The opinion
LANCASTER LENS CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
Lancaster Lens Co. v. Commissioner
Docket No. 11603.
United States Board of Tax Appeals
10 B.T.A. 1153 ; 1928 BTA LEXIS 3951 ;
March 2, 1928 , Promulgated
*3951 1. Jurisdiction. - The Board has no jurisdiction to determine appeals from deficiencies in tax imposed by statutes prior to the Revenue Act of 1916. Appeal of David B. Mills, 1 B.T.A. 199 .
2. Statute of Limitations. - The filing of an amended return does not extend the statutes of limitations contained in the various Revenue Acts. Appeal of National Refining Co. of Ohio, 1 B.T.A. 236 .
3. Invested Capital. - Held, that the invested capital for 1919 shall not be reduced in any amount by reason of an outlawed deficiency for 1918.
David J. Shorb, Esq., for the petitioner.
James L. Backstrom, Esq., for the respondent.
GREEN
*1153 In this proceeding the petitioner seeks a redetermination of its excise tax liability for the years 1910 and 1911 for which the respondent in his deficiency letter dated December 10, 1925, determined deficiencies of $49.38 and $98.14, respectively, and of its income and profits tax liability for the years 1918 and 1919 for which the respondent in the same letter determined deficiencies of $13,820.81 and $6,917.37, respectively. Two errors are assigned, namely, that *3952 the deficiencies for 1910, 1911 and 1918, are outlawed and that the respondent erred in reducing invested capital for 1919 by the 1918 outlawed deficiency prorated in accordance with article 845 of Regulations 45.
FINDINGS OF FACT.
The petitioner is a corporation organized under the laws of the State of Ohio.
On March 15, 1919, the petitioner filed with the Collector of Internal Revenue for the Eleventh District of Ohio a "tentative return and estimate of corporation income and profits taxes and request for extension of time for filing return" on Form 1031-T, requesting "An extension of 45 days in the time allowed for filing a completed return" for the calendar year 1918. At the time of filing the tentative return it paid the Collector $1,250 income and profits taxes for the calendar year 1918.
On April 25, 1919, it filed with the Collector for the same district its "corporation income and profits tax return for calendar year 1918" on Form 1120, and on April 26, 1919, it paid the Collector income and profits taxes in the amount of $186.36. This return *1154 showed a total tax liability of $1,436.36, computed on a net income of $13,417.86 set out in schedule form *3953 as follows: Gross sales $421,822.98
Less cost of goods sold 345,020.40
$76,802.58
Interest 156.61
Total gross income 76,959.19
Deductions:
Ordinary and necessary expenses $14,806.70
Compensation of officers 17,150.00
Repairs 12,152.65
Interest 36.66
Taxes 1,904.88
Bad debts 917.46
Depreciation 16,572.98
63,541.33
Net income 13,417.86
Attached to this return was a complete set of schedules itemizing and explaining each of the above items in detail. All of the blank schedules on the return were filled in where necessary and all questions asked on the return were answered. It was also signed and sworn to by both the petitioner's president and secretary. The return also bears the Income Tax Unit stamp "Office Audit - No Tax Due."
On October 15, 1924, the Income Tax Unit wrote the petitioner that an audit of its 1919 return disclosed a deficiency of $3,477.70 and granted it 30 days within which to file a protest. On November 12, 1924, in response to a request by the petitioner, it amplified its letter of October 15th. Nothing was said in either letter about the year 1918.
As a result of the above letters pertaining to *3954 the year 1919, the petitioner engaged an industrial engineer and public accountant to make "a thorough analysis of the income tax status of the Lancaster Lens Co., for years 1910 to 1923, inclusive." The engineer's and accountant's report embodied 56 pages and was completed on May 6, 1925. It showed additional taxes for some years and overassessments for others with a net additional tax of $30,664.53. Immediately preceding the accountant's signature to the report was the statement saying "We recommend that this report be submitted to the Treasury Department at once."
An amended return for the year 1918 was fully prepared and sworn to by the petitioner's president and treasurer on May 25, 1925, and submitted to the Treasury Department in Washington. This return disclosed a net income of $38,632.53 with a resulting tax liability of $15,257.17.
*1155 On December 10, 1925, the respondent issued a deficiency letter for several years in which he determined that the correct tax liability for the year 1918 was $15,257.17 and that the deficiency in respect of the tax shown by petitioner upon its original return for that year was $13,820.81. The petitioner now pleads the statute *3955 of limitations.
In computing the invested capital for 1919 the respondent deducted therefrom Federal income and profits taxes for 1918 in the amount of $15,257.17 prorated in accordance with article 845 of Regulations 45.
OPINION.
GREEN: The petition alleges and the answer admits that the "taxes in controversy are income and profits taxes for the calendar years 1910, 1911, 1918, and 1919." Congress did not give us jurisdiction to determine appeals from deficiencies in tax imposed by statutes prior to the Revenue Act of 1916 and we must therefore dismiss the appeal as far as it pertains to the years 1910 and 1911. . .
Regarding the year 1918 the respondent contends that the return filed on April 25, 1919, was not the return required by statute in that it did not include all items of income and deductions; that the amended return filed in 1925 was the return so required; and that in any event the voluntary filing of the amended return amounted in effect to the waiving of the statute of limitations. *3956 The identical question involved here has been before the Board many times in other cases and we have always held that the filing of an amended return did not extend the statute of limitations. See ; ; ; ; ; ; and . See also . Compare , and . In our opinion it is immaterial that the return filed on April 25, 1919, did not include all the income or deductions. There is no intimation that the return was fraudulently filed or that it did not disclose what the petitioner's officers believed was the correct tax liability at the time. Compare *3957 . In our opinion the return filed on April 25, 1919, was the return required by section 239 of the Revenue Act of 1918. In accordance with section 277(a)(2) of the Revenue Act of 1924, the time within which any deficiency in taxes for 1918 could be assessed *1156 had expired when the respondent issued his deficiency letter on December 10, 1925. Such deficiency may not be assessed or collected now. See section 277(a)(3) of the Revenue Act of 1926.
There is no deficiency for 1918. The deficiency for 1919 should be redetermined by restoring to invested capital for 1919 the amount by which invested capital was reduced by reason of the outlawed deficiency for 1918. The correct amount which should have been prorated and deducted was $1,436.36.
Judgment will be entered on 15 days' notice, under Rule 50.