author: Aiínold:

text:
    C. B. Crosby, Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 96401.
    Promulgated June 18, 1940.

      W. L. Sohnatterly, Esq., for the petitioner.

      Gene W. Reardon, Esq., for the respondent.
   OPINION.

Aiínold:

Petitioner appeals from a deficiency in income tax for 1986 of $68. Tbe deficiency resulted from respondent’s adjustment of a credit for dependents claimed by petitioner in the amount of $800 and allowed by respondent in the amount of seven-twelfths of $400, or $233.33.

Petitioner alleges, however, that the taxes in controversy are $331.14, and charges that respondent has erroneously refused to allow him the benefit of the credits against net income provided for by section 163 of the Kevenue Act of 1934.

The parties stipulated the facts, and we recite herein only that portion thereof deemed necessary to determine the issue presented.

The petitioner resides at Topeka, Kansas. His books and records are kept and his income tax returns are filed on the cash receipts and disbursements basis.

Petitioner’s father, Erastus H. Crosby, died testate March 8, 1935.

It is stipulated that by the seventh paragraph of his will certain shares of stock of domestic corporations:

* * * were transferred and issued to tbe petitioner, subject to the conditions contained in paragraph seven and eight of the will, namely, that if the net income from the trust estate is insufficient to pay annual income payments totaling $11,800.00 to the testator’s wife, sister and sister-in-law, then any such deficits shall be supplied from the income of the said stock issued to petitioner.
That no judicial interpretation of the seventh paragraph of the will has been sought but pursuant to convenience, all dividends from the said shares of stock ⅝ * * were paid to the trust estate and held by it until the close of its fiscal year when the distributive shares of its income were determined.

The E. H. Crosby trust estate filed a fiduciary return for the fiscal year beginning March 8, 1935, and ending February 29, 1936, which showed payment of $11,800 to the three beneficiaries aforementioned.

The income from the trust estate was insufficient to cover the income payments to the three beneficiaries in full and it was necessary to supply the deficit from dividends collected on the stocks transferred to petitioner under his father’s will. After supplying the deficit there remained a balance in dividends from said stocks of $8,278.38, which was received by petitioner in the year 1936 and reported by him as taxable income in his income tax return for that year.

If petitioner is entitled under section 163 of the Kevenue Act of 1934 to a dividend credit of $8,278.38 in computing his normal tax liability for 1936, it is stipulated that the correct overpayment is $268.14. If he is not so entitled, it is stipulated that the correct deficiency is $68.

The provisions oí the testator’s will bequeathing the corporate stocks in question to his son read in part as follows:

Seventh: I give and bequeath to my son Charles Bernard Crosby, should he survive me, the following shares of stock in the following corporations or in any successor of said corporations:
All of the stock of the Crosby Brothers Mercantile Company of which I may die seised except the shares of said stock bequeathed to Earle C. Williams and Cyrus L. E. Edwards by the Fifth and Sixth Paragraphs hereof;
All of the stock of The Central National Bank of Topeka, Kansas, of which I may die seised;
All of the stock of The Central Trust Company of Topeka, Kansas, of which I may die seised.
I direct that none of the stock above mentioned, that is to say, the stock of The Crosby Brothers Mercantile Company, the stock of the Central National Bank, or the stock of the Central Trust Company herein bequeathed to said Charles Bernard Crosby shall be sold, pledged or in any way alienated by said Charles Bernard Crosby so long as my said wife H,elen D. Crosby shall be living. I further direct that the income from said stock and all of it shall be applied to the payment to the said Helen D. Crosby [wife], to Mrs. Susan Sample [sister], and to Minnie D. Horner [sister-in-law], of the income bequeathed to them by Sections (e), (d), and (e) of the Eighth Paragraph of this my will, so far as shall be necessary to make up the full income by said sections of said Paragraph provided to be paid to such persons; that is to say, in case the net income from the property in the hands of the Trustees shall be insufficient to pay said income to said Helen D. Crosby, Susan Sample and Minnie D. Horner, such insufficiency shall be made up from the income from said shares of stock, but not from the principal thereof.
I also give and bequeath to my said son Charles Bernard Crosby all of the shares of stock of The Crosby Brothers Kealty Company of Shreveport, Louisiana, which I may own at the date of my death, except the stock bequeathed to Earle C. Williams by the Fifth Paragraph hereof.
I also give and bequeath to my said son all of the stock which I may own at the date of my death in The Pegues-Wright Dry Goods Company or in any successor corporation, not heretofore and in the Fifth and Sixth Paragraphs hereof bequeathed to Earle C. Williams and Cyrus L. E. Edwards.
Should my said son not survive me, then all of the property bequeathed to him in this paragraph of my will shall be and become a part of my residuary estate , and shall be disposed of as provided in the Eighth Paragraph of this my will.

The decedent’s residuary estate was given by paragraph eighth of his will to his son, his nephew, Earle C. Williams, and Cyrus L. E. Edwards, in trust, for the benefit of his wife, sister, and sister-in-law, for life, to the extent of $11,800 of the income, payable monthly to these beneficiaries for life, and any remaining income was to be paid to his son, petitioner herein. In case of petitioner’s death, his wife, or his children, depending upon survivorship, were to receive all trust income in excess of the annuities provided for, and upon termination of the trust petitioner’s child or children, or the issue thereof, were to receive any accumulated income and the trust corpus. Petitioner was given a power of appointment among his children or issue thereof as to the trust income and trust corpus.

Section 163 of the Revenue Act of 1934 specifies the credits that shall be allowed against the net income of a trust or estate and is set forth in the margin. Petitioner seeks to invoke the provisions of section 163 (b) upon the theory that the dividends of $8,278.38 which he reported as income on his individual return constituted a part of the income of the trust and, therefore, he is entitled to the credit provided by section 163. This section is found in the 1934 Act, but was eliminated, in so far as dividends are concerned, from the 1936 Act, Petitioner invokes the 1934 Act because the trust estate had a fiscal year starting March 8, 1935.

Applying section 163 (b) to the stipulated facts herein, it is our opinion that petitioner’s claim to the credit must be denied for two reasons, either of which would justify our conclusion. In the first place decedent bequeathed the stocks, the dividends from which are here involved, to petitioner. He did not include said stocks in the residuary estate. Decedent obviously intended thereby to exclude the dividends on these shares from liability under the annuity provisions of his will, unless the income from the residuary estate was insufficient to pay the annuities. If he had not so intended, the shares could have been thrown into the residuary estate, the income (herefrom could have been subjected to the burden of paying the annuities, and still the son would have received approximately the same income under other provisions of testator’s will. We think it is inescapable that decedent intended to provide for his son by the gift of these shares, just as he intended to provide for his wife, sister, and sister-in-law by the gifts of income. He desired, however’, to insure the receipt of $11,800 per year by the annuitants and, therefore, he restricted his son’s right to sell, pledge, or alienate the stocks during his wife’s lifetime and charged the income therefrom with making good any deficit in trust income requisite for payment of tbe annuities. It should be noted that the principal of the legacy to the son was expressly released from making good any deficit in trust income.

In the second place the parties have stipulated that said stocks were transferred and issued to petitioner subject to the conditions hereinabove mentioned, and that pursuant to convenience the dividends were paid to the trust estate and held by it until the close of its fiscal year. These stipulations can only mean that by his own affirmative action petitioner authorized the trust estate to collect and hold the dividends on his property until the end of the trust estate’s fiscal year. Petitioner and his heirs were the ultimate recipients of testator’s bounty, and as a trustee of the testamentary trust he was engaged in carrying out his father’s wish to provide for the latter’s widow, sister, and sister-in-law. It is not correct, therefore, to say, as petitioner does, that the income from these shares belonged to the trust and was distributed by the trust to petitioner. The dividends belonged first to petitioner, and were collected by the trust as a matter of convenience. The excess of the dividends over the trust deficit, $8,278.38 was not, therefore, distributed to petitioner by the trust as trust income, and, since there was no distribution to him of these dividends as a beneficiary of the trust, there is no occasion to apply section 163 of the 1934 Act, even if it is otherwise applicable to amounts received in 1936.

In view of the foregoing discussion, the respondent’s determination that there is a deficiency of $68 is approved.

Decision will be entered for the respondent.

       SEC. 163. CREDITS AGAINST NET INCOME.
      (a) Credits of Estate or Trust. — Eor the purpose ol the normal tax and the surtax the estate or trust shall be allowed the same personal exemption as is allowed to a single person under section 25 (b) (1), and, if no part of the income of the estate or trust is included in computing the net income of any legatee, heir, or beneficiary, then in addition the same credits against net income for dividends and interest as are allowed by section 25 (a).
      (b) Credits of Beneficiar!. — If any part of tbe income of an estate or trust is included in computing the net income of any legatee, heir, or beneficiary, such legatee, heir, or beneficiary shall, for the purpose of the normal tax, be allowed as credits against net income in addition to the credits allowed to him under section 25, his proportionate share of such amounts of dividends and interest specified in section 25 (a) as are, under Ihis Supplement, required to be included in computing his net income. Any remaining portion of such amounts specified in section 25 (a) shall, for the purpose of the normal tax, ho allowed as credits to the estate or trust.


source: Caselaw Access Project

author: Aknold:

license: Public Domain

text:
    Charlotte Hoskins, Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 96467.
    Promulgated June 18, 1940.

      W. E. Baird, G. P. A., for the petitioner.

      Gene W. Beatrdon, Esq., for the respondent.
   OPINION.

Aknold:

Section 25 (b) of the Bevenue Acts of 1984 and 1936 allows a personal exemption for the purposes of the normal tax and the surtax of $2,500 “in the case of the head of a family.” No statutory definition is given as to what constitutes the “head of a family.” Bespondent’s regulations, article 25-4 of Begulations 86 and 94, define the head of a family as:

* * * an individual who actually supports and maintains in one Rouse-hold one or more individuals who are closely connected with him by blood relationship, relationship by marriage, or by adoption, and whose right to exercise family control and provide for these dependent individuals is based upon some moral or legal obligation.

This definition has been considered and accepted by the Board as a fair interpretation of the statute and as having the force and effect of law. Olive Ross, 37 B. T. A. 928, 931; Alfred E. Fuhlage, 32 B. T. A. 222; petition to review dismissed, Helvering v. Fuhlage, 79 Fed. (2d) 998; Percy Wade, 40 B. T. A. 328. The determination of the present issue, therefore, requires an application of this definition to the stipulated facts.

Petitioner contends that she qualifies under the above definition because she actually supported and maintained her niece in one household, and that her right to exercise family control over and provide for such niece is based upon a moral obligation. Petitioner further contends that the “dependent individuals” referred to in article 25-4 of the regulations is not the same as the dependents referred to in section 25 (b) (2), which limits the $400 credit for dependents to persons under 18 years of age, or incapable of self- support because mentally or physically defective.

In Percy Wade, supra, we pointed out the three essentials necessary to establish the status of a head of a family as follows:

1. Dependence, accompanied by actual support.
2. Maintenance of the home.
3. Close relationship by blood, marriage, or adoption in order that the right of the taxpayer to exercise family control and provide for such dependents shall be bused upon some moral or legal obligation.

The stipulated facts show that this petitioner complies with at least a portion of all three essentials, since there was actual support in part, there was maintenance of a home, and there was a blood relationship in that the person living with petitioner was her niece. In the Wade case the relationship was that of a second cousin, which we held was too remote. But in William Lee Tracy, 39 B. T. A. 578, a niece was one member of a family maintained by the taxpayer in one household. The factual difference between the niece in the Tracy case and here is that this niece was an adult, educated woman, while Tracy’s niece was a minor under 18 years of age.

Petitioner concedes that she was under no legal obligation to support and maintain her niece, and rests her claim to the exemption upon the moral obligation imposed by their blood relationship. She stresses, however, (hat it is the right to exercise family control which she is required to establish, and not that the right was actually exercised. The argument is not without weight, as we expressed a similar thought in Sidney Williamson Kirtland, 39 B. T. A. 959, 961, where we said that “The regulations only require that the taxpayer have a right to exercise family control and they do not require that he have the exclusive right.” That case involved the support and maintenance of taxpayer’s divorced wife and two minor children, and we held that his right to exercise family control was sufficient to bring him within the definition of the head of a family.

The cited cases, and others that might be cited, in which the taxpayer was held to be the head of a family, involve factual situations more favorable to the taxpayers therein than the situation here presented. Ordinarily a family connotes a marital community, parent or parents and child or children. We do not, as a rule, think of two adults living together as constituting a family unless one is legally obligated to support the other. Cf. Alfred E. Fuhlage, supra. Certainly, this petitioner would have no standing here if her niece’s earning capacity was equal to her own and the niece was bearing her pro rata portion of the living expenses. We are being asked, therefore, to hold that for tax purposes a voluntary social and economic arrangement between two adult individuals shall be considered the equivalent of a family under section 25 (b), one of whom is the head thereof. We are unable to so hold.

Commendable and praiseworthy as petitioner’s efforts were in behalf of her niece, we can not agree that there was any such dependency on the part of the adult niece so as to entitle petitioner to classification as the head of a family. True, this petitioner carried the burden of maintaining and providing a living and quarters for both, but this fact does not entitle petitioner to classification as the head of a family. Tier right of control went to the living she would provide and the quarters she would furnish. Petitioner could exercise no control over her niece except through the latter’s gratitude for her aunt’s generosity. Dependency under the definition goes further than economic convenience; it speaks in terms of people incapable of supporting themselves because of infancy, senility, mental incompetence, physical incompetence, and like or similar circumstances. Cf. Augustus S. Loyless, 40 B. T. A. 600. Economic factors in recent years have made many able-bodied, intelligent persons dependent upon the generosity of others, but these conditions did not make the donor the head of a family within the meaning of section 25 (b) (1) and article 25-4, Begulations 86 and 94.

Decision will he entered for the respondent.


author: SteRnhagen:

text:
    Frank B. Thompson, Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 97498.
    Promulgated June 18, 1940.

      Albert E. James, Esq., for the petitioner.

      Marguerite Hawaii, Esq., for the respondent.
   OPINION.

SteRnhagen:

In determining the deficiency, the Commissioner ruled that the amounts contributed by the petitioner to the corporation in the years 1933, 1934, and 1935 were gifts, taxable in the aggregate as such, and that there was but one exclusion of $5,000 for each year. The petitioner assails this determination, primarily contending that the transfers to the corporation were not gifts but were contributions of paid-in surplus; and, in the alternative, if they are to be characterized as gifts, such characterization can only be applied to the interest which by his contribution the petitioner gave to the shareholders. By this latter conception petitioner would leap over the legal existence and ownership of the corporation; treat his transfer as if in fact it had been made to the individuals holding the corporation shares, of whom he himself was the largest; regard his ownership of half the shares of the corporation as a continuing half ownership of the amounts contributed to it and the proportionate interest of each other shareholder as a similarly proportionate interest in such amounts; and, by breaking up the legal transfer from himself to the corporation into parts, he would so break up the computation of the gift tax as to escape tax entirely.

There is nothing in the record to justify any aspersion upon the petitioner’s motive or good faith, and the case is not to be considered except as a legal question of the effect of the gift tax statute upon the facts stipulated.

We see no reason in the language of the statute for holding that the petitioner’s voluntary contribution to the corporation for which he received nothing, albeit the value of bis shares was fro tanto enhanced, may be regarded as other than a gift. Bothin Real Estate Co. v. Commissioner, 90 Fed. (2d) 91; King v. United States, 10 Fed. Supp. 206; affd., 79 Fed. (2d) 453; Commissioner v. Rosenbloom Finance Corporation, 66 Fed. (2d) 556; certiorari denied, 290 U. S. 692; Willputte Coke Oven Corporation, 35 B. T. A. 298. This is no less so because in the corporation’s accounting parlance the gift may have been regarded as paid-in surplus, Bothin Real Estate Co. v. Commissioner, supra; Southern Pacific Co. v. Edwards, 57 Fed. (2d) 891, or because the petitioner and the other shareholders derived benefit in the extent to which the augmentation of the corporation assets is reflected in the value of their shares, Bothin Real Estate Co. v. Commissioner, supra; Southern Pacific Co. v. Edwards, supra.

The corporation is, as the statute expressly says, a “person”, section 801 (a) (1), Revenue Act of 1934; section 1111 (a) (1), Revenue Act of 1932, and a taxpayer. As such it is in law separate from the petitioner, Dalton v. Bowers, 287 U. S. 404. It is the donee of petitioner’s contributions and the owner thereof in its own right. If it sells the property, the resulting gain or loss comes to it and not to its shareholders, Commissioner v. Rosenbloom Finance Corporation, supra. The measure thereof is calculable upon the basis which would have been applicable to the donor, section 113 (a) (8), Revenue Act of 1932; Bothin Real Estate Co. v. Commissioner, supra; Commissioner v. Rosenbloom Finance Corporation, supra; see Senate Finance Committee Report No. 665, p. 27, 72d Cong., 1st sess. If the donor remains a shareholder of the corporation, his death will result in the testamentary transfer not of the corporation’s property but of the petitioner’s shares in the corporation, which, as gross estate, will measure the estate tax. An intervening gratuitous transfer in trust of such shares and a consequent gift tax will have its statutory reflection in the decedent’s estate tax, section 402, Revenue Act of 1932; Wendell W. Fish et al., Executors, 27 B. T. A. 1002; affd., 75 Fed. (2d) 769. The gift tax and the estate tax are separately imposed on different occasions, and it is no objection that they both impinge upon the same taxpayer, or that the measure of each is as a matter of law to some degree derived from the same economic value. This is not double taxation; but even it it were, it would still not be invalid, Hellmich v. Hellman, 276 U. S. 233; King v. United States, supra.

Because the petitioner is now required to pay a gift tax upon the transfer of property to the corporation, his estate tax upon the testamentary transfer of the shares is not necessarily to be reduced to reflect the gift tax thus paid. Neither the statute nor the legislative reports indicate that Congress intended such a nicety of mathematical calculation in the coordination of the two taxes.

The gift by the petitioner to the corporation does not require a $5,000 exclusion for each of the other shareholders who by enhancement in value of their shares feel its benefit. Such indirect benefit is not a gift, direct or indirect, such as the statute, Revenue Act of 1932, section 501 (b), contemplates. As to gratuitous transfers in trust, the $5,000 exclusion has now been construed as applying separately to each beneficiary rather than, as it had formerly been held, to the trust itself, Hutchins v. Commissioner, 111 Fed. (2d) 229; McBrier v. Commissioner, 108 Fed. (2d) 967; Rheinstrom v. Commissioner, 105 Fed. (2d) 642; Welch v. Davidson, 102 Fed. (2d) 100; Wilton Rubinstein, 41 B. T. A. 220 (on review, C. C. A., 8th Cir.). But the very doubt which has affected the question as to trusts strengthens the conclusion that a gift to a corporation may not be treated as a group of gifts to its shareholders.

In our opinion, the Commissioner correctly held that the transfers in each year to the corporation were gifts to it which were subject to a single exclusion each year of $5,000, and were subject to the gift tax upon the total amount in excess of the composite $50,000 exemption. The determination is sustained.

Reviewed by the Board.

Decision will be entered for the respondent.


author: Disney :

text:
    George R. McClellan and Marie M. McClellan, Petitioners, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 90664.
    Promulgated June 18, 1940.

      William B. Spofford, Esq., and Charles S., Jacobs, Esq., for the petitioners.

      Paul E. Waring, Esq., and David B. Herman., Esq., for the respondent.
   OPINION.

Disney :

The Commissioner proposed a deficiency in income tax oí $4,346.10 against petitioners for the taxable year ended December 31, 1934. The petitioners allege the Commissioner erred in determining that the loss sustained by George R. McClellan in 1934, when he withdrew as a partner in Parrish & Co. and the partnership discharged its obligation to him as a withdrawing partner, was a capital loss limited to $2,000 rather than an ordinary loss. Other errors assigned were abandoned.

The major portion of the facts was stipulated. Inasmuch as we hereinafter set forth an epitome of all facts found, we here adopt, by reference and without repetition, as our findings those facts stipulated, and further find from the oral testimony and exhibits as follows:

George R. McClellan on January 1, 1930, entered an agreement oí copartnership in Parrish & Co., which provided for withdrawal by a partner upon wiitten notice given 60 days before the end of the current year. He withdrew from the partnership in 1934 without giving the required notice. Because of his ill health, and after discussion of the matter at a meeting of the partners, it was agreed that he might withdraw. No separate agreement of settlement was worked out, but the terms of the agreement of copartnership relating to withdrawals were followed. George R. McClellan wished his cash to stay with Parrish & Co., so that he could invest it; therefore, the $499,751.15, representing payment to him and agreed upon as his credit balance after his withdrawal, was transferred from his capital account to a customer’s account. The partnership had $944,518.37 in cash, and he could have withdrawn the $499,757.15 in cash, there being no restriction of any kind on his use of his customer’s account.

The articles of copartnership provided that, upon the death or withdrawal of a member, stock exchange seats and buildings owned by the partnership should be revalued as of the end of the year. Such adjustment of values, though not provided for otherwise than upon death or withdrawal of a partner, was made at the end of each year upon the books of the partnership, as a matter of policy and what was considered proper accounting. Such revaluation resulted in loss in the amount claimed by petitioners.

The question we have for solution here is whether or not a loss sustained by a partner upon withdrawing from a partnership is an ordinary loss or a capital loss. The respondent in determining the deficiency determined that there was capital loss and limited same to $2,000. Upon brief he suggests that there was no loss at all, but, inasmuch as no such suggestion is made in the pleadings, $2,000 capital loss is allowed by the deficiency notice, which refers to a loss as taken, and no effort has been made to increase the deficiency by the amount by which it would increase if there were no loss at all, we cenaider ...that there was a loss, and decide only the question as to whether it was ordinary or capital. The petitioners also have simplified the question, for they 'state that they “freely concede for the purpose of this case that an interest in a partnership is a capital asset.” Further, it is stated upon brief that it is admitted that if George R. McClellan had sold or exchanged his interest in the partnership, the loss would have been a capital loss, subject to the limitations prescribed by section 117 of the Revenue Act of 1934. In other words, the only question left for our consideration is whether or not there was a sale or exchange of petitioner George R. McClellan’s interest in a partnership.

The salient facts involved may be epitomized as follows: Petitioners are husband and wife and filed a joint income tax return for the year 1934. Petitioner George R. McClellan, hereinafter referred to as the petitioner, entered a partnership in 1930 and withdrew therefrom in 1934. By the terms of the original partnership agreement, any partner could withdraw by giving notice 60 days before the end of the year and upon such withdrawal would, in effect, receive back his capital contribution adjusted by his share of profit or loss, including his share of appreciation or diminution of the value of seats in stock exchanges and certain real estate. Petitioner did not give such notice, but by agreement was permitted to withdraw without it. A reserve account was set up by the partnership as to such stock exchange seats and real estate and at the time of withdrawal by petitioner he was debited with $34,070.05 because of diminution in the value of such real estate and stock exchange seats, as set forth in the reserve accounts. This represented petitioner’s pro rata share of $177,870 shrinkage in value of stock exchange seats and $47,000 shrinkage in value of real estate (as set up in the reserve account), petitioner’s pro rata share of the shrinkage in value as to stock exchange seats being $26,949.08 and as to real estate being $7,120.97. The amounts of shrinkage in value, as reflected in the reserve accounts, were never allowed as deductions in determining the taxable distributable income of the partnership. Petitioner at the time of withdrawal from the partnership received $499,757.15, that amount being transferred from his capital account to a customer’s account in his name. His original contribution was $667,634.32. During the partnership his distributable share of partnership earnings as adjusted by the Commissioner and as accepted by petitioner was $260,039.89. During the term of the partnership he withdrew $319,707.01, and $74,140 was charged to his account in 1934 because of the purchase by the partnership of a seat on the stock exchange in lieu of another seat of the same value which had stood in the name of George Rf McClellan, but in fact belonged to the partnership, which seat thereafter belonged in fact to George R. McClellan. The result of the capital conteibution, earnings, withdrawals, and transfer of balance of $499,757.15 to his credit upon his withdrawal was a loss to him of $34,070.05, resulting from shrinkage in value, as set up in the reserve accounts and proportionately charged to him, of the stock exchange seats and real estate owned by the firm, which assets with all other assets of the firm remained with it after the withdrawal of George E. McClellan.

We do not think the fact that a particular stock exchange seat owned by the partnership, but standing in the name of George E. McClellan, was in 1934 recognized as his individual property, another being purchased by the partnership for $74,140 and charged to him, has any effect upon the question here, for in effect George E. McClellan merely purchased a stock exchange seat for himself and the purchase price was paid by the partnership for him and was charged to his account with the partnership. We, therefore, do not further consider that transaction.

In Annie Laurie Crawford et al., Executors, 39 B. T. A. 521, 525, we distinguished between an ordinary dissolution of a partnership and the distribution of its assets to its members, and a situation where a partner “sells his interest to another or retires from the partnership, upon an agreed consideration and the business is continued”, and said: “In such cases, title to the retiring partner’s interest passes to another, and a closed transaction takes place. Hill v. Commissioner, 38 Fed. (2d) 165; Pope v. Commissioner, 39 Fed. (2d) 420.” In the Hill case, supra, payments were made to the estate of a deceased partner in accordance with the original partnership agreement, and it was held that “as regards the individual petitioners the payments made to the estate are not deductible as ordinary or necessary expenses for they were made by the petitioners in the purchase of a capital asset.” In the Pope case, supra, the situation was essentially the same and it was held, following Hill v. Commissioner, supra, “that the Board was warranted in ruling and finding that a sale was effected of the interests of the two estates to the new partnership.” In Dudley T. Humphrey, 32 B. T. A. 280, the petitioner by agreement withdrew from a partnership and assigned his interest therein for cash and notes. We held that the petitioner’s interest in the partnership, held for more than two years, was a capital asset and that the gain from the sale was taxable at capital gain rates.

The petitioner, however, in effect argues that he did not sell or exchange the interest in the partnership and summarizes his contention upon brief by stating7 insubstance that he sustained a loss because the cash which he received upon •withdrawal from the partnership was less than _the cash contribution to the partnership at the beginning, plus the distributive share of partnership^ income over the period of the partnership and minus the total of the •withdrawals..during: sucl^ period; and that therefore be sustained an ordinanyloss. The error in this view, in our opinion, is in the idea that the petitioner has simply recéivecf a pro rata' share" of the value of the partnership assets',Its upon an ordinary dissolution of the partnership and distribution of its assets, whereas in fact he, retiring from the partnership, receivfed only cash and parted with his interest in the partnership and its assets^ including cash and certain assets, to wit, real property and a seat upon the New York Stock Exchange. It is stipulated that the total of the shrinkage in value of the exchange seat assets and the reduction in value of real estate allocated to petitioner is claimed by petitioner as an ordinary loss. By the original agreement of partnership, the petitioner had the right, upon giving written notice 60 days before the end of the year, to withdraw from the partnership and receive therefrom the original contribution, increased or decreased by the proportionate share of gain or loss upon real estate and seats in the stock exchange owned by the partnership. However, the necessary notice was not given and the withdrawal from the partnership was not in pursuance of the original agreement, but the other partners, nevertheless, permitted withdrawal upon the same terms as originally provided by the partnership agreement. It thus appears that the withdrawal was upon terms agreed upon between the partners, i. e,, the original terms were adopted, though the petitioner had no right thereto. The terms might have varied greatly from the withdrawal of the same amount of money contributed originally, adjusted only by the profit ox loss taken because of diminution or appreciation in the value of the seats on the stock exchange and real estate. If the parties had been unable to agree upon the same terms as agreed upon in the original agreement providing for 60 days’ notice, it is obvious that a very different amount might have been paid to the petitioner upon the withdrawal from the partnership, so that it appears that what was ^actually received, was a payment in cash in consideration of the iur^ render of the interest in the partnership, including its assets, and *it becomes clear that for an agreed consideration the interest in the partnership was sold to the remaining members^ It being agreed that such ■ interest was a capital asset, it follows that section lit of the Bevenue Act of 1934 is properly applied by the respondent.

In Bull v. United States, 295 U. S. 247, it is said:

Where tile effect of lie contract is that the deceased partner’s estate shall leave his interest in the business and the surviving partners shall acquire it by payments to the estate, the transaction is a sale, and payments made to the “éstate are for the account of the survivors. * ⅜ *

"The above language was quoted by us in W. Frank Carter, 36 B. T. A. 60, 69, wherein we held that, where members of a partnership entered into an agreement providing that in case of the death of any member his estate should receive certain sums in full payment of his interest in the firm and its assets, the transaction was a sale. To the same effect is Estate of Bavier C. Miller, 38 B. T. A. 487. In Munson v. Commissioner, 100 Fed. (2d) 363, we find the converse of the situation herein involved. There the taxpayer and a former partner dissolved their partnership. The other partner contributed to the partnership a membership in the New York Stock Exchange, and the partnership agreement provided that in the event of dissolution the membership should be sold or retained by the partner at his option; that if sold, the gain or loss, being the difference between the sale price and the cost, should be apportioned between the partners; that if retained by the partner the difference between the liquidating value and the cost should be equally divided between the parties. The agreement terminating the partnership provided that the other partner elected to retain the membership and acknowledged his indebtedness to the petitioner for one-half of the difference between the cost thereof and a liquidating value agreed upon. The money difference was later paid to the petitioner. The court held:

The Board erred in holding that the sum was ordinary income taxable at normal and surtax rates, rather than a capital gain taxable at 12⅜⅞.

It was further stated:

* * * £n determining- whether the seat was a firm asset it could make no difference whether it was sold to a third party, as might have been done, or was retained by Adrian under an agreement to account ior the increment in excess of the value of $96,000 at which it w'as originally contributed. After the arbitration committee of the Exchange had estimated the profit at $261,500 it became quite unnecessary formally to credit Adrian with receipt of the seat in payment both of his capital contribution of $96,000 and of his share in the gain realized and then to pay Munson $130,750 less $2,500 expended for counsel fees, on account of his share of the profits. * * *

It is apparent that the present situation differs from that in the Munson case, supra, only in that herein there was loss by virtue of depreciation in the value of real estate and stock exchange seats instead of gain by virtue of appreciation thereof as in the Munson case. The court there held that the profit was capital gain. Cases cited by petitioner are found to contain elements distinguishing them from the present controversy. We hold that the loss suffered by the petitioner herein was a capital loss.

We find no error in the determination of deficiency by the respondent.

Decision will be entered for the respondent.


author:
Leech : Black,
      SteeNhageN,

text:
    Estate of Leonard B. McKitterick, Deceased, Cora Madeline McKitterick, Executrix, Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 95024.
    Promulgated June 19, 1940.

      Herman E. Riddell, Esq., Donald Agnew, Esq., and N. Philip Bastedo, Esq., for the petitioner.

      John R. Wheeler, Esq., for the respondent.
   OPINION.

Leech :

Respondent included in decedent’s estate, under the lie venue Act Ojf 1926, section 302, 34,902 shares of Philip Morris stock and 34,780 warrants, at the respective per unit values of $91% and $10%, as of August 15,1936, the date of decedent’s death. The stock of this company was listed on the New York Stock Exchange before, during, and after 1936, and the warrants were listed from July 27 to August 17, 1936. The values of decedent’s stock and warrants, as determined by respondent, were the mean unit market prices thereof, as reflected by actual sales on that Exchange on the critical date. The first issue involves only the correctness of this determination of value.

The term “value”, as used in the cited statutory provision, means “fair market value.” Cecil H. Gamble, Executor, 33 B. T. A. 94; affd., 101 Fed. (2d) 565; certiorari denied, 306 U. S. 664. This value is a fact, the determination of which is, at least, generally difficult. The result is rarely satisfactory. However', certain rules are helpful in considering the question.

Thus, respondent can not, by regulation or otherwise, limit the evidence to be considered. Commissioner v. Shattuck, 97 Fed. (2d) 790. All the evidence, bearing on the ultimate fact, must be considered. Crawford v. Helvering, 70 Fed. (2d) 744; Heiner v. Crosby, 24 Fed. (2d) 191.

However, in the absence of exceptional circumstances depriving them of or reducing their evidentiary worth, the prices at which stock or warrants are actually traded on an open public market, on the pertinent date, have been held generally to be the best evidence of their fair market value on that date. John J. Newberry, 39 B. T. A. 1123; Frank J. Kier et al., Executors, 28 B. T. A. 633.

The existence of such exceptional circumstances will not be presumed. It must be established clearly before a determination, supported by such evidence, will be disturbed. Safe Deposit & Trust Co. of Baltimore, Executor, 35 B. T. A. 259; affd., 95 Fed. (2d) 806; Estate of Archibald M. Chisholm, 37 B. T. A. 167; Frank J. Kier et al., Executors, supra.

Here petitioner argues that such exceptional circumstances do obtain. She says (1) the shares and warrants could not have been sold at the prices prevailing on the date of decedent’s death; (2) the intrinsic value of the stock should be given more weight here than the market price; and (3) the market price was abnormally high on the date of death by reason of the unusual situation existing at that time.

The first position is, of course, a statement of the so-called blockage rule. The application of this rule is not dogmatic. It is merely one of the exceptions to the rule just stated. Before it may be applied, the basis therefor must be shown clearly. Safe Deposit & Trust Co. of Baltimore, Executor, supra. That basis is that the actual market is so relatively narrow, as compared with the stock or warrants to be valued, as to destroy or seriously affect the weight of the prices in such market as competent evidence of the fact. Estate of Daniel Guggenheim, 39 B. T. A. 251; Helvering v. Kimberly, 97 Fed. (2d) 433; Commissioner v. Shattuck, supra.

Failure of the record to disclose that the market was so inactive on or about the critical date that it would have been impossible to dispose of the stock and warrants in a reasonably short period of time thereafter, prevents the application of the so-called blockage theory. John J. Newberry, supra; Frank J. Kier et al., Executors, supra.

Petitioner introduced the testimony of three expert witnesses, and the respondent the testimony of two such witnesses. Tavo of these Avitnesses of petitioner testified that trading would have stopped had the shares and warrants, involved in this proceeding, been offered for sale on August 15, 1936; that it would have taken three to six months to liquidate the block, swollen as it was by the exercise of the warrants, and that such sales would have been impossible except at an average price of from $70 to $75 per share for the stock and comparable prices for the warrants. The third witness of petitioner declined to testify as to the possibility of disposing of the stock. The effect to be given (he testimony of these two Avitnesses is more than a little weakened by the testimony of the witnesses for the respondent, and other evidence in the record. The market for Philip Morris stock was comparatively consistent and active throughout 1936.

Not only were 4,600 shares traded on the date of decedent’s death, and 5,900 on the next succeeding market day, but a total of 46,600 shares was bought and sold on the New York Stock Exchange within 40 days after August 15, 1936. That was more than the number of shares included in decedent’s block after the exercise of his warrants.

At least one of petitioner’s Avitnesses admitted that he had failed to assume a corresponding addition of buyers to the market when he considered the possibility of disposing of decedent’s stock and warrants. See John J. Newberry, supra. We therefore conclude that no basis has been established for the application of the blockage rule here.

No basis for the second position of petitioner, to the effect that intrinsic value should supersede market price as the best evidence of fair market value here, has been established. Formulas and evidence probative of intrinsic value are more appropriate to an unlisted stock valuation, than to the case of a listed stock for which there is an active market demand. See James Couzens, 11 B. T. A. 1040; George D. Harter Bank, Executor, 38 B. T. A. 387; W. M. Ritter Lumber Co., 30 B. T. A. 231, 281; Frederick A. Koch, Jr., Executor, 28 B. T. A. 363. The stock and warrants of Philip Morris & Co., Ltd., Inc., were not closely held. The market therefor was public and relatively broad. The testimony of one of petitioner’s witnesses disclosed wide discrepancies between “intrinsic” value and market price in the case of the stock of three other companies. It may be assumed that such a discrepancy frequently exists, but such a discrepancy) does not, in the present circumstances, warrant ignoring the market price as the best evidence of fair market value. Cecil H. Gamble, Executor, supra; Eleanor Lansburgh, Administratrix, 35 B. T. A. 928. It may be irrational for buyers on the stock market to pay more for a stock than the per share value of the underlying corporate assets, but we are concerned only with what that stock will fetch on such a market even though it be irrational. Ithaca Trust Co. v. United States, 279 U. S. 151.

The third argument for petitioner, which it is said justifies the re jection of the fair market price of this stock and the warrants as the best evidence of their fair market value on the critical date, is likewise without merit.

It is true that the market for Philip Morris stock was affected by adventitious factors, namely, a favorable annual report, the issuance of warrants to buy for $50 stock selling at $90, and the announcement of an increased dividend rate. But the presence of such factors would seem to be nothing more than valid reasons for the upswing in this stock’s value at the middle of the year. There was some testimony to the effect that the success ox Philip Morris was due mainly to the personality and efforts of decedent, and that his death robbed the stock of considerable of its value. There was other evidence, however, tending to show that the company was well enough organized to be able to carry on without decedent, and its subsequent history as disclosed, in its balance sheet and earnings statements for the fiscal year ended March 31,1937, shows this latter evidence to be true. The market price, moreover, remained fairly level for a month and a half following McKitterick’s death, serving to indicate the lack of any marked unfavorable reaction to! the loss of his services.

Witnesses for both sides agreed that there was no evidence of market manipulation on or around the critical date, although one “had a feeling” that the market was being supported. Petitioner, in an attempt to prove manipulation, introduced a record of a proceeding brought by the Securities and Exchange Commission against one Schulte, charging manipulation of the market in several stocks, Philip Morris among them. An examination of that record discloses aver-ments of manipulative practices in 1938, but there is nothing to show manipulation in 1936.

We have considered the entire record, including the expert testimony and the financial record and history of Philip Morris. It was a successful and growing company, engaged in the manufacture and sale of a product for which there was a firm and increasing demand. The demand was stimulated by conservative, nonspectacular promotion methods. The financial position of the company in 1936 seems to us to have been thoroughly sound, the need for new financing arising from a healthy increase in inventory requirements rather than from a lessening of profits. Earnings were increasing. The market was exceptionally but not unreasonably active in the circumstances. On the basis of all the evidence, we think the record fails to disclose error in respondent’s determination of values for the stock and warrants.

In determining the deficiency, respondent included in decedent’s gross estate the amounts paid to the petitioner, as executrix, by Philip Morris in 1937, on the ground that decedent owned the right on the date of his death to the percentage of the profits specified in the bonus contract then in effect, adjusted to that date. The second issue is raised by petitioner’s challenge to the propriety of this action.

Undoubtedly decedent could have made such a contract with Philip Morris as would not have created a legal liability on its part to pay a bonus to decedent’s estate for the period in the taxable year prior to his death. United States Trust Co. of New York et al., Executors, 9 B. T. A. 514. The question is, Did they do so here? We think not. Of course, the intention of the parties to the contract, evidenced by the corporate resolution referred to, controls. And that intention must be gathered from the resolution itself, as concurrently construed by the parties, together with the attendant circumstances. Barnett v. West Construction Co., 69 Fed. (2d) 266; Federal Surety Co. v. Bentley & Sons Co., 51 Fed. (2d) 24.

Petitioner contends that, since the corporate resolution of June 20, 1933, provided that a computation be made of the net profits after the close of the year and since the contract thus established was to be in effect only during decedent’s service as president, his death at any time before the date set for computing the amount payable thereunder would relieve the corporation from legal liability to compute and pay any bonus.

We do not agree with this view. The resolution mentioned provided that the bonus should be paid “for so long as L. B. McKitterick shall be President of the Corporation.” McKitterick held that office from the first day of 1936 until his death on August 15 of that year. During that period he performed the services for which his salary and bonus were to be paid. Unless the evidence shows a contrary intent, it would seem that the liability of the company to pay both, in the present circumstances, was the same. Here, no such opposite intent is revealed. Cf. United States Trust Co., Executor, supra. In fact, thes amount of his bonus, reasonably to be anticipated, was many times the amount of the salary and probably was the main inducement by which the services of decedent were secured.

The company, itself, construed the concurrent right of the decedent as thus fixed. The corporation, upon the close of the year of decedent’s death, by resolution directed the payment to his estate of the proportion of net earnings for the year, provided by the contract, allocable to that portion of the year during which he had lived and rendered services, entered this payment on its books as due the decedent on account of the bonus, and deducted it as the payment of an ordinary and necessary expense in its return for that year.

The disputed payment to decedent’s estate was due and owing on account of the bonus for the part of the year preceding his death or it was a gift. A sine qua non of a gift is donative intent on the part of the payor. Theodore C. Jackson et al., Administrators, 32 B. T. A. 470. And that intent will not be presumed. Inconsistency with any other intention must appear. In short, the intent of the donor to make a gift must be shown unmistakably. Edson v. Lucas, 40 Fed. (2d) 398; Moore v. Tiller, 61 Fed. (2d) 478; Gannon v. McGuire, 160 N. Y. 476; 55 N. E. 7; Guaranty Trust Co. of New York et al., Executors, 35 B. T. A. 916; affd., 98 Fed. (2d) 62. Here the record discloses the actual payment of the money by the company to decedent’s estate. But that fact does not characterize such payments as a gift. The corporate treatment of these payments, wholly inconsistent with the gift theory, supplemented by the absence of any provision in the resolution of June 20, 1933, releasing the company from liability to pay the bonus for any year during which decedent died, or any indication in the resolution of December 18, 1936, characterizing the payments as gifts, not only fails to establish that these payments were intended as gifts and the respondent’s determination, therefore, was in error, but it supports the premise upon which the respondent included the contested payments in decedent’s estate. See United States Trust Co., Executor, supra.

Decedent under the existing arrangement was rendering service for a stated yearly salary plus a certain percentage of the year’s profits. He died after rendering service for seven and one-half months of the year. The corporation had received the benefit of his service for that period. To avoid such liability it would have to be definitely established that the understanding was that decedent must live and serve through the year to be entitled to any payment of bonus. See United States Trust Co., Executor, supra. It was not so established.

We hold that upon decedent’s death his estate possessed the right, to exact of Philip Morris that proportion of the percentage of net profits of the corporation for the year designated in the bonus resolution of Juno 20,1933, as payable to decedent, allocable to the period January 1 to August 15. Having reached this conclusion, the question is ruled by our recent decision in Estate of G. Percy McGlue, 41 B. T. A. 1199. Respondent has included this right in decedent’s estate at a value of $134,513.38. No issue has been raised with respect to the computation of this amount nor has a lesser value for the right been shown. Consequently, respondent is affirmed on this issue.

Petitioner has claimed a number of additional deductions on account of ordinary and necessary administration expenses, and the amounts and character thereof have been stipulated. Respondent does not oppose these deductions on brief. They are all allowable under section 303 (a) (1) of the Revenue Act of 1926, and will be so considered in the recomputation under Rule 50.

Reviewed by the Board.

Decision will he entered wnder Bule 50.

Black,

dissenting: I respectfully dissent from the majority opinion because I believe that the valuation placed by the Commissioner on the Philip Morris common stock is too high. The executrix of the estate of decedent returned the valuations on the estate tax return at $71 per share for the Philip Morris common stock. The Commissioner increased these valuations to $91,375 for each share of common stock. The majority opinion sustains the Commissioner in the values which he has determined.

While I think that the values on this Philip Morris common stock returned by the executrix on the estate tax return filed by her are, in the light of the evidence, too low, on the other hand I think the valuations fixed by the Commissioner; and sustained by the Board are too high. Manifestly so large a block of stock as that owned by decedent on the day of his death, to wit, 34,902 shares, could not have been marketed on August 15 for $91,375 per share. I am convinced from the evidence that any attempt to have marketed that large a block of stock, on the basic date or any date thereabout, would have resulted in a much lower figure than $91,375. But it is of course true that no prudent executrix would attempt to market such a large block of stock in one day. Presumably, if selling is required, she would take a reasonable length of time in which to market so large a block of stock, and when this factor of valuation is taken into consideration, viewed in the light of the price range of the stock which existed after decedent’s death, it is difficult for me to see where the Commissioner’s valuation can be sustained. Considerably lower figures, I think, would be more in accord with the facts.

SteeNhageN,

dissenting: I reach the same conclusion as my brother Black, but only upon the ground that the evidence indicates that the entire block of shares could not have been sold on that date for the market price per share, and not because of the recognition that in the nature of things a large block as a rule fetches less than the aggregate value of its units. Whether it does or not is a matter of evidence and not of rule. Helvering v. Safe Deposit & Trust Co. of Baltimore, 95 Fed. (2d) 806; Estate of Archibald M. Chisholm, 37 B. T. A. 167. The evidence here I think supports a lower value.


author: MuRdocK :

text:
    William M. Greve, Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 97522.
    Promulgated June 19, 1940.

      Lamrenoe A. Baker, Esq., for the petitioner.

      James B. JoJmston, Esq., for the respondent.
   OPINION.

MuRdocK :

Section 275 of the Kevenue Act of 1928 required that income taxes for the calendar year 1931 should be assessed within two years after the return was filed. The petitioner has shown that he filed his return for the calendar year 1931 on March 15,1932. He has thus made a prima facie showing that the period for assessment and collection of the taxes in controversy expired on March 14, 1934. It then became encumbent upon the Commissioner to show that the two-year period of limitation which began on March 15, 1932, had not expired on December 19,1938, when he mailed the notice of deficiency upon which this proceeding is predicated. The Commissioner has shown that he mailed a letter on February 23,1934, and remailed that letter on March 8, 1934, and he contends that those letters, or one of them at least, was a proper notice under section 272 (a) which suspended the running of the two-year period of limitation from that date until 60 days after the decision of the Board at Docket No. 75686 became final.

The decision of the Board at Docket No. 75686 is fatal to this contention of the Commissioner. The Board there considered all of the facts which are pertinent to the question of whether or not either one of those letters was a notice of deficiency in accordance with the provisions of section 272 (a), and held that neither constituted a notice as authorized and required under section 272 (a). The Commissioner’s only escape from the effect of that decision was to prosecute a successful appeal. He did not do that and is now foreclosed from contending that either the letter of February 23 or that of March 8 was a notice authorized and required by section 272 (a) as a preliminary to assessment and collection of the taxes for 1931. Thus, we conclude in the present proceeding that the Commissioner allowed the two-year period of limitation upon assessment and collection to expire without mailing to the taxpayer, as authorized and required by section 272 (a), a notice of deficiency, and since that period expired on March 14, 1934, obviously the running of the period could not be suspended by anything which happened thereafter. American Railways Co., 30 B. T. A. 939.

The statutory provision upon which the Commissioner relies is as follows:

S15C. 277. SUSPENSION OF RUNNING OF STATUTE.
The running of the statute of limitations provided in section 275 or 27G on the making of assessments and the beginning of distraint or a proceeding in court for collection, in respect of any deficiency, shall (after the mailing of a notice under section 272 (a)) be suspended for the period during which the Commissioner is prohibited from making the assessment or beginning dis-traint or a proceeding in court (and in any event, if a proceeding in respect of the deficiency Is placed on the docket of the Board, until the decision of the Board becomes final), and for 60 days thereafter.

The limitation upon assessment and collection provided in section 275 necessarily limits the time within which a notice of deficiency may be mailed. Section 272 (a) authorizes the sending of a notice of deficiency and provides that no assessment or collection shall be made until the notice has been mailed, until the expiration of the period for the filing of a petition with the Board, and, if a petition has been filed, until the decision of the Board has become final. It is obvious from these provisions that the mailing of a proper notice under section 272 (a) suspends the running of the period of limitation upon assessment and collection from the day upon which the notice is mailed. But the suspension was predicated upon the mailing of a notice under section 272 (a). In other words, there was no suspension until after the mailing of a notice under section 272 (a). Once the Commissioner had sent out a notice of deficiency, he had to wait until the taxpayer had an opportunity to exhaust his rights before the Board. The statute suspended the running of the period of limitation while the Commissioner’s hands were thus tied and for 60 days thereafter. This was so under section 277 (b) of the Bevenue Act of 1926. It was discovered that the Commissioner needed some additional protection where defective petitions were filed with the Board and the portion of section 277 of the Bevenue Act of 1928 marked off with the second set of parentheses was inserted for that purpose.

There is nothing in section 277 or its legislative history to indicate an intention on the part of Congress to protect the Commissioner in case he did not send out a notice in accordance with section 272 (a) or to protect the Commissioner by suspending the statute from the date upon which he sent out a notice which did not comply with the provisions of section 272 (a). The defect in the notice mailed on February 23, 1934, was due entirely to an error of the Commissioner for which the petitioner was in no way to blame. Thereafter, but within the two-year period of limitations, there were two occasions when he might reasonably have been expected to have corrected his error by sending out a notice by registered mail to the petitioner in strict compliance with section 272 (a). He chose to rely upon the effectiveness of what he had already done. The Board held that his prior notices were ineffective. The sending of the second notice is a recognition that the first was ineffective. It is not surprising to find that there are no statutory provisions saving the Commissioner from the running of the statute of limitations under such circumstances. Cases cited by the Commissioner, holding that the running of the statutory period of limitations is suspended from the date upon which a proper notice under section 272 (a) is mailed, are not in point here, where he did not send such a notice within the statutory period.

Decision will be entered for the petitioner.

       A petition might be filed after the statutory period for filing petitions with the Board had expired, a paper filed within the period might prove insufficient to constitute a petition, a waiver filed might prove to he invalid, a review bond might not be filed, and in any such eases the Commissioner could not safely delay assessment and collection, so Congress decided to give protection to both parties by suspending the running of the period of limitation from the time any proceeding was placed on the docket of the Board unta the decision of the Board with respect thereto became final and for sixty days thereafter. See Ways & Means Committee Report No. 2, 70th Cong., 1st sess, p. 23, and Senate Finance Committee Report No. 960, 70th Cong., 1st sess., p. 31.