Wilmington Gasoline Corp. v. Comm'r of Internal Revenue
| Decision Date | 12 December 1956 |
| Docket Number | Docket No. 45220. |
| Citation | 27 T.C. 500 |
| Parties | WILMINGTON GASOLINE CORPORATION, A CALIFORNIA CORPORATION, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
John A. Gorfinkel, Esq., for the petitioner.
Aaron S. Resnik, Esq., for the respondent.
Where original timely claim for refund claimed carryback of unused excess profits credit from fiscal 1946 to fiscal 1944 based upon invested capital credit, but amended claim was filed after the date on which limitations would have expired on an original claim, the amended claim likewise claiming carryback of unused excess profits credit from and to the fiscal years referred to above, but based upon allowance of constructive average base period net income under section 722, and where the internal revenue agent in charge and the Excess Profits Tax Council were advised as to the nature of the claims and gave tentative effect thereto by allowance of constructive average base period net income, including constructive average base period net income for carryback purposes, all occurring a substantial period of time before ultimate determination by respondent disallowing the carryback on the sole ground that the claim had not been timely filed, held, that respondent waived any objection to the insufficiency of the original claim, that the amended claim was fused with the original claim and as such was timely filed, and that the carryback of the unused credit based upon constructive average base period net income under section 722 from fiscal 1946 to 1944 is allowable.
Respondent determined an overassessment of excess profits tax in the amount of $14,174.40 and a deficiency in income tax of $12,450.34 for the fiscal year ended April 30, 1944.
The issue presented is whether petitioner has filed a timely and sufficient claim for unused excess profits credit based upon the use of constructive average base period net income for carryback purposes, so that constructive average base period net income may be employed in computing the amount of unused excess profits credit for its fiscal year ended April 30, 1946, for carryback purposes to its fiscal year ended April 30, 1944. An inherent factor in the problem is whether, assuming the insufficiency for the foregoing purposes of the original claim filed, such insufficiency was cured by waiver on the part of respondent and the filing by petitioner of an amended claim after the date upon which the time for filing an original claim would have expired.
All of the facts are stipulated and are incorporated herein by reference.
The petitioner is a California corporation with its principal office at Los Angeles, California.
Petitioner's fiscal and taxable year ends on April 30 of each calendar year. Petitioner filed with the collector for the sixth district of California an excess profits tax return and an amended excess profits tax return for the year ended April 30, 1944.
Petitioner filed applications on Form 991 for relief under section 722 of the Internal Revenue Code for each taxable year ended April 30, 1941, to April 30, 1945, inclusive. On its application for relief on Form 991 for the year ended April 30, 1941, petitioner stated: ‘This application is filed in order to support taxpayer's right to unused excess profits credit carry over.’ On its application for relief on Form 991 for the year ended April 30, 1944, (filed July 11, 1944) petitioner did not refer to any unused excess profits credit carryover or carryback. No application for relief on Form 991 was filed for the year ended April 30, 1946.
In July 1946, petitioner filed a claim for refund on Form 843, the claim stating that it was based on ‘Carryback of unused excess profits credit for the year ended April 30, 1944. Detailed computation attached. The computation attached was for a carryback of unused excess profits credit based on invested capital from 1946 to 1944. It did not make any reference to a carryback based upon constructive average base period net income under section 722.
In 1948, a refund was allowed for the year ended April 30, 1944 (pursuant to the claim for refund filed in July 1946), and a certificate of overassessment issued. At approximately the same time (the time being immaterial in this proceeding), taxpayer was also notified that, except to the extent previously allowed, said refund claim was disallowed. The certificate of overassessment stated that it was ‘in accordance with adjustments to your tax liability to which you have agreed.’ That statement referred to a letter signed by petitioner, dated April 4, 1947, addressed to the internal revenue agent in charge, transmitting executed waiver Forms 874 and 872 with respect to the fiscal year April 30, 1943. The letter contained the following sentence:
Our agreement to the ‘standard issues' as determined by the agent's report for the years April 30, 1941 to April 30, 1943 inclusive, is not to be considered an agreement to the rejection of any of our rights under Section 722.
On June 15, 1950, petitioner filed a claim on Form 843 for refund for the year ended April 30, 1944, computed according to a carryback from 1946 of an unused excess profits tax credit based on constructive average base period net income. That claim stated: ‘This claim is to amend and supplement * * * (the) claim filed in July 1946, to apply to the carry back of unused excess profits credit from the year ended April 30, 1946, based on the excess profits credit allowable for such year computed under the provisions of Code Section 722.’
On December 1, 1950, the internal revenue agent in charge mailed to petitioner a report dated October 10, 1950. The letter of transmittal and page 1 of the report are as follows:
December 1, 1950.
WILMINGTON GASOLINE COMPANY
LOS ANGELES, CALIFORNIA
Report dated: 10/10/50
Fiscal Years: 4/30/41 to 4/30/46, inclusive.
GENTLEMEN:
There is enclosed for your information and files a copy of a report covering the examination of your application(s) for relief under Section 722 of the Internal Revenue Code for the year(s) indicated, recently made by a representative of this office. You have indicated your agreement to the constructive average base period net income as shown in the report.
This letter is not a final notice of determination under Section 732 of the Internal Revenue Code. In accordance with established procedure the recommendations contained herein will be certified to the Excess Profits Tax Council for review and approval. If approved, the recomputation of your tax liability which will be furnished you will represent a determination of the amount of your income and excess-profits tax liability for the year(s) under consideration. If not approved, you will be so advised and afforded an opportunity for hearing before the Excess Profits Tax Council.
Your prompt acknowledgement of the receipt of this letter and related papers upon the enclosed form will be appreciated.
Very truly yours,
(s) George D. Martin Internal Revenue Agent in Charge
Enclosures:
Copy of Sec. 722 Report
Form of receipt
Taxpayer: WILMINGTON GASOLINE PLACE Los Angeles, California
Co. October 10, 1950
Application(s) for relief filed by the above-named corporation in accordance with the provisions of section 722 of the Internal Revenue Code have been subjected to field investigation. After careful consideration the following recommendations are made:
+-----------------------------------------------------------------+
¦SUMMARY ¦
+-----------------------------------------------------------------¦
¦ ¦ABPNI ¦
+----------+------------------------------------------------------¦
¦Year ended¦ ¦ ¦Used on ¦ ¦ ¦
+----------+-----+----------+--------------+----------+-----------¦
¦ ¦Claim¦Date claim¦return or ¦CABPNI ¦CABPNI ¦
+----------+-----+----------+--------------+----------+-----------¦
¦ ¦No. ¦filed ¦allowed * ¦claimed ¦allowed ¦
+----------+-----+----------+--------------+----------+-----------¦
¦4/30/41 ¦4755 ¦9/7/43 ¦* $22,251.77¦$72,826.56¦a $30,170¦
+----------+-----+----------+--------------+----------+-----------¦
¦4/30/42 ¦4756 ¦9/7/43 ¦* 21,900.45 ¦72,826.56 ¦56,707 ¦
+----------+-----+----------+--------------+----------+-----------¦
¦4/30/43 ¦22769¦9/3/43 ¦* 24,141.39 ¦72,826.56 ¦56,707 ¦
+----------+-----+----------+--------------+----------+-----------¦
¦4/30/44 ¦36368¦7/11/44 ¦* 18,426.57 ¦72,826.56 ¦56,707 ¦
+----------+-----+----------+--------------+----------+-----------¦
¦4/30/45 ¦42939¦1/15/46 ¦* 15,527.21 ¦72,826.56 ¦56,707 ¦
+----------+-----+----------+--------------+----------+-----------¦
¦4/30/46 ¦(a )¦ ¦ ¦ ¦(a ) ¦
+-----------------------------------------------------------------+
FN* Where invested capital credit was used on return or allowed give amount and mark with asterisk.
The contents of this report have been discussed in detail with:
+------------------------------------+
¦Mr. E. V. MCKENZIE ¦Attorney-in-fact¦
+-------------------+----------------¦
¦ ¦ ¦(capacity) ¦
+-------------------+----------------¦
¦Mr. H. E. ALBER ¦Attorney-in-fact¦
+-------------------+----------------¦
¦ ¦ ¦ ¦ ¦
+------------------------------------+
FNa A CABPNI in the amount of $56,707 is computed for fiscal year ended 4/30/46 for carry-back purposes to the extent applicable. A CABPNI in the amount of $30,170 is computed under the 1941 Act for the fiscal year ended 4/30/41, for carry-over purposes to the extent applicable.
On October 19, 1950, petitioner signed an agreement on Form EPC-1 consenting...
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