Citations
- 61 F.2d 530
Full opinion text
SAWTELLE, Circuit Judge.
This is an appeal from a decree rendered by the District Court in favor of the United States against the appellants. The appeal is heard upon the judgment roll.
Leighton & Co., Incorporated, was a California corporation engaged in business in San Francisco during the years 1918, 1919, and 1920, for which years it filed federal income and profits tax returns. The corporation claimed the right to be taxed as a “personal service corporation” under certain sections of the Revenue Act of 1918 (40 Stat. 1057).
On February 21, 1921, the corporation disposed of its business and other assets for $12,000 in cash, and distributed the same to its stockholders, in proportion to their respective ownership of shares. This distribution left the corporation without means wherewith to pay taxes due to the appellee.
The court found that the “corporation entered into written waivers with the Commissioner of Internal Revenue by which the period for assessment against it of additional income taxes for the calendar years 1918 and 1919 was duly extended to March 3, 1926.”
On January 16, 1926, the Commissioner of Internal Revenue assessed additional taxes against the corporation for the taxable years mentioned above, aggregating $33,-382.14. Warrants of distraint were issued against the corporation and returned unsatisfied. The present suit in equity was filed by the United States on July 26, 1929.
The court also found that “no proceedings were ever begun against the stockholders to impose said taxes against them other than the present proceeding, and no judgment was ever obtained against the corporation,” and that “this suit was authorized by the Commissioner of Internal Revenue.”
The court’s conclusion of law was as follows:
“That the corporate assets distributed to these defendants in the manner previously found by the court constituted a trust fund for the payment of said taxes owing by said company to the United States and that said distributees are accountable to this court for said trust property so distributed to the extent distributed to each of them from the assets of said company, namely:
“John II. Leighton, $6,004.00
“Jamos A. McPherson, $888.00-
“Sue I. Leighton, $800.00
“Ralph W. Crosman, $100.00-
“Robert L. Wyriek, $400.00.
“Herman Weinberger, $120.00
—together with interest thereon at 6% from January 16, 1926, said amounts to be applied to the payment of said taxes.”
A decree was rendered accordingly.
The applicable provisions of the Revenue Act of February 26,1926, and of the Revised Statutes axe quoted at length:
Section 274 (a). “If in the case of any taxpayer, the commissioner determines that there is a deficiency in respect of the tax imposed by this chapter, the commissioner is authorized to send notice of such deficiency to the taxpayer by registered mail. Within 60 days after such notice is mailed * * * the taxpayer may file a petition with the Board of Tax Appeals for a redetermination of tho deficiency. Except as otherwise provided in section 1048b or 1048d of this title or in section 1051, 1063, 1071, or 1224 of this title [subdivision (d) or (f) of this section or in sections 279, 282, or 1001], no assessment of a deficiency in respect of the tax imposed by this title and no distraint or proceeding in court for its collection shall be made, begun, or prosecuted until such notice has been mailed to the taxpayer, nor until tho expiration of such 60-day period, nor, if a petition has been filed with the board, until the decision of the board has become final. Notwithstanding the provisions of section 154 of this title [3224 of the Revised Statutes] the making of such assessment or tho beginning of such proceeding or dis-traint during the time such prohibition is in force may be enjoined by a proceeding in the proper court.” (26 USCA § 1048).
Section 277 (a). “Except as provided in section 278:
“(1) The amount of income taxes imposed by this chapter shall bo assessed within three years after the return was filed, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period. * * *
“(3) The amount of income, excess-profits, and war-profits taxes imposed by the A