Proceeding by Virginia G. Dunnington against the United States to recover back deficiency assessments with interest.
Petition dismissed.
In this case plaintiff seeks to recover $11,735.39 with interest, representing a deficiency in tax of $9,269.14 and interest of $2,468.19 paid for 1922.
Special Findings of Fact
1. March 15, 1923, plaintiff filed his income-tax return for 1922 wherein he reported a net loss and no tax due for that year.
Thereafter, after an audit of that return in connection with a revenue agent's report thereon and conferences held with respect thereto, the Commissioner mailed to plaintiff a deficiency notice on February 2, 1927, advising him of his determination of a deficiency for 1922 of $9,269.14 and also of an overassessment for 1923 of $1.94.
2. March 31, 1927, plaintiff appealed to the United States Board of Tax Appeals from the Commissioner's determination. However, no hearing was ever had before the Board on that appeal. November 5, 1927, plaintiff's counsel filed with the Board a motion to dismiss reading as follows:
"Whereas your Petitioner has decided not to prosecute this case further;
"And whereas, said Petitioner now consents to the assessment of the Deficiency set forth in Sixty Day Department Letter from the Commissioner of Internal Revenue, dated February 2, 1927, viz:
Deficiency Overassessment in Tax
1922 .......... $9,269.14 ..... 1923 .......... ......... $1.94
"It is hereby moved that the Petition be dismissed."
A duplicate copy of that motion was served upon the General Counsel of the Bureau of Internal Revenue who was representing the Commissioner before the Board.
3. November 30, 1927, the Board entered the following order of dismissal:
"This proceeding having been called from the Day Calendar of November 30, 1927, on motion of counsel for the petitioner to dismiss the proceeding, without objection by counsel for the respondent, it is hereby
"Ordered that the motion be and the same is hereby granted and the proceeding dismissed. The amount of the deficiency is $9,269.14 for the year 1922 as determined by the Commissioner."
4. January 7, 1928, the Commissioner signed an assessment list which included an assessment against plaintiff of a deficiency for 1922 of $9,269.14 and interest thereon of $2,468.19, that is, a total of $11,737.33. The interest assessed represented interest upon the deficiency prorated to the four installment dates at the rate of 6 percent per annum from the installment dates in 1923 to January 7, 1928, the date of the assessment of the tax.
The assessment list contained a notation: "Collector: Withhold demand pending comparison 1923 overassessment." The making of the assessment and the crediting of the overassessment for 1923, after having been determined to be an overpayment, were carried out under the offset practice which was being followed in the Internal Revenue Bureau at that time as outlined in finding 18 in the case of the Eastman Kodak Co. v. United States, 82 Ct.Cl. 504, 518, 13 F. Supp. 435. The "Remarks" column of the assessment list did not contain either the word "agreement" or the word "jeopardy," although it was the customary practice in the Bureau of Internal Revenue at that time to include the word "agreement" in that column in cases where the taxpayer had agreed to an immediate assessment and collection of the assessment and also to include the word "jeopardy" in those cases where the assessment was a jeopardy assessment.
Plaintiff never filed any written consent or waiver under section 274(a) of the statutory restrictions upon the assessment and/or collection of the deficiency for 1922 other than the extent to which a consent or waiver might be inferred from the motion to dismiss filed with the United States Board of Tax Appeals.
5. The assessment list was received in the office of the collector at Baltimore, Maryland, on or prior to January 11, 1928, and on February 20, 1928, the collector issued a notice and demand for payment of the total assessment less $1.94, the overassessment for 1923; that is, $11,735.39. In the meantime, January 24, 1928, the Commissioner signed a schedule of overassessments allowing an overassessment in favor of plaintiff for 1923 of $1.94, and on the same day that amount was applied as a credit in partial satisfaction of the deficiency assessed for 1922.
March 1, 1928, plaintiff paid $3,735.39 of the above assessment, and following the issuance by the collector, on March 23, 1928, of a warrant of distraint for the balance of the assessment, plaintiff paid such balance in four equal installments of $2,000 on June 3, September 6, and December 12, 1928, and March 6, 1929.
6. On his March 1929 assessment list the Commissioner assessed $641.33 as additional interest due under section 250(e), Revenue Act of 1921, for failure on the part of plaintiff to pay the deficiency assessment for 1922 within ten days after notice and demand therefor, such amount being at 1 percent per month. April 8, 1929, plaintiff filed with the collector an offer in compromise with respect to such interest reading in part as follows:
"The sum of $320.67 is hereby tendered voluntarily with request that it be accepted as a compromise offer and that release be granted the undersigned from the following liability resulting from the violation or failure specified: In lieu of 12% interest, the above amount being equivalent to 6% interest.
"The following facts and reasons are submitted as grounds for acceptance of the offer: The government was put to no expense in making the collection, the instalment payments having been voluntarily made by the taxpayer out of current earnings as at the time the additional tax was assessed the taxpayer was unable to pay in full. The imposition under such circumstances of interest at 12% imposes an undue hardship on the taxpayer."
On the same day the collector recommended that the offer in compromise be accepted and forwarded it to the Commissioner for his approval. May 9, 1929, the Commissioner notified plaintiff of his acceptance of the offer in compromise, his letter of that date reading in part as follows: "The Commissioner of Internal Revenue has considered the proposition and decided under date of May 1, 1929, with the advice and consent of the Secretary of the Treasury, to accept the amount heretofore paid and deposited in full settlement of the liability above described."
7. March 10, 1931, plaintiff filed a claim for refund of $11,737.33, the tax and interest theretofore paid for 1922 as heretofore shown, the basis of such claim reading in part as follows:
"The deficiency in tax was assessed and/or collected at a time when the act of so doing was prohibited, or not permitted by the Revenue Laws.
* * *
"It is therefore claimed that the assessment and/or collection were made in violation of the provisions of the Internal Revenue Laws, relating to the matter. Of the Revenue Act of 1926, particular sections which have been violated or not complied with are 283(a), 274(h), 274(a), 274(b), 277(a)(2), and 278(d) [ 44 Stat. 63, 55, 58, 59].
"An overpayment has thus been made and claim for refund is therefore hereby made under the provisions of Section 284 of the Revenue Act of 1926 [ 45 Stat. 66] and/or under the provisions of Section 3228 of the Revised Statutes for the refund thereof, plus interest thereon as provided by law."
8. July 9, 1931, the Commissioner advised plaintiff that his claim for refund for 1922 would be disallowed, giving reasons therefor, and September 4, 1931, the Commissioner advised plaintiff that the claim was disallowed on a schedule of that date. These notices are made a part hereof by reference.
LITTLETON, Judge.
In this case it appears that the Commissioner determined a deficiency in respect of the tax of plaintiff for 1922 and on February 2, 1927, mailed to plaintiff a deficiency notice. Within sixty days thereafter plaintiff filed a petition with the Board of Tax Appeals and on November 5, 1927, filed with the Board a motion to dismiss its appeal on the ground that it did not desire further to prosecute the same, and, in that motion, plaintiff set forth that it consented to assessment of the deficiency set forth in the Commissioner's deficiency notice of February 2, 1927. A duplicate copy was mailed to the General Counsel who was representing the Commissioner before the Board. Accordingly the Board entered a judgment on November 30, 1927, and on January 7, 1928, the Commissioner assessed the deficiency, together with interest to date of assessment. Thereafter, on February 20, 1928, the collector mailed to plaintiff a notice and demand for payment of the assessment less a certain overassessment for another year, and on March 1, 1928, plaintiff paid a portion of the amount assessed and the balance was paid on certain dates between June 3, 1928, and March 6, 1929.
On these facts it is clear that plaintiff is not entitled to recover. The plaintiff specifically consented on November 5, 1927, to assessment of the deficiency determined by the Commissioner. This consent justified the Commissioner in assessing and collecting the tax. The taxpayer's consent to assessment of the deficiency as determined by the Commissioner carried with it the right to collect. He specifically agreed to the deficiency and there was thereafter no basis for any objection by him to its assessment and collection. No objection was made to the assessment or collection until March 1931. See Lehigh Portland Cement Company v. United States, Ct.Cl., 30 F. Supp. 217, decided this date.
Plaintiff is not entitled to recover and the petition is dismissed. It is so ordered.