Court of Claims.
*291 *292 *293 Robert Ash, of Washington, D. C., for plaintiff.
J. W. Hussey, of Washington, D. C., and Charles B. Rugg, Asst. Atty. Gen., for the United States.
Before BOOTH, Chief Justice, and LITTLETON, WHALEY, WILLIAMS, and GREEN, Judges.
LITTLETON, Judge.
The first contention of the plaintiff is that the written consent executed by him waiving the statute of limitation for assessment and collection of a deficiency against him for 1917 was executed after the expiration of the statute of limitation; that it was obtained by duress, and was therefore invalid. He further insists that, since the period of limitation for making an additional assessment for 1917 expired prior to June 2, 1924, and the waiver in question was given after that date and before the enactment of the Revenue Act of 1926, the waiver in question is invalid under the decision of the Circuit Court of Appeals for the Second Circuit in Uncasville Mfg. Co. v. Commissioner, 55 F.(2d) 893, 895, decided February 1, 1932. We find no merit in the contention of the plaintiff that the waiver was invalid because executed after the expiration of the statute of limitations, Stange v. United States, 282 U.S. 270, 51 S. Ct. 145, 75 L. Ed. 335, nor in the claim that it was obtained under duress.
The matter of the computation of the partnership's profits tax under the special relief provisions of section 210 of the Revenue Act of 1917 was entirely within the discretion of the Commissioner. Williamsport Wire Rope Co. v. United States, 277 U.S. 551, 48 S. Ct. 587, 72 L. Ed. 995. Had the Commissioner proceeded to collect from the partnership the excess profits tax due by it under the normal tax provisions of the Revenue Act of 1917 on its income for that year, as he had a right to do, such tax would have amounted to $100,005.14, and there would have been no overassessment against the partnership and no additional tax due by the partners. It cannot be said that a waiver executed by the plaintiff in order to obtain a reduction in the amount of the profits tax due by the partnership through a computation under the relief provisions of the statute was exacted by duress. He executed the waiver because it was to his advantage to do so. The Commissioner was not required to compute the tax of the partnership under the special relief provision, and had he declined to do so, neither the partnership nor the plaintiff would have had any legal right to complain. Maas v. United States, 282 U.S. 822, 51 S. Ct. 33, 75 L. Ed. 734. Any adjustment in the profits tax liability of the partnership necessitated a corresponding adjustment in the distributive interests of the partners, and a reduction of partnership income increased the taxable income of the individual partners. The Commissioner therefore advised the plaintiff and the other partner of McDonnell & Truda that, if waivers of the statute of limitation with respect to their individual tax liability for 1917 should be filed by them, he would give consideration to the determination of the profits tax of the partnership under the special relief provisions of section 210. Accordingly, the plaintiff duly executed such waiver. He was not forced to do so, and the results obtained as a result of the execution of the waiver were favorable to him.
The case of Uncasville Mfg. Co. v. Commissioner, supra, holds that, where the statutory period expired prior to June 2, 1924, waivers executed after that date and before the approval of the Revenue Act of 1926 were invalid.
We have carefully considered the decision of the learned Circuit Court of Appeals for the Second Circuit, but we are unable to concur in the conclusion that a waiver executed under such circumstances is invalid and that a tax collected on the basis thereof must be refunded. Burnet v. Chicago Railway Equipment Co., 282 U.S. 295, 51 S. Ct. 137, 75 L. Ed. 349; Brown & Sons Lumber Co. v. Burnet, 282 U.S. 283, 51 S. Ct. 140, 141, 75 L. Ed. 343; Aiken v. Burnet, 282 U.S. 277, 51 S. Ct. 148, 75 L. Ed. 339; Stange v. United States, supra.
In the Uncasville Case, the court said:
"Confessedly, had the time for assessment expired after June 2, 1924, the waivers would have been good, though executed after the expiry of the time to assess or collect. Burnet v. Railway Equipment Co., 282 U.S. 295, 51 S. Ct. 137, 75 L. Ed. 349. However, section 278 (e) of the Act of 1924 (26 USCA § 1062 note) declared that the section as a whole should not allow the assessment or collection of a tax, barred by existing limitations on June 2, 1924. Subdivision (c) of section 278 (26 USCA § 1060 note) is necessary to the assessments because they depended upon the waivers, and there was no other law regulating waivers in effect after June 2, 1924. Thus if subdivision (e) confines subdivision (c) to cases where the assessment was not barred on June 2, 1924, the company is right. In spite of some intimations in Burnet v. *294 Chicago Railway Company, which, however, expressly reserved the point, we think that an analysis of section 278 (26 USCA §§ 1058, 1059 and §§ 1060-1062 notes) as a whole does not admit of any other construction. * * *"
In none of the cases cited was collection barred on the date of the enactment of the Revenue Act of 1924; however, in Aiken v. Burnet, supra, a waiver had been given before the enactment of the Revenue Act of 1921 (42 Stat. 227), which fixed a limitation period of five years. The court held that the taxpayer had sufficient authority, in the absence of any statute, to execute a valid waiver, and that the Commissioner, under the same circumstances, had authority to accept such waiver and bind the government. The court further held that a waiver signed is valid to extend the subsequently enacted limitation upon collection. Other waivers were secured in the Aiken Case under the Revenue Act of 1921, and were held valid to authorize assessment on March 12, 1925. Again in Brown & Sons Lumber Co. v. Burnet, supra, the court infers that the last of the three waivers involved in that case would have been sufficient standing alone. A footnote in the opinion states: "Inasmuch as the second and third waivers were in themselves sufficient to extend the period for collection, the first waiver may be disregarded in this connection, as was done by the lower court. See 38 F.(2d) 428." In Brown & Sons Lumber Company Case, supra, the first waiver was filed December 13, 1920, and the second on December 10, 1923; the third waiver was filed October 25, 1924. In the Uncasville Mfg. Company Case the court construed section 278 (e) of the Revenue Act of 1924 as a prohibition upon the giving of a waiver by a taxpayer and the acceptance thereof by the Commissioner. We are unable to find any provision in the 1924 Revenue Act which precludes a taxpayer from voluntarily waiving the benefits of the statute of limitation, nor do we find anything in such act prohibiting the Commissioner's acceptance of such waiver. This view seems not to have been presented in the Uncasville Mfg. Company Case, supra; it was not commented upon by the court in its opinion. The court merely stated that subdivision (e) of section 278 of the Revenue Act of 1924 limits the preceding subdivision (e) of section 278 so that subdivision (c) does not authorize the extension of time for assessment by a waiver executed after the enactment of the Revenue Act of 1924 where the time for assessment expired prior to the enactment of that act. In Burnet v. Chicago Railway Equipment Co., supra, in footnote 5, page 300 of 282 U. S., 51 S. Ct. 137, 139, 75 L. Ed. 349, to the statement in the opinion that "We need not determine whether respondent is correct in assuming that section 278 (e) qualifies section 278 (c) in respect to waivers on assessment of taxes barred prior to June 2, 1924," it is stated that "Subdivision (e) cannot be said to qualify every other subdivision in section 278. Nothing indicates an intention to have it limit the effect of section 278 (a), 26 USCA § 1058, which permits assessment to be made or suit to be brought at any time in the case of a false or fraudulent return or a failure to file any return. * * * Nor is there any indication that it should qualify subsection (c) which provides for the giving of waivers." (Italics ours.) We conclude, therefore, that the Revenue Act of 1924 does not preclude a taxpayer from waiving the benefit of the statute of limitation, and that a waiver given after the enactment of the Revenue Act of 1924, in a case where the statutory limitation had expired prior thereto, and before February 26, 1926, is valid.
The plaintiff next contends that the Commissioner failed to comply with the statutory requirement of assessment and collection of the tax for the reason that he did not send to the plaintiff a notice of the deficiency, as required by section 274 (a) of the Revenue Act of 1926 (26 USCA § 1048). We think this contention of the plaintiff is unimportant as affecting his right to institute a proceeding before the United States Board of Tax Appeals under the Revenue Act of 1926 upon receipt of notice of assessment, which would have constituted the Commissioner's final determination had the Commissioner failed to mail him a formal notice prior to assessment. However, the facts show that the Commissioner fully complied with the requirements of section 274. May 22, 1926, the Commissioner notified the plaintiff of a proposed assessment of a deficiency for 1917, allowing him thirty days within which to protest the same or to execute a waiver of his right to file a petition with the Board of Tax Appeals consenting to immediate assessment. The waiver was not executed, but plaintiff filed a protest setting forth that the correct tax was $4,386.15 instead of $4,549.03, as proposed by the Commissioner in the thirty-day letter. The protest was considered and allowed, and thereafter, on July 12, 1926, the Commissioner sent the plaintiff a written notice of his final determination of a deficiency for 1917 in the amount of $4,386.15. This notice *295 complied with section 274 (a) of the Revenue Act of 1926. The Commissioner was not required specifically to advise plaintiff in this notice of his right to institute a proceeding before the Board. The plaintiff did not institute a proceeding before the Board of Tax Appeals with respect to this deficiency, and thereafter, on October 9, 1926, more than sixty days after the mailing by the Commissioner of the notice of his final determination, the Commissioner assessed the deficiency and collected the same October 23, 1926. Section 274 (a) of the Revenue Act of 1926 does not require any special form of notice, but provides only that, if the Commissioner determines that there is a deficiency, he is authorized to send notice of such deficiency to the taxpayer by registered mail. The notice of July 12, 1926, which was received by the plaintiff, complied with this requirement.
The petition is dismissed. It is so ordered.
