United States v. Southern Lumber Co.

• Decision Date: 11 August 1931
• Docket Number: No. 9007.,9007.
• Citation: 51 F.2d 956
• Parties: UNITED STATES v. SOUTHERN LUMBER CO.
• Court: U.S. Court of Appeals — Eighth Circuit

51 F.2d 956 (1931)

UNITED STATES v. SOUTHERN LUMBER CO.

No. 9007.

Circuit Court of Appeals, Eighth Circuit.

August 11, 1931

G. T. Sullins, Asst. U. S. Atty., of Ft. Smith, Ark., and M. W. Goldsworthy, Sp. Atty., Bureau of Internal Revenue, of Washington, D. C. (W. N. Ivie, U. S. Atty., of Ft. Smith, Ark., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and Lester L. Gibson, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., on the brief), for the United States.

H. T. Harrison, of Little Rock, Ark. (Edward L. Wright, of Little Rock, Ark., on the brief), for appellee.

Before KENYON and BOOTH, Circuit Judges, and OTIS, District Judge.

KENYON, Circuit Judge.

This suit was brought to recover a portion of the income tax assessed against appellee, a corporation, for the years 1918 and 1919, together with interest thereon.

Parties will be designated as in the trial court.

The undisputed facts are as follows: Plaintiff filed its return as to the 1918 tax on June 12, 1919, showing a total tax due of $122,423.41, which was duly assessed by the Commissioner of Internal Revenue (hereinafter termed Commissioner) on September 24, 1919. On September 30, 1919, plaintiff filed claim for the abatement of $90,406.79 of the tax shown due on its return. The tax was finally determined by the Commissioner on February 3, 1926. Additional protests were filed by the taxpayer on April 25, 1926, and final conference was held on July 2, 1926. The unpaid balance of $82,423.49, principal, was paid October 19, 1926. Interest on the amount in the sum of $34,119.01 was paid November 30, 1926. The claim for abatement was rejected November 16, 1926. As to this tax three waiver agreements were entered into between the Commissioner and the taxpayer. The first dated January 23, 1924, extended the period for determination, assessment, and collection of the tax for the year involved to June 12, 1925. The second waiver dated January 8, 1925, extended the period for making any assessment of income or excess profit tax under any return for the year 1918 to December 31, 1925. The third waiver dated December 17, 1925, extended the period for making any assessment of income or excess profit tax under any return for the year 1918 to December 31, 1926. October 6, 1928, claim for refund of $82,423.49 was filed. May 25, 1929, claim for refund of interest in the sum of $34,119.01 was filed. Both claims were rejected in July, 1929. The proceedings relative to the 1919 tax were similar except as to dates. The return for 1919 was filed March 15, 1920, showing a tax due of $89,688.63, which was duly assessed by the Commissioner on May 29, 1920. March 17, 1920, plaintiff filed with the Commissioner a claim for the abatement of $55,880.70 of the tax shown due on its return. The tax was ultimately determined on February 3, 1926. Additional protests were filed by the taxpayer on April 25, 1926, and final conference was held on July 2, 1926. The claim of the taxpayer was allowed on November 12, 1926, for $16,216.67, and rejected for $39,669.07. This sum was paid to the collector on October 19, 1926. Interest on the tax assessed in the sum of $14,801.45 was paid on November 30, 1926. Two waivers with relation to this matter were entered into by the taxpayer and the Commissioner. One dated January 8, 1925, extended the period for making any assessment of income or excess profit tax for the year 1919 to December 31, 1925. The second waiver was dated December 19, 1925, which extended the period for making any assessment of income or excess profit tax for the year 1919 to December 31, 1926. Claim for refund was filed October 6, 1928, for $39,669.07, the amount rejected in claim for abatement. This refund claim was rejected in November, 1928. A supplemental refund claim was also rejected.

The case was tried by the court without a jury. Motion for judgment made on behalf of defendant was overruled, the findings of fact and the conclusions of law requested by defendant were refused, and judgment was entered against defendant for the sum of $171,013.02 with interest.

The trial court held that the waivers were executed by reason of threat of distraint and after all rights of the government to collect the tax had expired by virtue of the statute of limitations, and therefore payments of the taxes could be recovered from the government; that section 611 of the Revenue Act of May 29, 1928 (26 USCA § 2611), was not applicable as it was enacted after liability for the taxes had been extinguished.

Plaintiff contends that the waivers given do not extend the time for collection, the assessment not being made within the extended period; that section 611 of the Revenue Act of 1928 does not apply, and that collection was not stayed thereby; that the action is brought under section 3220 of the Revised Statutes (26 USCA § 149) for an erroneous or illegally assessed tax and not as one for an overpayment under section 607 of the Revenue Act of 1928 (26 USCA § 2607). It concedes that the government had a right to collect under an assessment made pursuant to an assessment waiver, but that such is not this case. It is the position of defendant that the collection of the taxes in question was made within the statutory period for collection because of the extensions granted by the waivers; further that the filing of the claim for abatement operated under section 611 of the Revenue Act of 1928 as a stay, and therefore the payments could not be considered as overpayments under the provisions of section 607 of said act relative to payments made after the expiration of the period of limitation properly applicable thereto.

A number of statutes are involved, which we group in the footnotes for convenient reference.¹

The consideration of this case falls into the divisions: (a) The effect of the waivers upon the applicable statute of limitations, (b) the effect of section 611 of the Revenue Act of 1928. It is unnecessary to consume space by setting out all of these waivers. The two relating to the 1919 tax are practically the same as the second and third relating to the 1918 tax, the difference being as to the years. We will set out therefore only the waivers with relation to the 1918 tax. The first, entered into January 23, 1924, is as follows:

"January 23, 1924.

"Income and Profits Tax Waiver.

"In pursuance of the provisions of subdivision (d) of section 250 of the Revenue Act of 1921, Southern Lumber Company, of Warren, Arkansas, and the Commissioner of Internal Revenue, hereby consent to a determination, assessment, and collection of the amount of income, excess-profits, or war-profits taxes due under any return made by or on behalf of the said Southern Lumber Company for the years 1917 and 1918 under the Revenue Act of 1921, or under prior income, excess-profits, or war-profits tax Acts, or under Section 38 of the Act entitled An Act to provide revenue, equalize duties, and encourage the industries of the United States, and for other purposes, approved August 3, 1909. This waiver is in effect from the date it is signed by the taxpayer and will remain in effect for a period of one year after expiration of the statutory period of limitation, or the statutory period of limitation as extended by any waivers already on file with the Bureau, within which assessments of taxes may be made for the year or years mentioned.

"Signed Southern Lumber Company Taxpayer "By Fred Wyman, President. "D. H. Blair (SA) Commissioner."

It is to be noted that this waiver consents to a later "determination, assessment and collection" of the amount of the tax. Little objection is found by plaintiff to this waiver.

The second waiver, dated January 8, 1925, is as follows:

"January 8, 1925.

"Income and Profits Tax Waiver.

"(For taxable years ended prior to March 1, 1921.)

"In pursuance of the provisions of existing Internal Revenue Laws Southern Lumber Company, a taxpayer of Warren, Arkansas, and the Commissioner of Internal Revenue hereby waive the time prescribed by law for making any assessment of the amount of income, excess-profits, or war-profits taxes due under any return made by or on behalf of said taxpayer for the year 1918 under existing revenue acts, or under prior revenue acts. This waiver of the time for making any assessment as aforesaid shall remain in effect until December 31, 1925, and shall then expire except that if a notice of a deficiency in tax is sent to said taxpayer by registered mail before said date and (1) no appeal is filed therefrom with the United States Board of Tax Appeals then said date shall be extended sixty days, or (2) if an appeal is filed with said Board then said date shall be extended by the number of days between the date of mailing of said notice of deficiency and the date of final decision by said Board.

"Southern Lumber Company, Taxpayer "By Fred Wyman, President. "D. H. Blair, Commissioner."

This extends time for making assessment, etc. — does not use the words "determination" and "collection."

The third waiver, dated December 17th, 1925, is as follows:

"December 17th, 1925.

"In pursuance of the provisions of existing Internal Revenue Laws Southern Lumber Company, a taxpayer of Warren, Arkansas, and the Commissioner of Internal Revenue hereby waive the time prescribed by law for making any assessment of the amount of income, excess-profits, or war-profits taxes due under any return made by or on behalf of said taxpayer for the year 1918, under existing revenue acts, or under prior revenue acts.

"This waiver of the time for making any assessment as aforesaid shall remain in effect until December 31, 1926, and shall then expire except that if a notice of deficiency in tax is sent to said taxpayer by registered mail before said date and (1) no appeal is filed therefrom with the United States Board of Tax Appeals then said date shall be extended sixty days, or (2) if an appeal is filed with said Board then said date shall be...