Appeal from the District Court of the United States for the Western District of Pennsylvania; Frederic P. Schoonmaker, Judge.
Before BUFFINGTON, Circuit Judge, and THOMSON and AVIS, District Judges.
THOMSON, District Judge. The Liberty Baking Company brings this suit against D. B. Heiner, collector, to recover back $16,418.24 income and profits taxes for the year 1918. The collector having held the company liable, an appeal was taken to the Board of Tax Appeals, which was heard in 1926, the Board sustaining the ruling of the collector. The appeal to the Board being filed before the Act of 1926, the plaintiff, instead of appealing directly to this court, elected to pay the taxes and sue in the United States District Court, under section 283(b) of the Revenue Act of 1926 (26 USCA § 1064(b). The case was tried without a jury, and the court, after making special findings, entered judgment thereon for the defendant. The case is before us on appeal from that decision.
The first question involves the statute of limitations. If that statute does not apply, the next question is:
Was the plaintiff entitled, in computing its taxable income for the year 1918, to deduct --
(a) Loss of $11,000 alleged to have resulted from the demolition of certain buildings which were razed in order to make way for plant extensions?
(b) Loss of $10,000 alleged to have resulted from the worthlessness of a flourmilling process.
(c) An alleged loss of $5,895.45, being a part of the cost of certain bread wrappers which were too small for the bread loaves manufactured by the plaintiff after the war.
The statute of limitations would have been a bar in this case, except for two waivers, executed by the plaintiff -- one dated February 4, 1924, extending the time for the assessment and collection of the 1918 taxes for one year after the expiration of the statutory period of limitations, and a second waiver dated November 29, 1924, which covered not only the year 1918, but also the year 1919.
While these waivers have been attacked by the defendant as invalid, we agree with the court that there does not appear any substantial objection to their validity. The extension of time seems to have been of marked advantage to the plaintiff, and was followed by very substantial reductions in the amounts claimed against it.
The first waiver was signed by the president and secretary of the plaintiff company with the corporate seal annexed. In it, the plaintiff consented to the "determination, assessment and collection" of any taxes for the year 1918, for "one year after the expiration of the statutory period of limitations."
By the second waiver, the plaintiff consented to the extension of the period for "determination, assessment and collection" of taxes for the years 1918 and 1919, for one year "after the expiration of the statutory period of limitations within which assessments of taxes may be made for the year or years mentioned."
The court below held as untenable the objection that the waivers were not properly executed by the plaintiff or by the Commissioner of Internal Revenue; that the signing of such a waiver, by one or more executive officers, with the corporate seal affixed, given as it was to secure further consideration of corporate tax liability, comes within the ordinary powers of corporate officers; that, as to the acceptance by the Commissioner, waivers being filed in his office bearing what purports to be his signature and acted upon by that officer, giving repeated consideration to the plaintiff's claims for further reductions, which resulted in withholding collections while the plaintiff's books were being examined, these facts preclude the plaintiff from now controverting the validity of the waivers. The objection that the waivers were without consideration cannot be sustained. The statute requires nothing but "consent," and it would be unconscionable to allow the taxpayer to ...