Citizens Coal & Supply Co. v. Commissioner

1 B.T.A. 608, 1925 BTA LEXIS 2860

• Court: United States Board of Tax Appeals
• Decided: February 25, 1925
• Docket: Docket No. 965.
• Status: Published

Opinion

OPINION.

Smith:

This appeal raises the question whether a corporate taxpayer may file a return for a fractional part of the calendar year 1918 when in point of fact its books of account are kept upon a calendar year basis. The pertinent facts are stated in the findings of fact.

The Eevenue Act of 1916 required corporate taxpayers to make returns upon a calendar year basis; except in those cases where the corporation had established a fiscal year different from the calendar year. In the establishment of such a year the corporation should

give notice of the day it has thus designated as the closing of 'its fiscal year to the collector of the district in which its principal business office is located at any time not less than thirty days prior to the first day of March of the year in which its return would be filed if made upon the basis of the calendar year. (Section 13(a).)

Pursuant to this provision of law and the regulations issued thereunder, the taxpayer received permission from the collector for its district on September 26, 1918, to make returns upon a fiscal year basis ended April 30, and was given instructions that its next return should be filed on or before March 1, 1919, for the fiscal period January 1 to April 30, 1918. It had not closed its books at April 30,1918, and made no attempt to do so. It did, however, close them at December 31, 1918, and claimed that one-third of the net income for that year was the income for the first four months of the calendar year. The taxpayer alleges that it was advised by a deputy collector that such a procedure was proper.

So far as the evidence shows, the taxpayer has never made a closing of its books of account at April 30, 1918. It has furnished the Board with no data from which its true net income for the period January 1 to April 30, 1918, could be accurately determined.

The Revenue Act of 1918 was approved February 24, 1919, and was retroactive to January 1, 1918. That act provided an entirely new basis for the making of returns, namely, that a taxpayer should make returns in any case “ upon the basis of the taxpayer’s annual accounting period (fiscal year or calendar year, as the case may be) in accordance with the method of accounting regularly employed in keeping the books of such taxpayer.” (Section 212 (b).) The Commissioner now contends that the taxpayer is obligated to make a return for the calendar year 1918 since its books of account were not closed at the end of any month except December during the year 1918 and that its annual accounting period for 1918 was the calendar year.

We are of the opinion that the taxpayer was obligated by the express language of the Revenue Act of 1918 to make a return for the calendar year 1918. It closed its books of account at x\pril 30, 1919, and that closing was with the approval of the Commissioner. It is therefore entitled to make a return for the fiscal period January 1 to April 30, 1919, under the provisions of section 226 of the Revenue Act of 1918.