author: Van Fossan:

text:
    William R. Hopkins, Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 91753.
    Promulgated May 29, 1940.

      Asldef M. Van Duzer, Esq., and George P. Bickford, Esq., for the petitioner.

      W. W. Kerr, Esq., for the respondent.
   OPINION.

Van Fossan:

The theory underlying respondent’s determination that petitioner received a capital gain in 1933 is not made clear in the notice of deficiency and was not clarified at the hearing or on brief. Tn his brief respondent sums up his position thus: “On the whole record herein, respondent respectfully submits that this petitioner, after deducting cost of the 570 shares of Buckeye stock, together with taxes and all other charges against the dividends on such stock, is enriched to the extent of $111,953.24, as found by the respondent, upon which he has never personally paid one penny of Federal income taxes.” He argues at length about the irregularity of the procedure by which Griffiths returned the dividends and paid the taxes in his own returns. In reply to this petitioner contends that the contract of sale gave title to the stock to petitioner in 1920; that possession was withheld only because payment was to be made out of dividends; that full payment was completed by 1926; that dividends were at all times received for petitioner’s account; that the taxes were paid by Griffiths out of money arising from the dividends which belonged to petitioner.

As we view it, the real issue is beclouded by these collateral facts. It must be borne in mind that only the year 1933 is before us. Bespondent held that income arose in that year by reason of the court decree and the consequent accounting. He is not charging fraud nor attempting to charge petitioner with income in the prior years. If no income arose in 1933, that is an end of the matter here involved.

The determination of this question turns on the ownership of the Buckeye stock and the dividends. If petitioner owned this stock from 1920 and the dividends were paid for his account as they accrued, there being no sale or exchange, the dividends were not income in 1933 when, in their then present form, they were accounted for pursuant to the court decree. This being true, it matters not that through a misconception of- his duty and an unwarranted assumption as to his rights in the premises, the taxes on the dividends were paid as though his own by Griffiths. True, it seems utterly incredible that any lawyer, much less one of the age and experience of petitioner, should have believed that Griffiths could legally return as though it were his own that part of petitioner’s income arising from the dividends on the Buckeye stock. But such is petitioner’s testimony. Here, however, that fact is not controlling. As observed above, the Government makes no charge of fraud and does not claim deficiencies for those earlier years. Cf. T. G. Nicholson, 38 B. T. A. 190.

That petitioner acquired the Buckeye stock in 1920 is stated as a premise and therefore conceded by respondent in the notice of deficiency. That this is correct is apparent upon an examination of the facts. The agreement of August 16, 1920, was an executed, and not merely an executory, contract. It recites that the Griffiths “have purchased for the benefit of” petitioner and “have caused said shares to be put into the name of” the Trust Co. This is confirmed by the decree in petitioner’s suit for accounting, wherein the court found that on August 16, 1920, the Griffiths “did purchase for the benefit of the plaintiff” the 570 shares, and retained “constructive possession” by placing them in trust. The retained possession, the court said, was “as security against moneys advanced.” Consequently, in view of the provisions of the contract, and its construction by the Ohio court, it must be held that the petitioner was the owner of the shares from and after August 16, 1920. Erie Railroad Co. v. Tompkins, 309 U. S. 64. The decree does not purport to make the petitioner the owner of the shares from the time of the decree, but on the contrary, confirms his ownership from August 16, 1920.

Since petitioner was at all times the owner of the stock, we pass to the question of the dividends.

Under the statute, income is taxable to one on the cash basis in the year when received. Such is the general rule. Sec. 42, Revenue Act of 1932; art. 331, Regulations 77. However, physical receipt by the taxpayer is not always necessary in order to sustain an application of the rule. There may be receipt by an agent, which is regarded as receipt by the principal, Maryland Casualty Co. v. United States, 251 U. S. 342; there may be constructive receipt, John A. Brander, 3 B. T. A. 231; Ella C. Loose, Executrix, 15 B. T. A. 169. As to dividends, “there are different times at which it reasonably may be claimed the taxpayer receives them.” Avery v. Commissioner, 292 U. S. 210. Dividends on stock in trust received by the trustee and used by it to discharge debts of the owner are income to the owner. Lucy A. Blumenthal, 30 B. T. A. 591; affd., 296 U. S. 552.

Beginning in 1921, and from then until in 1932, distributions were made on the Buckeye stock. These distributions were received by the Guardian Trust Co., not as owner, nor for the Griffiths, but for the petitioner as the equitable owner; a fact confirmed by the decree later rendered. The trustee can not, in our opinion, be regarded as trustee for the petitioner as he had never appointed it to act in that capacity. If it were to be said that the contract of August 16, 1920, made the Trust Co. a trustee for the petitioner, then the Trust Co. was under the duty of filing returns and reporting the distributions as they occurred, and its failure to do so can not now be charged to the petitioner. A careful appraisal of the facts convinces us that, as the decree of the Ohio court holds, constructive possession of the stock- was retained by the Griffiths as security for the petitioner’s debts. The Griffiths and Guardian were thus nothing more nor less than agents of the petitioner to collect the income from the Buckeye stock and apply it as far as necessary to the discharge of the petitioner’s obligations. Receipt by the agents was receipt by the petitioner, and that receipt occurred prior to 1933.

The decree of the court in 1933 did not create income. It meiely declared ownership of the Buckeye stock in 1920 and required an accounting of the proceeds and avails of such stock. The income on the stock followed its ownership and receipt occurred in the preceding years. This is true of the cash as well as the other items comprised in the accounting. The decree did not cause conversion of assets into cash or make the cash income in 1933.

Respondent’s position, as above indicated, is primarily based on the ground of untaxed enrichment. If equitable consideration were to be taken into account, we could not fail to note that, though the action by Griffiths in reporting the dividends was entirely without legal sanction and wholly irregular, by reason of the fact that Grif-fiths’ personal income was much greater than that of Hopkins the Government probably was paid an amount of tax on account of the dividends much in excess of what it would have received had petitioner returned them properly and paid the tax in due course.

Petitioner admittedly permitted some of his income to be returned and taxes paid by another. The statute of limitations prevents adjustment of the situation as to the years of actual receipt of income. This fact, however, does not justify the approval of a deficiency as to 1933 if no income was then received.

The respondent seeks to fortify his position by citing various cases which hold that income received as the result of litigation is subject to taxation in the year in which the litigation is terminated. However, in the case at bar we note that the action brought by the petitioner was for the purpose of compelling the return of property already owned, not for the adjudication of a claim. As above indicated, the suit was a simple proceeding against Guardian for1 an accounting and to repossess property unlawfully withheld from the petitioner by that company. .Thus, the cases relied on by the respondent are clearly distinguishable on facts.

We conclude that no income was received by petitioner in 1933 as a result of the decree of the Ohio court, nor was there any capital gain.

. Reviewed by the Boat'd.

Decision will be entered under Bule 50.

Mellott dissents.


source: Caselaw Access Project

author: Tdrneh :

license: Public Domain

text:
    The First National Bank of Memphis, Executor of the Estate of Frederick G. Proutt, Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 89423.
    Promulgated May 29, 1940.

      John B. Snowden, II, Esq., for the petitioner.

      Frank, M. Thompson, Jr., Esq., for the respondent.
   OPINION.

Tdrneh :

The petitioner contends that part of the proceeds of the eight insurance policies here in question, to the extent of $40,000, should be excluded from the gross estate under the second clause of section 302 (g) of the Revenue Act of 1926, as amended. It is argued that under the laws of Tennessee the executor had no right to or interest in the proceeds of the policies which could be used for the purpose of paying the debts of the decedent or costs of administrating his estate; that the entire proceeds of the policies inured to the benefit of the widow and daughter of the decedent; that the proceeds were not “receivable by the executor” within the meaning of the first clause of section 302 (g), sufra; and that it is therefore entitled to the $40,000 exemption provided for in the last clause of that section as proceeds “receivable by all other beneficiaries.” It relies on Julia S. Lucky et al., Executrices, 2 B. T. A. 1268, and Commissioner v. Jones, 62 Fed. (2d) 496, which it contends decided this same question for the taxpayers.

The first contention of the respondent is that the Lucky and J ones cases are not controlling here because they involved the construction of section 402 of the Revenue Act of 1921 and section 302 of the Revenue Act of 1924, respectively, whereas the present case involves the interpretation of section 302 of the Revenue Act of 1926, which latter act changed the prior acts by eliminating the exemption previously allowed in cases of this kind. Section 402 (f) of the Revenue Act of 1921 and section 302 (g) of the Revenue Act of 1924 are identical with section 302 (g) of the Revenue Act of 1926. The change referred to by the respondent involves section 402 (a) of the Revenue Act of 1921 and section 302 (a) of the Revenue Act of 1924, which were identical and provided as follows:

Sec. 402. That the value of the gross estate of the decedent shall be determined by including the value at the tíme of his death of all property, real or personal, tangible or intangible, wherever situated—
(a) To the extent of the interest therein of the decedent at the time of his death which after his death is subject to the payment of the charges against his estate and the expenses of its administration and is subject to distribution as part of his estate.

With respect to the change referred to, the respondent points to the fact that the limitations contained in the above quoted provision (requiring that property, in order to be includable in the decedent’s estate, be subject tq the payment of charges against his estate, to the expenses of its administration, and to distribution as part of his estate) were eliminated from the corresponding section of the Revenue Act of 1926, which simply provided that the gross estate should include all the property: “[Seo. 302.] (a) To the extent of the interest therein of the decedent at the time of his death.”

In support of his contention that this change in the 1926 Act was made for the purpose of eliminating the $40,000 exemption previously allowed in cases of this kind (Lucky and Jones cases) the respondent quotes from the pertinent report of the House Ways and Means Committee as follows (69th Cong., 1st sess., Report No. 1, p. 15):

Section 302. Under existing law tbe gross estate is determined by including tbe interest of tbe decedent at tbe time of bis death in all classes of property which after his death is subject to the payment of the charges against his estate and the expenses of its administration and is subject to distribution as a part of his estate. In the interest of certainty it is recommended that the limitating language above referred to shall be eliminated in the proposed bill, so that the gross estate shall include the entire interest of the decedent at the time of his death m all the property. [Italics supplied.]

With further reference to the $40,000 exemption allowed in the Lucky and Jones cases, it is the contention of the respondent that the above mentioned limitations contained in section 402 (a) of the Revenue Act of 1921 were read into section 402 (f) of that act by this Board in the Lucky case, and that the same limitations contained in section 302 (a) of the Revenue Act of 1924 were likewise read into section 302 (g) of that act by the Circuit Court of Appeals in the Jones case. In other words, the respondent contends that the test applied by this Board and the Circuit Court, in determining whether the insurance was receivable by the executor, was whether such insurance was subject to the debts of the estate and was to be distributed by the executor as part of the estate, which limiting language was borrowed from sections 402 (a), supra, and 302 (a), supra. Therefore, argues the respondent, since these limitations have been eliminated from section 302 (a) of the Revenue Act of 1926, this act no longer requires that property of the decedent, in order to be includable in his estate, be subject-to his debts and be distributed as part of the estate, and such limitations no longer apply in the construction of section 302 (g) of the Revenue Act of 1926. He contends that the committee report above quoted shows that Congress intended that under the 1926 Act all the property of the decedent, including the entire proceeds of insurance policies payable to his executor or estate, should be included in his gross estate irrespective of whether the law of his domicile subjected such proceeds to the debts of his estate and regardless of how the executor ultimately distributed such proceeds.

The second contention of the respondent is that the Lucky and Jones cases are distinguishable from the present case. The distinction pointed out is that in those two cases the proceeds from the insurance policies passed directly to the widow and children of the decedent under the laws of distribution of Tennessee, whereas in the present case the proceeds of the insurance policies passed under and in accordance with the provisions of the decedent’s will. More specifically, he points out that in the Lucky case the decedent provided in his will that “my life insurance shall not pass under this will but under the statutes of this state”, and that in the Jones case the proceeds of the insurance policies were likewise distributed under and in accordance with the statutes of the State of Tennessee. Therefore, argues the respondent, it can not be successfully contended that the above mentioned laws of Tennessee have any bearing on the question presented in the present case.

We have then a direct conflict in the views of the parties as to the applicability of the Lucky and Jones cases and the question resulting from that conflict is whether by operation of the Tennessee statute it may be held on the facts here that the proceeds of the insurance policies were receivable by “other beneficiaries”, the decedent’s widow and daughter, and were not therefore receivable by the executor of the decedent’s estate within the meaning of section 302 (g), supra. By the terms of the insurance contracts themselves the proceeds of the policies were payable to decedent’s executor. Section 8456 of the 1932 Tennessee Code provides, however, as follows:

Any life insurance effected by a husband on his own life shall, in case of his death, innre to the benefit of his widow and children; and the money thence arising shall be divided between them according to the statutes of distribution, without being in any manner subject to the debts of the husband.

In Harvey v. Harrison, 89 Tenn. 476; 14 S. W. 1085, the Supreme Court of Tennessee attributed two purposes to the provision of the code just quoted. The first, designated as the primary purpose, was to exempt life insurance from the claims of creditors, and the second, described as the secondary purpose, was to provide for its disposition. The husband still has the power, however, to dispose of the insurance during his lifetime or by will, and with respect to the secondary purpose the statute does not become operative where by use of apt words an intention to dispose of the proceeds of such insurance by will is clearly indicated. Chrisman v. Chrisman, 141 Tenn. 424; 210 S. W. 783. In that case the court said:

These sections of the Code [4030 and 4231] being section 3 of chapter 216 of the Acts of 1845-46, have been construed by this court in numerous cases wherein creditors have sought to have satisfaction of their claims out of the proceeds of life insurance, and it has been consistently held that the act in no wise limited the authority of the husband to control policies of insurance upon his life where the same are payable to his estate — -such insurance is the property of the husband and subject to his disposition either during his lifetime or by will. Rison v. Wilkerson, 35 Tenn. (3 Sneed.) 569; Williams v. Carson et al., 68 Tenn. (9 Baxt.) 516; Nashville Trust Co. v. First National Bank, 123 Tenn. 617, 134 S. W. 311.
It is likewise decided by our cases that, notwithstanding the absolute control and authority of the husband over policies of insurance on his life made payable to his estate, the proceeds of the same do not pass by will in the absence of the use of apt words used therein clearly indicative of such intention, but goes to those entitled, by virtue of the provisions of the statute referred to. Cooper v. Wright, 110 Tenn. 214, 75 S. W. 1049; Rowlett v. Rowlett, 116 Tenn. 467, 95 S. W. 821.

In both the Lucky and Jones cases the disposition of the proceeds of the insurance policies under consideration was effected by operation of the statute and not by the will of the deceased husband. In the Luohy case the husband had specifically directed that the insurance should pass under the statutes of the State of Tennessee, and our conclusion was stated as follows:

Under the statutes of Tennessee and decisions referred to, we are of the opinion that the insurance here involved did not at any time become a part of the gross estate of the decedent receivable by the executor within the meaning of section 402 (f) but was receivable by the widow and children, or next of kin, in the same manner as if they had been specifically designated as beneficiaries therein.

In its opinion in the Jones case, the court said:

Likewise it is held that the insurance is not an asset of the estate, and while the executor may collect it he merely acts as a conduit to pass it on to the statutory beneficiaries who take a vested interest at the insured’s death free from any claims against his estate.

It is thus apparent that it was the accomplishment of the secondary purpose of the statute, namely, the disposition' of the proceeds of the insurance policies to the statutory beneficiaries, that resulted in the conclusion that the insurance was receivable in the Lucky and Jones cases by “other beneficiaries” and not “by the executor” within the meaning of the Federal estate tax statute.

In the instant case the decedent by specific language in his will included the insurance policies in question in the residue of his estate and devised and bequeathed the said residue to the First National Bank of Memphis, as trustee, to hold during the term of and upon the trusts thereinafter set forth. The facts were stipulated and show that the insurance was received by the petitioner as executor and distributed by it in accordance with the terms of the will as a part of the residue of the decedent’s estate. While it is true that the decedent’s wife and daughter are beneficiaries of the testamentary trust to which the residue of the estate was bequeathed, their interests are limited interests and not the interests they would have received as “statutory beneficiaries.” Furthermore, the interests were not received by operation of the Tennessee statute, but through distribution of the decedent’s estate under his will. The Lucky and Jones oases are not in point.

It has been argued, however, that, even though the decedent did dispose of the insurance by will, the provision of the Tennessee Code which exempts life insurance from the claims of creditors is none the less operative and the proceeds of such insurance, not being subject to the debts of the estate, can not be classified as “receivable by the executor” within the meaning of section 302 (g), supra, but must fall within the classification of policies receivable by “other beneficiaries.” As we have pointed out, it was the accomplishment of the secondary purpose of the Tennessee statute, namely, the disposition of the insurance to the “statutory beneficiaries”, which resulted in the conclusion in the Lucky and Jones cases that the insurance was receivable by “other beneficiaries” and not “by the executor.” In the instant case the insurance was in fact received “by the executor” and by it distributed according to the terms of the will to the legatees named therein. In so doing, petitioner was functioning in its capacity as executor, the decedent’s representative, and not merely as a conduit for “statutory beneficiaries.” We find nothing in the accomplishment of the primary purpose of the Tennessee statute, namely, the exemption of the proceeds of the insurance policies from the claims of creditors, to justify the conclusion that the insurance here under consideration was not “receivable by the executor” within the meaning of section 302 (g), supra. First National Bank & Trust Co. of Minneapolis v. United States (U. S. Dist. Ct., Dist. of Minnesota, 4th Div., May 4, 1939), cited by petitioner, is not in point. As we read the facts, the trust was not a testamentary trust but had been created prior to the decedent’s death. The trust and not the executor was the named beneficiary in the policies and none of the proceeds of the policies came into the hands of the executor for any purpose. Cf. Marmaduke B. Morton, Administrator, 23 B. T. A. 236, and Estate of Waldo Rohnert, 40 B. T. A. 1319.

The contention of the petitioner is rejected and it becomes unnecessary to consider the broad contention of the respondent, that, since the change in the estate tax statute effected by the enactment of section 302 (a) of the Revenue Act of 1926, the conclusion reached in the Lucky and Jones cases is no longer tenable even in cases indistinguishable as to facts.

Reviewed by the Board.

Decision will Toe entered under Rule 50.

ARundfal dissents.

       Sec. 302. The value of the gross estate of decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible of intangible, wherever situated — •
      *******
      (g) To the extent of the amount receivable by the executor as insurance under policies taken out by the decedent upon his own life; and to the extent of the excess over $40,000 of the amount receivable by all other beneficiaries as insurance under policies taken out by the decedent upon his own life.


author: Leech:

text:
    Union Guardian Trust Company, Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 94687.
    Promulgated May 29, 1940.

      Louis F. Dahling, Esq., for the petitioner.

      P..A. /Sebastian, Esq., for the respondent.
   OPINION.

Leech:

The principal question in this case is whether petitioner paid debts of the decedent in disregard of the priority of the United States in respect of claims for income taxes and hence brought itself within the provisions of section 311 (a) (2) of the Revenue Act of 1928 and section 3467 of the Revised Statutes. These sections, together with the relevant section 3466 of the Revised Statutes, are set out in .the margin.

Petitioner is liable only if out of the assets received from decedent it paid out moneys in discharge of debts to which the Government claim had priority. Conversely, it is not liable if the obligations which it paid had priority over the Government’s claim for taxes. Jessie Smith, Executrix, 24 B. T. A. 807.

It is settled law that Federal taxes have no priority over valid preexisting liens. As was said in Conard v. Atlantic Insurance Co., 1 Pet. 386, the Government’s “priority is no more than a right of prior payment out of the general funds of the debtor.” North River Coal & Wharf Co. v. McWilliams Brothers, 32 Fed. (2d) 355; affd., 59 Fed. (2d) 979, and 288 U. S. 290; United States v. Cutts, 1 Sumn. 133; 25 Fed. Cas. 745 (Case No. 14912); Brent v. Bank of Washington, 10 Pet. 594; Conard v. Atlantic Insurance Co., supra; United States v. Hooe, 3 Cranch, 73.

The collateral given by the decedent here to secure his notes to the Peoples Wayne County Bank could be applied not only to the note itself, but to “all other liabilities, absolute or contingent, present or future” of decedent. Such a provision in a note is valid in Michigan, Riess v. Old Kent Bank, 253 Mich. 557; 235 N. W. 252, and elsewhere, Citizens Bank & Trust Co. v. Thornton, 174 Fed. 752; Beacon Trust Co. v. Robbins, 173 Mass. 261; 53 N. E. 868. The bank thus had valid liens against the collateral from the proceeds of the sale of which the disputed payments on the lien debts were made. These liens existed at decedent’s death and therefore had priority over the Government’s later asserted claim for decedent’s income taxes.

Respondent also claims that the Government had priority in respect of the debt of $41.25 owed by decedent to the Grosse lie Golf & Country Club. We hold that in the light of the above authorities the club in question likewise had a lien prior to the Government’s claim for income taxes.

• Respondent contends that the cancellation of , the membership in the Bloomfield Hills Club for debts owing the club was a payment of a debt of the decedent. This contention has no merit, since the membership never belonged to decedent and such debts were not owed bj him.

We bold, therefore, that petitioner paid no debts owed by the decedent in disregard of the priority of the United States claim for income taxes of decedent. In consequence, it is not liable for those taxes. In view of this result, it will not be necessary to pass upon the second point raised by petitioner, namely, that respondent can not assess the tax against petitioner because of a reorganization in which petitioner’s liabilities were assumed by another entity.

Decision will he entered for the fetitioner.

         SEC. 311. TRANSFERRED ASSETS.
      (a) Method of coKeeiiom. — The amounts of the following liabilities shall, except as hereinafter in this section provided, be assessed, collected,- and paid in the same manner anü subject to the same provisions and limitations as in the case of a deficiency in a tax imposed by this title * * * :
      *******
      (2) Eiduciakies. — The liability of a fiduciary under section 3467 of the Revised Statutes in respect of the payment of any such tax from the estate of the taxpayer. Any such liability may be either as to the amount of tax shown on the return or as to any deficiency in tax.
      Sec. 3466. (Priority in Administration.)
      Whenever any person indebted to the United States is insolvent, or whenever the estate of any deceased debtor, in the hands of the executors or administrators, is insufficient to pay all the debts due from the deceased, the debts due to the United States shall be first satisfied; and the priority hereby established shall extend as well to cases in which a debtor, not having sufficient property to pay all his debts, makes a voluntary assignment thereof, or in which the estate and effects of an absconding, concealed, or absent debtor are attached by process of law, as to cases in which an act of bankruptcy is committed.
      Sec. 3467. (Liability of Fiduciary.)
      Every executor, administrator, or assignee, or other person, who pays, in whole or in part, any debt due by the person or estate for whom or for which he acts before he satisfies and pays the debts due to the United States from such person, or estate, shall become answerable in his own person and estate to the extent of such payments for the debts so due to the United States, or for so much thereof as may remain due and unpaid. [As amended by sec. 518, Revenue Act of 1934.]


author: Disney:

text:
    Susan Sturgis Barry, Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 94141.
    Promulgated June 4, 1940.

      Charles S. Jacobs, Esq., for the petitioner.

      Bernard D. Daniels, Esq., for the respondent.

       Originally entered as a memorandum opinion on April 27, 1940.

   opinion.

Disney:

This proceeding involves income taxes for the calendar years 1934 and 1935, the respective amounts being $503.59 and $388. The question presented is as to taxability of a wife, divorced under the law of Maine, for her own fault, upon income of a trust set up by her husband while the divorce action was pending. The facts have been stipulated and are so found.

The stipulation shows that the divorce was granted for the fault of the petitioner herein. No provision was made by the decree for alimony or support of the wife. If it is clear that the local law and the trust agreement give the divorced husband a full discharge and leave no continuing obligation of support, however contingent, upon the husband, the husband is not taxable upon the income of the trust set up by him. Helvering v. Fitch, 309 U. S. 149; Helvering v. Leonard, 310 U. S. 80; Helvering v. Fuller, 310 U. S. 69. That such is the situation herein is clear from the evidence.

In Luques v. Luques, 127 Maine, 356; 143 Atl. 263, the court said:

* * * It is true that, under the divorce statute of this state, a husband cannot be compelled without his consent to provide alimony or support for a wife against whom he has obtained a divorce for her fault. * * *

To the same effect is Stratton v. Stratton, 77 Maine, 373.

It thus appears that the court could not have modified the divorce decree between petitioner and her husband, except with his consent. But modification by consent of parties is obviously not the modification which the courts have in mind in holding that a final decree constitutes a termination of a husband’s duty of support of a wife. No showing is made herein that the husband has consented to modification of the decree. Petitioner cites cases such as Clayton G. Dixon, 39 B. T. A. 527, for the proposition that a trust set up by the husband during marriage causes liability of the husband for tax after dissolution of the marriage. The Supreme Court, however, in the cases above cited, has made continuance of duty of support under state law the test. Petitioner’s position in this regard is, in effect, the view set forth in the dissenting opinion in Helvering v. Fuller, supra. The husband’s duty having ended with finality with divorce for the wife’s fault under the law of Maine, the husband was no longer taxable upon the trust income.

In Metcalf v. Commissioner, 108 Fed. (2d) 957, involving a divorce under the law of Maine, the court reversed in order for a finding to be made as to whether either party had remarried, a fact found by the court to be determinative of the case under the facts in that case. That fact, however, is not here determinative, since as above seen the divorce herein was for the fault of the wife, and was therefore a final discharge of the husband’s duty of support. The divorce in the Metcalf case was not for the wife’s fault.

No question is suggested herein as to such short term of trust or control of the trust corpus as would cause application of Helvering v. Clifford, 309 U. S. 331, and obviously none could be raised, for the trust agreement gave the husband no control over the trust corpus or income, and the term is the life of the petitioner.

We hold that the Commissioner did not err in his determination of deficiency.

Decision will be entered for the respo'ndent.


text:
    Arnold Bruckner, Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 97507.
    Promulgated June 5, 1940.

      Arnold Bnwhner pro se.

      Joe D. Hughes, Esq., for the respondent.

       SEC. 251. INCOME FROM SOURCES WITHIN POSSESSIONS OP UNITED STATES.
      (a) Generad Rule. — In the case of citizens of the united States or domestic corporations, satisfying the following conditions, gross income means only gross income from sources within the united States—
      (1) If 80 per centum or more of the gross income of such citizen or domestic corporation (computed without the benefit of this section), for the three-year period immediately preceding the close of the taxable year (or for such part of such period immediately preceding the close of such taxable year as may be applicable) was derived from sources within a possession of the united States; and
      * * * * * * *
      (3) If, in case of such citizen, 50 per centum or more of his gross income (computed without the benefit of this section) for such period or such part thereof was derived from the active conduct of a trade or business within a possession of the united States either on his own account or as an employee or agent of another.
      (b) Amounts Received in united States. — Notwithstanding the provisions of subsection (a) there shall be included in gross income all amounts received by such citizens or corporations within the united States, whether derived from sources within or without the United States.
      [Note. — Subsequent paragraphs relate to deductions and credits.]

   OPINION.

Van Fossan:

Article 254 (4) of Regulations 94 denominates the Panama Canal Zone a possession of the United States. By article 251 (1) of Regulations 94, the respondent has construed the salary of the petitioner as a member of the civil personnel of the United States for services rendered in the Panama Canal Zone to represent income derived from the active conduct of a trade or business within a possession of the United States and thus to come within the purview of section 251 of the Revenue Act of 1936. The problem then is to determine how the provisions of section 251 (a) (1) shall be applied to the stipulated facts.

The percentage requisites designated in subsections (1) and (3) are conjunctive — the petitioner must derive 80 percent of his gross income for the period described and also 50 percent of such income must arise from the active conduct of a trade or business, both within a possession of the United States. John W. Haussermann, 23 B. T. A. 378; affd., 63 Fed. (2d) 124; certiorari denied, 289 U. S. 729. Since all of the income which the petitioner received within the Canal Zone was derived from his services as a member of the civil personnel of the United States and therefore, from the active conduct of a trade or business, no question arises under section 251 (a) (3).

The first issue scarcely deserves comment. The fortuitous circumstance that the petitioner happened to be on a vacation out of the Canal Zone on December 31, 1937, has no bearing whatever on the situation. He was still under a permanent appointment as assistant comptroller of the Panama Canal, he returned to his duties as such in due time, and he expects to continue indefinitely his employment and residence in the Canal Zone. There is nothing in the act which requires the taxpayer to be physically present in a possession of the United States on the last day of the taxable year in order to enable him to exclude his income derived from sources within such possession, nor can we conceive that such a requirement could or would be exacted. The statute limits the petitioner’s gross income to that derived from sources within the United States if he satisfies certain “conditions.” Presence in the possession on the last day of the taxable year is not one of them. The suggested holding is arbitrary and capricious.

There remains, therefore, the primary question to be answered — • under the facts before us, how should the statutory language “for the three-year period immediately preceding the close of the taxable year (or for such part of such period immediately preceding the close of such taxable year as may be applicable)” be construed?

The respondent’s position is that the part of the three-year period “applicable” begins with the date on which the petitioner first engaged in conducting a trade or business in the possession, or August 27, 1935, and extends to the end of the taxable year, December 31,1937. However, this theory ignores one important fact: The petitioner received a temporary appointment as assistant to the Comptroller of the Panama Canal and served in that capacity until February 17, 1936. On that day he returned to the United States and was employed and resided there until December 29, 1986. The record does not reveal the circumstances or character of his ^employment or position during that period but, obviously, it was not that of a civilian employee of the Panama Canal. His temporary appointment in the Canal Zone terminated on the day he left the possession.

The petitioner returned to the Canal Zone on December 29, 1936, under a permanent appointment as an assistant comptroller, a position quite different from that which he occupied earlier in that year and one which he expects to hold indefinitely. The continuity of his employment as assistant to the comptroller (held by the respondent to be a trade or business) was thus effectively and conclusively broken when he left the Canal Zone and should not be taken into consideration in determining the portion of the three-year period applicable to the case at bar.

The language of the statute is, “immediately preceding the close of such taxable year as may be applicable.” The period from August 27, 1935, to February 17,1936, must be excluded for the reasons above stated. During the period from February 17 to December 29, 1936, the petitioner resided and was employed in the.TJnited States. Hence, the applicable period is that immediately preceding December 31, 1937, the close of the taxable year, or from December 29, 1936, to December 30, 1937, inclusive.

Of the petitioner’s total gross income ($7,657.79) received by him during the year 1937, $7,126.39 was paid to him as an employee of the Panama Canal. The amount so paid to him for the last three days of 1936 is negligible. He thus satisfied the conditions imposed by section 251 and income so derived is not includible in his gross income for the year 1937. His act in setting forth in his return, Form 1040 E, for that year, the amounts received by him in 1935, 1936, and 1937 is wholly immaterial to the issue. In cases such as this, decisions are controlled, not by the inclusion in the taxpayer’s return of unnecessary data nor by his misconception of their tax significance, but by the applicable facts.

Decision will be entered for the petitioner.


author: SteRnhagen:

text:
    The K. Taylor Distilling Co., Inc., Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 92261.
    Promulgated June 7, 1940.

      Herbert A. FriedlicJi, Esq., Harry Thom, Esq., and Benjamin A. Ragir, Esq., for the petitioner.

      John D. Kiley, Esq., for the respondent.
   OPINION.

SteRnhagen:

1. The Commissioner’s determination included the following adjustment:

(a) Income has been adjusted to reflect the accrual of Kentucky production tax, assumed by the purchaser, in income for the taxable year. After a careful consideration and review of all the facts and information submitted in support of your contention that the production lax on whiskies is not income until actually received from the purchaser upon withdrawal from the warehouse, you are advised that the Bureau holds that all items entering into the transaction whereby the sale of your product is recorded on your books must be treated alike. There can be no segregation whereby a part of the total sale price (including storage charges and taxes) can be set aside and reported at some future or problematical date. Such a method would contravene the provisions of article 41-2 of Regulations 86, which provides that “a method of accounting will not, however, be regarded as clearly reflecting income unless all items of gross income and all deductions are treated with reasonable consistency.”

The petitioner assails this ruling. It contends that the $47,699.39 production tax applicable to whiskey sold in 1935 which had not yet been withdrawn from the warehouse was not accruable as a reimbursement to it because (a) there was no enforceable right to its collection in 1935; (b) the holders of the warehouse receipts were unknown to it; (c) there was doubt as to its collection; and (d) in fact some was not collected.

The contention must be rejected. When the whiskey was sold, whether for immediate delivery or upon a warehouse receipt, the consideration invariably included the amount identified as the exact equivalent of the amount which petitioner had been required to pay as the production tax. Petitioner as the producer was alone subject to this tax. When it paid the tax, either directly or by credit against its advance deposit, the tax obligation was discharged, and to speak of the amount thereafter as a tax was but a convenience. Between seller and buyer it was merely a factor of the sale price. Thus it was among petitioner’s accrued receipts equally with the other elements of the sale price which petitioner was to receive and the purchaser or his assignee or successor was to pay. To omit it as an accrued item while including the rest of the unpaid price and deducting the taxes as an item of cost would be a distortion rather than a clear reflection of income.

There was in petitioner an enforceable right to receive the contract price protected by the withheld warehouse receipt and collectible from the person, regardless of identity, who presented the receipt and took delivery. Whether such person was unknown to petitioner was of no importance in respect of the accrual of the elements of the sale price.

The doubt as to whether the amount would ever be received is no more than the doubt inherent in every such market transaction. It does not affect the accrual of the fixed price when the sale is made even though it may be necessary or proper to make an adjustment in a later year if things turn out differently from the supposition upon which the accrual was made. Spring City Foundry Co. v. Commissioner, 292 U. S. 182. This is not a case where the amount in all reasonable likelihood will never be received. The respondent’s determination must be sustained.

2. The same reasoning requires the denial of petitioner’s contention that the storage charges which it makes for holding the whiskey until the warehouse receipt is presented and the whiskey withdrawn should not be accrued until delivery is made. Such charges are at a fixed and definite rate. Each year the accrued but unpaid storage charges are ascertainable. The petitioner accrues them on its books and properly included the amount of such accrual on its tax return. It is not entitled to have this item changed.

Decision will be entered v/nder Rule 50.


author: MuRdock :

text:
    The Hoagland Corporation, Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 95920.
    Promulgated June 7, 1940.

      Ciarle M. Hebner, Esq., for the petitioner.

      Walt Mandry, Esq., for the respondent.
   OPINION.

MuRdock :

The petitioner concedes that there was a reorganization of Seven Eleven Fifth Avenue, Inc., within the meaning of that term as defined in section 112 (g) (1) (D) of the Revenue Act of 1934, in that there was a recapitalization. Section 112 (b) (3) provides that “Ho gain or loss shall be recognized if stock or securities in a corporation a party to a reorganization are, in pursuance of the plan of reorganization, exchanged solely for stock or securities in such corporation.” That provision exactly covers the transactions participated in by the present petitioner. It held before the reorganization all of the capital stock and a demand promissory note of the reorganized corporation. The petitioner does not contend that the promissory note was not “securities” within the meaning of that term as used in the above provision. It surrendered the stock and the notes, pursuant to the plan of reorganization, and received in exchange new stock of the reorganized corporation. The conclusion, that no gain or loss shall be recognized to the petitioner on the transaction, seems inevitable.

The petitioner contends that the surrender by it of one-fourth of the stock and the amount due on the note was not an “exchange”, since the petitioner was required to make that surrender in order to induce others to assist the corporation through financial difficulties and since it received no tangible consideration of determinable value for the surrender. It argues that the reorganization through recapitalization was an incident which necessarily took place prior to the surrender of one-fourth of the stock and, therefore, the loss does not come within the nonrecognition provisions of section 112. A reorganization under section 17 (b) of the Federal Bankruptcy Act may differ materially from a reorganization through recapitalization within the meaning of section 112 (g) (1) (D). Here, however, the distribution of the new stock, 40 percent to the bondholders and 60 percent to the petitioner, was an essential part of the plan of reorganization through recapitalization, within the meaning of section 112. The reclassification of the stock can not be separated from its distribution. The evidence shows that the petitioner exchanged its old stock and the debt due it for 60 percent of the new stock. These steps bring the transaction squarely within the provisions of section 112 (b) (3). Edith M. Greenwood, 41 B. T. A. 664. The cases which the petitioner cites are all right, as far as they go, but they do not go far enough for the petitioner’s purpose.

The petitioner argues that its loss was not a capital loss and, therefore, was not limited to a deduction of $2,000. The respondent does not mention that point in his brief, but he does contend that the petitioner would not be entitled to any deduction on the showing which it has made, even if there were no reorganization and nonrecognition provisions in the revenue act. The petitioner has failed to prove its basis for gain or loss on the shares. It has failed to prove that the debt in question had any value at the beginning of the taxable year. There is evidence which raises serious doubt as to whether or not it had any value at the beginning of the year. The respondent argues that 60 percent of the new stock represents the amount realized from the exchange and the value of that stock, an essential element in the computation of any gain or loss, has not been shown. He contends also that any loss would be subject to adjustments, in amounts not disclosed in the record, since consolidated returns were filed in which losses of the subsidiary were offset against income of the petitioner. See Regulations 89, arts. 39 and 40. These questions, which would otherwise be important, are not so here, where the petitioner is not entitled to any loss by reason of section 112 (b) (3).

Decision will be entered for the respondent.


author: Mukdook:

text:
    David L. Loew, Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 95976.
    Promulgated June 11, 1940.

      Maurice Henry BUnk&n, Esq., for the petitioner.

      Harold F. Noneman, Esq., for the respondent.
   OPINION.

Mukdook:

The Commissioner determined a deficiency of $7,200 in gift tax for the calendar year 1936. The contention of the petitioner is that the Commissioner erred in not allowing six exclusions of $5,000 each in addition to the three exclusions of $5,000 each which were allowed. The facts have been stipulated and the Board hereby adopts the stipulation as its findings of fact.

The petitioner transferred property on December 15, 1936, to nine separate trusts. The Commissioner, in determining the deficiency, has refused to allow any exclusion whatsoever in regard to six of the transfers. The correctness of his action in that respect is the only issue before the Board. The petitioner contends that the gifts were to the trusts, and, since there were transfers to six separate trusts, he is entitled to six separate exclusions of $5,000 each. He relied upon a number of decisions, including Commissioner v. Wells, 88 Fed. (2d) 339; Seymour H. Knox, 36 B. T. A. 630; Charles W. Deeds, 37 B. T. A. 293; and Mary M. Hutchings, 40 B. T. A. 27. The Board, in Wilton Rubinstein, 41 B. T. A. 220, reversed its position taken in the above cases and decided to follow the rule annunciated by the three Circuit Courts of Appeals to the effect that the gifts, in cases of transfers in trust, are not to the trusts but to the beneficiaries. See also J. Willis Gardner, 41 B. T. A. 679; Leopold E. Block, 41 B. T. A. 830; and Mary duPont Faulkner, 41 B. T. A. 875.

The Commissioner contends that the transfers in question were of future interests and, therefore, no exclusion is proper under section 504 (b) of the Revenue Act of 1932. The income of each trust was to be paid to the petitioner during his life and after his death to one of his children, except that if the wife of the petitioner should survive him and should be married to him and living with him at the time of his death, then she was to receive the income of three of the trusts for her life, after which it was to be paid to the children. The corpus of each trust is payable to one of the three children of the petitioner. The distribution is to be made in one-half or one-third portions when the child reaches a certain age. The ages range from twenty-five to forty. But the payment of the corpus to the children is to be deferred until the death of the petitioner, and in the case of three trusts, until the death of his wife, in case she becomes entitled to receive the income. The deeds also provide that, in case the children fail to survive the life beneficiaries or fail to live until all of the corpus has been distributed to them, then the corpus is to be distributed among their lawful descendants. If they have no lawful descendants, then it is to be divided among the surviving brothers or sister and their lawful descendants. Otherwise it is to be paid over to the lawful heirs of the petitioner, in accordance with the laws of California, excluding the mother and wife of the petitioner.

The Board has held that gifts substantially similar to these which follow the life estate of the petitioner are gifts of future interests within the meaning of section 504 (b) of the Revenue Act of 1932. Edith Pulitzer Moore, 40 B. T. A. 1019; J. Willis Gardner, supra; Leopold E. Block, supra. No gift is involved in so far as the petitioner transferred the property and made the income payable to himself for life. The gifts to all of the other beneficiaries of the trusts are gifts of future interests within the meaning of that term as used in section 504 (b) and as interpreted in the decisions just cited. Therefore, the Commissioner did not err in refusing to allow any exclusions in the case of the transfers to the six trusts.

Decision will T>e entered for the respondent.


author: ARNOLD:

text:
    O’Bryan Brothers, Petitioner, v. Commissioner of Internal Revenue, Respondent. T. P. Kennedy, Sr., Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket Nos. 83382, 90681.
    Promulgated June 11, 1940.

      Cecil Sins, Esq., and T. W. Branch, C. P. A., for the petitioners.

      F. L. YanHaaften, Esq., for the respondent.
   OPINION.

ARNOLD:

The first issue is whether respondent erred in disallowing the deduction of $138,567.20 claimed by the corporate petitioner as that portion of a debt ascertained to be worthless and charged off during the taxable year. O’Bryan Brothers determined the worthless portion of the indebtedness by valuing the remaining collateral that secured the Kennedy note at thei time Kennedy, Sr., transferred 751 shares of stock to his son. There is no dispute between the parties with respect to the charge-off on petitioner’s books, so that the issue is reduced to a question of whether the facts establish a sufficient ascertainment of worthlessness.

The respondent contends that the disallowance of the deduction was proper because (1) the withdrawals represented in the Kennedy account wore in the nature of dividends and accordingly should be charged to surplus; (2) the Kennedy accounts were not ascertained to be worthless in the year 1933 oven in part; and (3) the charge-off by O’Bryan Brothers was in the nature of a forgiveness of indebtedness and should have been charged to surplus.

Briefly, the facts show that prior to the taxable year the corporate petitioner had sustained losses and its principal creditor, a Nashville bank, had assumed supervision of its affairs in order to work out the indebtedness owing to the bank. One of the principal assets of O’Bryan Brothers was an open account with its majority stockholder, who had withdrawn over $200,000 from the corporation during the years 1925 to 1932, inclusive. Upon the insistence of the bank the majority stockholder executed a promissory note in favor of the corporate petitioner and pledged his 1,308 shares of corporate stock and a deed of trust on his home as security for the note. O’Bryan Brothers then pledged the note and the security with the bank as collateral for its own indebtedness. The bank officials placed the son of the majority stockholder in charge of the corporate petitioner and directed the affairs of O’Bryan Brothers through this nominee of the bank. Kennedy, Sr., remained as chairman of the board of directors but confined his activities to selling.

In order to retain young Kennedy’s services the bank proposed that Kennedy, Sr., transfer 751 shares of his stock to his son so that the latter would have an incentive to work the corporate petitioner out of its financial difficulties. The elder Kennedy consented to the proposal and the bank and the corporate petitioner successively released the 751 shares as collateral so that the elder Kennedy could effect the transfer of stock control to his son. The delivery of said shares occurred on June 5, 1933, and it is this transfer, together with the physical and financial condition of Kennedy, Sr., and the financial condition of O’Bryan Brothers, which petitioner says establishes the partial worthlessness of the elder Kennedy’s debt.

While there may be merit in respondent’s contention that the withdrawals by Kennedy, Sr., were in the nature of dividends, we prefer to dispose of the issue upon the assumption that an indebtedness existed. The fact that O’Bryan Brothers voluntarily relinquished collateral securing the indebtedness, thereby contributing to the partial worthlessness thereof, is, in our opinion, the critical factor herein. A taxpayer is not permitted voluntarily to surrender property which concededly is valuable and which was given for the purpose of protecting it from loss on an indebtedness, and then charge off the debt, Gilliam Manufacturing Co., 1 B. T. A. 967, 971. Such action would amount to a perversion of the statute. W. F. Taylor Co., 38 B. T. A. 551, 557. We can not, therefore, agree that the transfer of the 751 shares on June 5, 1933, coupled with the financial and physical condition of T. P. Kennedy, Sr., established the partial worthlessness of any part of the indebtedness.

Our findings show tliat the corporate petitioner fixed the value of the 557 shares at $35,000, or approximately $62.81 per share. This valuation, if correct and if applied to the entire 1,308 shares, plus the appraised value of the real property, might entitle petitioner to a smaller deduction than that claimed. For the purpose of determining the gift tax liability of the individual petitioner, respondent fixed the value ox each share of stock given to T. P. Kennedy, Jr., at $150 per share. If respondent’s valuation is correct the value of the collateral held by O’Bryan Brothers prior to the relinquishment of a portion thereof exceeded the amount of the indebtedness. The value of O’Bryan Brothers’ stock, therefore, is one of the determining factors as to two of the issues presented.

The evidence of value is conflicting. We have the testimony of Kennedy, Jr., that the stock had no market value when given to him, and yet the corporate petitioner valued the stock at approximately $62.81 per share in fixing the amount of deduction it would claim. We have evidence that O’Bryan Brothers was being operated under the direction of its principal creditor; opposed to this is other evidence which shows that its earnings for the taxable year amounted to $54.82 per common share, if preferred stock and the deduction claimed are not taken into consideration. The balance sheets of the corporation for 1931, 1932, and 1933 indicate that the stock had substantial book values of $159.27, $166.25, and $128.95 per common share, respectively. The asset values on O’Bryan Brothers’ balance sheets fail to reflect the evident value of its trademark’and good will as indicated by the company’s dividend record and the net withdrawals of its principal stockholder. A small corporation like O’Bryan Brothers must have a substantial earning power to pay its majority stockholder a salary and bonus of $35,000 per year, permit him to make net withdrawals of $19,915.57 for 1925, $43,128.58 for 1926, $24,801.66 for 1927, $46,398.45 for 1928, $57,440.61 for 1929, and $12,063.42 for 1930, and in addition pay dividends of 8 percent on its preferred stock and 5 or 10 percent on its common stock for most of these years.

More favorable to petitioners is the known economic condition of the country in 1932 and 1933, but in spite of economic conditions generally, the record shows that particular events favored O’Bryan Brothers in 1933. Furthermore, it was testified that its operations were profitable until its employees struck in September, and yet, despite the economic loss that usually results from a strike, O’Bryan Brothers was able to finish the year with earnings of more than $82,000, omitting from consideration the bad debt deduction.

In view of all the facts and circumstances herein, we are of the opinion that the value of the common stock of O’Bryan Brothers was $150 per aliare; that the collateral secuiing tlie indebtedness, together with the collateral surrendered, exceeded in value the amount of the elder Kennedy’s indebtedness; and that no part of said indebtedness was properly ascertained to be worthless. On this issue decision will bo for the respondent.

The second issue involves respondent’s determination of the amount of depreciation to which the corporate petitioner is entitled. No evidence was offered by petitioner, but it contends that as a matter of law respondent erred in his determination. The deficiency letter and the statement and depreciation schedules attached thereto indicate that respondent determined as a matter of fact that the life of petitioner’s factory equipment and of its furniture and fixtures was 15 and 20 years, respectively, and not 10 and 15 years, respectively, as originally determined by petitioner and accepted by the respondent. Respondent, therefore, determined new rates for these depreciable assets based upon their longer useful life, and depreciated the remaining cost thereof over their remaining life, beginning with the taxable year. Petitioner agrees with respondent’s determination of fact, namely, a longer useful life for these assets, but asks the Board to require respondent to make his determination retroactive to January 1,1930. This wTe can not do unless petitioner shows that 1933 income would somehow be affected, such as by net losses sustained in prior years; Sample-Durick Co., 35 B. T. A. 1186. But the record here shows that this xietitioner had taxable income for 1932, and that it has offered no evidence to overcome respondent’s determination of a question of fact. The respondent’s determination must, therefore, be approved on this issue.

As to the third issue, petitioner T. P. Kennedy, Sr., contends that the proper date for filing his gift tax return was June 15, 1934, the date of its receipt by the revenue agent in charge, and accordingly tiiat the statute of limitations has run against the collection of the tax. The respondent contends that the gift tax return was filed August 7, 1934, when it was received by the collector of internal revenue i'or the district of Tennessee, and therefore the statute of limitations has not run against the collection of the tax. In support of this contention respondent relies on the case of Hill Co. v. Commissioner, 64 Fed. (2d) 506; certiorari denied, 290 U. S. 691, affirming 22 B. T. A. 1351. wherein it is stated:

The first contention made by the petitioner is that the statute of limitations has operated to bar the assessment and collection of the deficiency found to be due for the fiscal year ended March 31, 1920. The petitioner contends that a return for this fiscal year was executed by the officers of the petitioner and delivered to the revenue agent at his request; that he promised to file the return, and that the execution and lodgment of the return with the revenue agent meets the requirements of the statute. There is no merit in this contention. Under the heading “Time and place for Filing Returns” section 241 (b) of the Revenue Act of 1918 provides:
Returns shall he made to the collector of the district in which is located the principal place of business or principal office or agency of the corporation, or, if it has no principal place of business or principal office or agency in the United States, then to the collector at Baltimore, Maryland.
It is no part of the duties of an internal revenue agent or of an internal revenue agent in charge to file returns for taxpayers. That is the dirty which law places on the shoulders of the taxpayers. ⅜ * *

Section 507 (b) of the Revenue Act of 1932 is to the same effect as section 241 (b) of the 1918 Act mentioned above. Upon authority of Hill Co. v. Commissioner, supra, the contention of the respondent in respect to this issue is sustained.

As to the fourth and last issue presented for determination, petitioner T. P. Kennedy, Sr., contends that respondent erred in placing a value of $150 per share on 751 shares of stock of O’Bryan Brothers as of June 5, 1938, the date of the gift of the stock to his son, T. P. Kennedy, Jr. In view of our decision on the first and third issues it is unnecessary to further consider the value of O’Bryan Brothers common stock in determining the gift tax liability of T. P. Kennedy, Sr., since he does not dispute the making of the gift to his son, and the only question raised is the value of the gift. Respondent’s determination on this issue is approved.

Since the petitioner, O’Bryan Brothers, has paid the collector of internal revenue at Nashville, Tennessee, $1,941.30 on its income and excess profits tax liability for the calendar year 1933, it is entitled to credit for this payment in the recomputation of its taxes for that year.

Decision will ~be entered under Rule SO.


author: Murdock:

text:
    The Thibaut & Walker Company, Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 96149.
    Promulgated June 11, 1940.

      Alexander F. Mahay, C. P. A., for the petitioner.

      Leonard A. Sf adding, Jr., Esq., for the respondent.
   OPINION.

Murdock:

The Commissioner determined a deficiency of $1,862.05 in the petitioner’s income tax for the calendar year 1936. The only issue for decision is whether the Commissioner erred in failing to allow a credit of $14,737.24 under section 26 (c) (1) of the Revenue Act of 1936 in computing the surtax on undistributed profits. The facts are presented by a stipulation which the Board adopts as its findings of fact.

The petitioner is a corporation, organized under the laws of New York. The ownership of its outstanding stock at all times material hereto was as follows:

Shares
Randall O. Walker_1,040
Heermance M. Howard_ 320
Kenneth J. Howe- 320
Osear S. Swanson_ 320
Total_2,000

The par value of each share was $100. Its adjusted net income as defined in section 14 (a) (1) was $34,137.24 for the taxable year. It declared and paid dividends of $20,000 during the year. It claims that it is entitled under section 26 (c) (1) to a credit of $14,737.24, “the excess of the adjusted net income over the aggregate of the «.mounts which can be distributed within the taxable year as dividends without violating a provision of a written contract executed fey the corporation prior to May 1, 1936, which provision expressly deals with the payment of dividends.” It bases this contention upon an agreement entered into on August 9, 1933, by the petitioner and the four individuals who owned all of its stock.

The agreement recites that the four individuals own the capital stock of the corporation; they desire to provide a conservative policy for the growth of the corporation and an adjustment of interest in the event of death of any of them; the corporation has taken out fife insurance to compensate it for loss from the death of any of them and to enable it to finance purchases of stock deemed advisable upon the death of any of them; they desire to provide a plan by which the corporation will supply any additional funds necessary to complete the purchases; and they desire to bind their estates to sell the stock in case of their deaths and the corporation has agreed to purchase the stock in so far as it may lawfully do so.

The agreement provides that in consideration of the premises and of $1 paid by each party to each of the others, “It is understood and agreed”, first, (a) that the individuals agree to vote their stock so as to elect themselves directors and as directors to cause themselves to be elected officers and paid certain salaries; (b) that upon the death of Walker, a director shall be elected in a certain way; and:

Second: Walker, Swanson, Howard and Howe agree that as Directors of the Corporation to such extent as the law permits they hind themselves to vote in favor of the following policy in reference to tlio payment of dividends hy the Corporation:
At the end of each fiscal year, payment of a dividend of not less than 10%, if earned, payable under the provisions of the law of the State of New York, and after crediting the surplus account with not less than $15,000, if earned, payment of the balance of net earnings to the officers of the Corporation as additional salaries, in such proportion as their respective salaries as above set forth bear to such balance of net earnings.

The agreement next provided in considerable detail for the purchase by the corporation of the stock of any of the four individuals who might die. Each individual also agreed not to sell his stock without first offering it to the other three. The agreement contained this provision:

Fifteenth: It is understood and agreed that this contract is divisible as to all of its provisions and that the illegality of any part shall not thereby render the whole void or voidable.

Obviously the corporation was a party to the above agreement and the agreement contains a provision which expressly deals with the payment of dividends. Also, a distribution in excess of 10 percent during the taxable years would have violated the provisions of the agreement, nevertheless, it is our opinion that section 26 (c) (1) does not apply. The corporation did not contract that it would refrain from paying dividends in excess of 10 percent. On the contrary, it was the four individuals Avho agreed that as directors they would vote in favor of a dividend policy limiting the dividends to 10 percent and requiring that the next $15,000 of earnings be added to capital. Congress intended to give a credit to a corporation only where the corporation had bound itself not to pay a dividend. This is reasonably clear from the language of the section. The legislative history indicates that Congress Avas trying to relieve situations in Avhich a corporation had contracted with creditors to retain its earnings for their protection, but did not have in mind contracts such as this one, entered into by parties inside the corporate group to refrain from declaring dividends for their own mutual benefit. Seidman’s Legislative History of Federal Income Tax Laws, p. 216, et seq., relating to section 26 (c) (1). “The intention of the lawmaker controls in the construction of taxing acts as it does in the construction of other statutes, and that intention is to be ascertained, not by taking the word or clause in question from its setting and vieAving it apart, but by considering it in connection with the context, the general pur-looses of the statute in which it is found, the occasion and circumstances of its use, and other appropriate tests for the ascertainment of the legislative will.” Helvering v. Stockholms Enskilda Bank, 293 U. S. 84. The petitioner is not entitled to the credit.

Decision will be entered for the resfondent.


author: Black:

text:
    Claude S. Rucker, Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 99749.
    Promulgated June 11, 1940.

      Claude S. Rucker pro se.

      E. L. Corbin, Esq., for the respondent.
   OPINION.

Black:

Section 25 (b) (1) of the Bevenue Acts of 1934 and 1936 reads in part as follows:

(b) ⅜ * * There shall be allowed for the purposes of the normal tax and the surtax the following credits against net income:
(1) Personal exemption. — In the case of a single person, a personal exemption of $1,000; or in the case of the head of a family [at a married person living with husband or wifeja personal exemption of $2,500. % * *

The Treasury has promulgated Begulations 86 and 94 relating to the Bevenue Acts of 1984 and 1936, respectively, and article 25-5 of each of those regulations reads as follows:

Personal exemption of marries, person. — In the case of a married man or married woman the joint exemption replaces the individual exemption only if the man lives with his wife or the woman lives with her husband. In the absence of continuous actual residence together, whether or not a man or woman has a wife or husband living with him or her within the meaning of the Act must depend on the character of the separation. If merely occasionally and temporarily a wife is away on a visit or a husband is away on business, the joint home being- maintained, the additional exemption applies. The unavoidable absence of a wife or husband at a sanatorium or asylum on account of illness does not preclude claiming the exemption. If, however, the husband voluntarily and continuously makes his home at one place and the wife hers ac another, they are not living together within the meaning of the Act, irrespective of their personal relations. * * *

It seems plain that, under the applicable statutes and regulations which we have quoted above, petitioner is not entitled to the $2,500 personal exemption which he claims as a married person. The evidence at the hearing shows that in each of the taxable years petitioner and his wife were not living together as man and wife. She was living in an apartment in one residence and he in another. There is no evidence before us to show that the separation was involuntary. The wife testified at the hearing that during the years in question she was in poor health and unable to work and that petitioner supported her. That was about the extent of her testimony. No explanation was given as to why they were living apart. For aught we know they may have been living apart by mutual agreement without one being more at fault than the other.

We think the facts which we have been able to find in our findings of fact fail to bring petitioner within the terms of the $2,500 personal exemption granted to a married man living Avith his wife.

Nor do we think that the facts entitle the petitioner to personal exemption of $2,500 as the head of a family. The facts of the instant case are distinguishable from those present in Meier S. Block, 37 B. T. A. 945, in which we alloAved the taxpayer’. $2,500 personal exemption as the head of a family. In that case the taxpayer was a married man, with a wife and a minor daughter. The wife and daughter were living apart from the taxpayer. The taxpayer lived in one house and his wife and daughter lived in another. Although the husband and Avife were separated, there had been no divorce. Neither the taxpayer’s wife nor his daughter had any property or independent means of support. The taxpayer during the taxable year in question furnished them money for food, clothing, living quarters, and other miscellaneous expenses. He visited his Avife and daughter in their home approximately six times during the taxable year and was consulted many times during that year with regard to his daughter’s welfare and had, to a considerable extent, control over her conduct. Under those circumstances in the Block case, supra, we alloAved the taxpayer a personal exemption of $2,500, not on the ground that he was a married man living with his wife, but on the ground that he was the head of a family within the meaning of section 25 of the Revenue Act of 1932 and the regulations promulgated thereunder. In that case, among other things, we said:

It is clear that petitioner “supports and maintains ⅜ ⅜ * one or more individuals who are closely connected with him by blood relationship ⅜ * ⅜” and does have a “right to exercise family control and provide for these dependent individuals * * * based upon some moral or legal obligation”, as the regulation provides. “Civilly, a father is entitled to the custody, services, and earnings of a minor child, and is under obligation to provide for the welfare of the child, and the child is subject to parental discipline and restraint”, Manners v. State (Ind. 1936), 5 N. E. (2d) 300.

In the instant case there is no minor child as there was in the Block case, supra. The case of Sidney Williamson Kirtland, 39 B. T. A. 959, is distinguishable upon the same ground.

In the instant case there is a wife who during the taxable years was entirely supported by the husband, petitioner, but there is nothing to show that he had any right to exercise any family control or that there was any “legal or moral” obligation on his part to provide the support which the regulations require with reference to “head of a family.” For aught we know, the fact that Mrs. Kucher was living apart from her husband may have been entirely voluntary on her part. The fact that petitioner continued to support her, though separated, may have been due to motives of generosity rather than any legal or moral obligation on his part. For us to find that petitioner continued to support his wife after the separation because he was morally and legally bound to do so, we would have to assume facts which are not in the record. That we may not do. If, notwithstanding the separation, petitioner continued legally and morally bound to support his wife, the facts which made him so obligated should have been proved at the hearing. We can not supply their absence by inference.

As Ave have already stated, petitioner furnished the sole support of his Avife during the taxable years. He claims that if he is not entitled to a personal exemption of $2,500 as a married man living with his Avife or as the head of a family, then in the alternative he is entitled to a credit of $400 in each of the taxable years for one dependent. Section 25 (b) (2) of the Revenue Acts of 1934 and 1936 provides:

Ceedit for Dependents. — $400 for each person (other than husband or wife) dependent upon and receiving his chief support from the taxpayer if such dependent person is under eighteen years of age or is incapable of self-support because mentally or physically defective.

The plain language of the statute appears to exclude husband and Avife from the classification of “dependents.” If a spouse is entitled at all to personal exemption on account of husband or wife, he is entitled to the full amount of $2,500. Failing to be entitled to that exemption, he is only entitled under the statute to a personal exemption of $1,000 as a single person.

For reasons already stated Ave sustain the Commissioner in his allowance to the petitioner of a personal exemption of $1,000 for each of the taxable years. Inasmuch as the petitioner did not file any income tax return for either of the taxable years, the penalties are mandatory. Paul L. Case, 37 B. T. A. 365, and cases there cited.

Decision will be entered for the respondent.


author: HaiíRON :

text:
    Foster Wheeler Corporation, Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 96610.
    Promulgated June 11, 1940.

      Schuyler M. Meyer, Esq., Russell D. Morrill, Esq., and John W. Mats, Esq., for the petitioner.

      Walt Mandry, Esq., for the respondent.
   OIUNION.

HaiíRON :

This proceeding involves a deficiency determined by the Commissioner in respect of excess profits liability on Navy contracts under the provisions of the so-called Vinson Act. In Foster Wheeler Corporation, 40 B. T. A. 1, involving this docket, the Board held that it has jurisdiction to redetermine such deficiencies. The Commissioner’s motion to dismiss this case was denied by order of the Board pursuant to the opinion in Foster Wheeler Corporation, supra. Thereafter, the proceeding was duly heard and submitted for determination of the issue raised by the pleadings.

The question presented is a special question arising under the provisions of the so-called Vinson Act, which, in general, require that the excess profit, if any, realized from a Navy contract completed within the income taxable year shall be paid into the Treasury of the United States by the contractor, to become the property of the United States. Whether or not petitioner realized excess profit from Navy contracts in the income taxable year 1936 in the amount of $883.63 is the ultimate question. The answer to that question turns upon whether or not petitioner completed in 1936 Navy contract No. 39610, hereinafter referred to as the 1934 contract, so as to be entitled to use the loss on that contract as an offset against the gain on contract 49319, which was admittedly completed in 1936. Determination of that question requires consideration of the meaning of the words “* * * such contracts * * * as arc completed by the particular contracting party within the income taxable year” appearing in section 3 (b) of the Vinson Act, as amended by the Act of June 25, 1936.

In its annual report of profit on Navy contracts for 1936, petitioner reported the combined contract prices of Navy contracts Nos. 39610 and 49319. (Contract No. 49319 will be referred to hereafter as the 1936 contract.) Petitioner reported that the 1934 contract was completed in the year 1936. The 1936 contract was completed in the year 1936, and there is no question regarding that contract. Petitioner reported the loss sustained on the 1934 contract and the gain realized on the 1936 contract, and offset the loss against the gain. As a result of this offset, the report showed no excess profit for the year 1936 on Navy contracts to be paid into the Treasury.

The respondent determined that the 1934 contract was completed by petitioner in 1935, within the meaning of section 3 of the Vinson Act, pursuant to article 5 .(a) of the regulations prescribed by the Secretary of the Treasury with respect thereto, promulgated in Treasury Decision 4723, approved December 31, 1936, by the Acting Secretary of the Treasury. See Internal Eevenue Cumulative Bulletin 1937-1, pp. 519 to 529. Respondent disallowed the offset of the loss from the 1934 contract against the profit from the 1936 contract, with the resulting determination that petitioner realized in 1936 an excess profit of $883.63 on the 1936 Navy contract, payable into the Treasury.

Before turning to the consideration of petitioner’s contentions and of the main question, attention is called to the pertinent provisions of section 3 of the Vinson Act before and after the amendment enacted in 1936. " ⅛'⅞' •

Section 3 (a) of the Vinson Act as originally enacted in 1934 provided, in substance, that in each Navy contract the contractor must agree to mate a report on each contract to the Secretary of the Navy upon the completion of the contract; and section 3 (b) provided that the contractor must agree to pay into the Treasury profit in excess of 10 per centum of the total contract price (singular). Thus, as originally enacted, section 3 contemplated that the excess profit, if any, to be paid into the Treasury, would be on the basis of the profit shown on a single Navy contract, and, until the year 1936, a contractor under a Navy contract could not compute net profit on more than one Navy contract completed in an income taxable year in one report, and thereby offset the loss, if any, on one contract, against the profit on another. However, the amendment to section 3 (b) enacted in 1936 changed the terms of section 3 (b) to refer to profit in excess of 10 per centum of the total contract 'prices (plural) of such contracts (plural) as are completed within the income taxable year; and income taxable years are defined to be such taxable years beginning after December 31, 1935.

It therefore appears, and the parties to this proceeding do not contend otherwise, that under section 3 (b) as amended, in reporting on Navy contracts completed in any income taxable year, including the year 1936 and after, a contractor may report in a single report the combined contract prices of more than one Navy contract completed within the income taxable years, and may compute net gain under all contracts by offsetting loss, if any, against gain, in computing the net income in excess of 10 percent to be paid into the Treasury. See Decisions of the Comptroller General of the United States, vol. 18, p. 84, 87.

It follows, therefore, that if petitioner completed the 1934 contract in the year 1936, he properly computed net gain under both the 1934 and 1936 contracts, offsetting the loss from one against the profit of the other.

The pertinent provisions of section 3 of the Vinson Act as amended in 1936 are set forth in the margin, in só far as it seems necessary to understand the following consideration of the main question.

Petitioner contends that the words in section 3 (b), as amended in 1936, “such contracts * * * as are completed by the particular contracting party within the income taxable year”, mean such contracts as are completed by final payment on the contract by the Government. Petitioner contends that the 1934 contract was completed in 1936 because the final tests of contract materials aboard ship were completed and final payment by the Government was made in 1936. It is noted that petitioner does not contend that the time of completion of the 1934 contract was extended by petitioner’s guarantee to replace “airy or all parts giving evidence of defect in material or workmanship within one year after installation and test aboard ship.”

On the other hand, respondent contends that the particular words set forth above mean such contracts under which the contract work is completed by the contractor within the taxable year, and that, therefore, the 1934 contract was completed in 1935, when the contract materials were delivered at the respective navy yards and were inspected both as to quality and quantity and passed by naval inspectors, and when payment of 90 percent of the contract price less certain penalties for delay in shipment was made.

Upon due consideration, we are of the opinion that respondent’s contention is correct.

The words used in section 3 (b), “such contracts * * * as are completed by the particular contracting party within the income taxable year”, seem to be clear and unambiguous. The contracts referred to are those which are completed lyy the contractor. It is proper, therefore, to consider the question by looking at what the performance of the contractor is in the income taxable year. A review of the legislative history of section 3 of the Vinson Act, as amended in 1936, shows that Congress intended that contracts were to be considered completed by the contractor when the worle under the contracts was completed by the contractor. The Commissioner, in his regulations prescribed under section 3 of the Vinson Act, in article 5 thereof, has defined “completion of the contract” to be the date of delivery of contract materials, unless the Navy contract provides a method for determining the date of completion. See C. B. 1937-1, p. 521. While the Commissioner’s definition in his regulation is not determinative, it has not been shown in this case to be unreasonable or to exceed the terms of the statute. His regulation is not inconsistent with the evident intent of Congress as disclosed by the legislative history of section 3 (b), as amended in 1936.

When the bill which later became the Vinson Act of March 27, 1934, was passed by the House of Representatives in its original form, section 3 provided simply for a limitation of the profits on certain Navy contracts, but made no reference to the completion of the contracts. The first reference to the completion of the contracts was made in an amendment to section 3 of the bill which was passed by the Senate and provided in part that all contractors were to report the net profits from Navy contracts within the scope of the section to the Secretary of the Treasury “upon completion of the work under such contract.” [Italics supplied.] The conference report on the bill recommended that the House of Eepresentatives agree to the Senate amendment to section 3 of the bill with a further amendment, which later became a part of section 3 of the Vinson Act of March 27, 1934, and provided in part that no Navy contract within the scope of the section was to be made unless the contractor agreed “(a) To make a report * * * to the Secretary of the Navy upon the completion of the contract.” In explaining to the House of Eepresentatives the recommendations made in the conference report, Chairman Vinson of the House Naval Affair's Committee stated that the further amendment recommended in the conference report was “not essentially different from the Senate proposal” and set forth “the matter in what is believed to be a more orderly and clearer way.” Thus, it is clear that Congress intended that the words “completion of the contract” which were contained in section 3 (a) of the Vinson Act of March 27, 1934, were to have the same meaning as the words “completion of the work under such contract” which were contained in the Senate amendment. The Act of June 25, 1936, amended subdivision (b), and not subdivision (a) of section 3 of the Vinson Act. Subdivision (b) of section 3 of the Vinson Act, as amended, refers to “such contracts * * * as are completed by the particular contracting party” and to “such contracts ⅝ * * completed by the particular contractor.” It is evident that Congress intended that the meaning of “completed” as used in subdivision (b) of section 3 of the Vinson Act, as amended, was to be the same as the meaning of “completion” as used in subdivision (a), and we believe that Congress has expressed that intent explicitly in the wording of subdivision (b) of section 3 of the Vinson Act as amended.

It should be pointed out that the requirement-of section 3 (a) of the Vinson Act that the contractor shall make a report upon the completion of the work under the contract is entirely consistent with the further requirement of section 3 that “The report * * * shall state the total contract price, the cost of performing the contract, the net income and the per centum such net income bears to the contract price.” Upon tlie completion of the work under the contract the 'contractor is able to state each of the required items. Moreover, section 3 (b) of the Vinson Act as amended provides that “all provisions of law * * * applicable with respect to the taxes imposed by Title I of the Revenue Act of 1934, and not inconsistent with this section, shall be applicable with respect * * * to refunds by the Treasury of overpayments of excess profits” and that the provision “relating to the * * * refunding of excess profits * * * by £]ie Treasury shall be retroactive to March 27, 1934.” Thus, if additional costs are incurred or adjustments to the contract price are made after the contractor has made a report of profit on Navy contracts and has paid the excess profits disclosed in the report, the contractor may file a claim for the refund of the amount of the overpayment of excess profits. It should be noted that there is nothing in the record here to show that any additional costs were incurred by petitioner or any adjustments to the contract price were made subsequent to the payment in 1935 of 90 percent of the contract price less certain penalties for delay in shipment.

The facts show that the materials covered by the 1934 contract were completed and delivered in 1935. The petitioner completed its work on the contract materials in 1935. In 1935 the contract materials were inspected “both as to quality and quantity” and passed by naval inspectors. The installation and tests of the contract materials aboard ship, which were made by the Government in 1936. obviously were not part of petitioner’s work under the contract. We believe it immaterial that 10 per centum of the contract price was paid by the Government in a year subsequent to the year in which petitioner completed its work and delivered the contract materials. The matter is governed, in our opinion, by the time when the contractor completes the contract work, and not by the time when final payment under the contract is made by the Government.

It is held that the 1934 contract was completed by the petitioner in. 1935. Petitioner, therefore, erred in attempting to bring the 1934 contract within the provisions of section 3 (b) of the Vinson Act, as amended in 1936, by reporting the contract price and loss under the 1934 contract with the contract price and gain of the 1936 contract, which was completed in 1936. Respondent’s determination is sustained.

Reviewed by the Board.

Decision will be entered for respondent.

       The act known as the Vinson Act was originally enacted March 27, 1934, by the 73d Congress, 2d session. See 48 U. S. Stat. 503, 504, 505. Section 3 (b) of the Vinson Act was amended by Act of June 25, 1936, insofar as material in this case, by the 74th Congress, 2d session. See 49 Stat. 1926, 1927.

       48 Stat. 503, 505—
      Sec. 3. * * * Provided, That no contract shall be made by the Secretary of the Navy for the construction and/or manufacture of any complete naval vessel or aircraft, or any portion thereof, herein, heretofore, or hereafter authorized unless the contractor agrees—
      (a) To make a report, as hereinafter described, under oath, to, the Secretary of the Navy upon the completion of the contract.
      * * * * * ⅞ *
      The report shall be in form prescribed by the Secretary of the Navy and shall state the total contract price, the cost of performing the contract, the net income, and the per centum such net income bears to the contract price. A copy ol' such report shall he transmitted to the Secretary of the Treasury for consideration in connection with the federal income tax returns of the contractor for the taxable year or years concerned,
      49 Stat. 1920, 1927—
      Sue. 3. (b) To pay into the Treasury profit, as hereinafter provided shall be determined by the Treasury Department, in excess of M per centum of the total contract prices, of such contracts within the scope of this section as are completed by the particular contracting party within the income taxable year, such amount to become the property of the united States, but the surety under such contracts shaU not be liable for the payment of such excess profit: Provided, That if there is a net loss on all such contracts or subcontracts completed by the particular contractor or subcontractor within any income taxable year, such net loss shall be allowed as a credit In determining the excess profit, if any, for the next succeeding income taxable year: Provided further, That if such amount is not voluntarily paid the Secretary of the Treasury shall collect the same under the usual methods employed under the internal-revenue laws to collect Federal income taxes: Provided further, That all provisions of law (including penalties) applicable with respect to the taxes imposed by Title I of the Revenue Act of 1934, and not inconsistent with this section, shall be applicable with respect to the assessment, collection, or payment of excess profits to the Treasury as provided by this section, and to refunds by the Treasury of overpayments of excess profits into the Treasury: * * * And provided further, That the income taxable years shall be such taxable years beginning after December 31, 1935, except that the above provisos relating to the assessment, collection, payment, or refunding of excess profit to or by the Treasury shall he retroactive to March 27, 1934. [Italics supplied.]

       Congressional Record, 73d Cong., 2d sess., pp. 1629, 1630.

         Congressional Record, 73d Cong., 2d sess., pp. 3492, 3793.

       Congressional Record, 73d Cong., 2d sess., pp. 5171, 5172.

       Congressional Record, 73d Cong., 2d sess., p. 5174.

       The Commissioner has provided in his regulations prescribed under section 3 oí the Vinson Act the method to be followed in filing a claim for refund. See article 19, C. B. 1937-1, p. 529.