute of limitations run while his offer of settlement is pending. United States v. Fischer, 2 Cir., 93 F.2d 488, 489. Compare United States v. John Barth Co., 279 U.S. 370, 376, 49 S.Ct. 366, 73 L.Ed. 743.

This Court, in United States v. Southern Lumber Co., 8 Cir., 51 F.2d 956, 960, said with reference to such waivers:

"It is probable that had there been no waivers the government would have collected its taxes without any question arising as to the statute of limitations. Waivers are of quite general use in the adjustment of federal taxes. They need not be given prior to the expiration of the statutory period of limitation or such period as extended by valid waivers, but at any time with the effect of reviving liability. W. P. Brown & Sons Lumber Co. v. Commissioner of Internal Revenue (C.C.A.) 38 F. (2d) 425; Stange v. United States, 282 U. S. 270, 51 S.Ct. 145, 75 L.Ed. 335; Burnet v. Chicago Ry. Equipment Co., 282 U.S. 295, 51 S.Ct. 137, 75 L.Ed. 349. Their purpose is to give a longer period for the determination of tax liability where the time under the applicable statute of limitations is insufficient. The courts have tried to carry out this purpose, and while holding that the waiver is not a contract, Florsheim Bros. Drygoods Co. v. United States, 280 U.S. 453, 50 S.Ct. 215, 74 L.Ed. 542; Stange v. United States, 282 U.S. 270, 51 S.Ct. 145, 75 L.Ed. 335, they have in construing waivers considered the intention of the parties as an important factor. The taxpayer waives the time limitation, and while the signature of the Commissioner of Internal Revenue is required only for administrative purposes, Stange v. United States, 282 U.S. 270, 51 S.Ct. 145, 147, 75 L.Ed. 335; Burnet v. Chicago Ry. Equipment Co., 282 U.S. 295, 51 S.Ct. 137, 75 L.Ed. 349, the government under the waiver gives up its present right to collect, and its intention as well as that of the taxpayer is entitled to consideration."

In construing such waivers, the courts generally give effect to the...