643 Reporter's Statement of the Case ciary returns as non-taxable trusts are held to be associations subject to Corporation Income Tax as proposed in New York Division (2nd Dist.) Letters of 6/17/30, which tax if imposed would subject this corporation to double taxation as under advice of counsel it as a holder of certificates of the above noted Funds, reported and paid tax upon its proportionate share of the net income of the Funds as a beneficiary. This claim is filed to protect this Taxpayer against limitations. The Commissioner of Internal Revenue did not consider the merits of plaintiff's formal claim for refund until the summer and autumn of 1933 and after the entry on May 23, 1933, of final decisions and orders in those Board of Tax Appeals proceedings mentioned in finding 6, supra. In the summer of 1933 the Commissioner considered the effect upon plaintiff's income tax liability for the year 1928 of an elimination from gross income, as shown upon its 1928 income tax return, by allocating to the year 1927, $86,394.50 or more of the value of $143,283.23 of the B shares included in that return, as income received by plaintiff during 1928. 11. Conferences were held between representatives of the Commissioner and of plaintiff on December 26, 1933, July 11, 1934, and July 20, 1934. On July 24, 1934, prior to the rejection by the Commissioner of the formal claim for refund filed March 12, 1931, plaintiff filed with the Commissioner an unsworn document consisting of a three-page letter, together with attached exhibits, stating, in effect, that plaintiff's claim for refund filed March 12, 1931, should be increased in amount to $20,211.99, with interest, and, further, that such increase resulted from deductions from plaintiff's gross income for the year 1928 of the sum of $86,394.50, representing the market value of the B shares claimed to have been earned by plaintiff in the year 1927 as its compensation for the management of the several trust funds. 12. Plaintiff was notified by Bureau letter of March 21, 1935, that its claim for refund of $9,844.65 for the year 1928 "will be disallowed" for the stated reason that its taxable income for the year 1928 had been understated rather than overstated, and that the federal income tax in question had not been overpaid. The Commissioner rejected plaintiff's Opinion of the Court 93 C. Cls. claim for refund on April 19, 1935, and plaintiff was so advised by registered letter of the same date. No part of that claim has ever been allowed. By letter dated September 17, 1935, plaintiff applied for the reopening of its claim for refund and on December 30, 1935, the Commissioner denied that application. On January 20, 1936, plaintiff protested the denial of its application for a reopening of the action, and on June 26, 1936, the Commissioner affirmed his prior refusal to reopen it. The court decided that the plaintiff was not entitled to recover. MADDEN, Judge, delivered the opinion of the court: Plaintiff in 1927 and 1928, then known as the Insuranshares Management Company, entered into agreements with Insuranshares Corporation, herein called the distributor, and Farmers Loan and Trust Company, herein called the trustee. By these agreements five investment funds were set up in the hands of the trustee. The funds consisted of stocks of banks, trust companies and insurance companies designated by plaintiff, acquired by the distributor and deposited with the trustee. The two funds involved here were H-27, set up in 1927, and B-28, set up in 1928. Under the agreements, plaintiff's function was to act as manager, selecting the securities to be acquired and placed in the fund, and directing their subsequent disposition and performing numerous other functions as manager of such a trust, as set out in finding 4. The distributor's function was to acquire the securities designated by plaintiff, deposit them with the trustee, and receive in return certain shares in the fund, which shares it might retain or market. The trustee's function was to hold, as trustee, the securities deposited with it by the distributor and to issue the shares hereinafter described. Under each agreement, the trustee was to issue two different kinds of participating shares. One kind, to be issued to the distributor, for sale to the public, if it so desired, was an inseparable combination of so-called A and B shares. Each A share had a par value of $20. B shares had no par value. Each A share was entitled to a noncumulative semiannual distribution out of the net income of the fund, at the rate of 3% per annum. Each B share was entitled, after the rights 643 Opinion of the Court of the A shares had been satisfied, to a pro rata distribution of at least 20% of the remaining net income, and of so much more of it as should be determined by plaintiff and approved by the distributor. Each A share was entitled, in liquidation, to a distribution of $20, its par value, and the holder of a combination A share and B share was entitled on two specified dates per year, on seventy days' notice, to turn in his share certificate and receive, either in cash or securities, whichever should be elected by plaintiff, the value of his shares, less a charge of two dollars for each A share, and less a further charge for redemption of one-third of one percent. In short, the A share part of the inseparable combination had the qualities of a preferred stock, and the B share part of it had the qualities of a common stock, comprising all rights to income above the noncumulative 3% per annum, and all rights to increases in the capital of the fund. The other kind of share which each agreement called for was a separate B share, which had the same rights as the B share in the combination just described. These shares were to be issued only to plaintiff, and were to be its sole compensation for the management of the trust. It was to receive 18 B shares for every one hundred B shares issued to the distributor in the combination shares. At the time each fund was set up, the then market value of the securities deposited with the trustee was divided by twenty, the dollar par value of the A shares, and a number of combined shares equal to the quotient was issued. An immediate liquidation would, then, have permitted no distribution on the B shares either to plaintiff, or to the holder of the combined share. When additional securities were placed in the funds, and additional certificates were issued, the price of the shares sold was adjusted to prevent dilution of the investments of earlier investors and to avoid giving later investors a share in any increment already accrued to the fund. Plaintiff became entitled in 1927 under the H-27 agreement to 36,000 B shares. The shares were not actually issued to it until 1928. In its corporation income tax return for 1927, filed March 15, 1928, on the accrual basis, it returned as income on account of these B shares one dollar, having valued Opinion of the Court 93 C. Cls. them at one cent each and having set up a reserve against even that valuation of all of it except one dollar. In 1928, plaintiff became entitled to 10,800 B shares under the H-27 agreement and 37,800 shares under the B-28 agreement. In its return for that year it stated a value of $41,688 for the former shares, $3.85 per share, and a value of $15,200.73 for the latter shares, 40.2 cents per share. It also included, in its 1928 return, B shares to which it had become entitled in 1927, viz, 63,450 B shares in H-27 and three other funds, of a total value of $86,395.50, deducting one dollar from that sum because of the return of one dollar made in 1927. The total of $143,283.23, then, represented plaintiff's valuation of the B shares to which it became entitled during the two years 1927 and 1928, and $86,394.50 of that income, accounting for $10,361.91 of its tax, was attributable to 1927. It claims therefore that that part of its tax should be refunded, since it was not obliged to pay it as a 1928 tax, and the defendant's right to collect it as 1927 tax is barred by the statute of limitations. Plaintiff also claims that a sum of $82,038.75 which it included in its 1928 return as "undistributed income of Insuranshares Funds-B shares" which was plaintiff's pro rata interest, by reason of its ownership of separate B shares, in the income earned by the five trust funds during 1928, as distinguished from the B shares themselves which it received as compensation during 1928, was improperly included, or should have been deducted, as corporate dividends, since the funds themselves were taxed as corporations upon their income. Since this sum of $82,038.75 accounted for $9,844.65 of the tax plaintiff paid in 1928, it asks also for a return of that amount, making a total amount of $20,206.56 claimed for return. The defendant's contentions are: 1. There was no sufficient claim for refund as to the asserted overassessment of $82,038.75 and overpayment of $9,844.65. 2. There was no timely claim for refund as to the asserted overassessment of $86,394.50 and overpayment of $10,361.91. 3. If either or both of the foregoing contentions are found to be without merit, still plaintiff is not entitled to recover, because the B shares to which it became entitled in 1928 643 Opinion of the Court had a fair market value of more than the total income returned by plaintiff for 1928, and therefore plaintiff underpaid, rather than overpaid, its 1928 tax. The defendant does not seriously contest plaintiff's contention that the $82,038.75 item in the 1928 return was deductible as a dividend of a domestic corporation. Revenue Act of 1928, sec. 23 (p). The funds were taxed on their incomes as domestic corporations within the meaning of the statute, and it follows that their distributions should be treated as those of domestic corporations, not taxable to the shareholders receiving such distributions. As to the defendant's first contention, that the refund claim timely filed, and quoted in finding 10, was insufficient, we think that the claim was sufficient. The claim was conditional, but the contemplated condition was that the funds should be taxed as domestic corporations, and that happened. That such taxation should be, strictly, double taxation of plaintiff was not really a part of the condition. It follows that unless plaintiff underpaid its taxes for 1928 in some other respect, it would be entitled to a refund of the $9,844.65 tax paid on the $82,038.75 item of income. The defendant's second contention, relating to the timeliness and sufficiency of plaintiff's claim for refund of taxes paid in 1928 on 1927 income, presents a more serious question. It will be remembered that plaintiff filed its first claim for refund of 1928 taxes on March 12, 1931, which was within the permissible two-year period after payment of the tax. Revenue Act of 1928, sec. 322 (b) (1). Its claim relating to its return of 1927 income in 1928 was not filed until July 20, 1934, more than two years after the taxes had been paid. Plaintiff contends that this claim was a permissible amendment of its previous timely claim. We do not think so. The timely claim was specific, both as to the item of income to which it related and as to the asserted ground for refund. The 1934 claim related both to a different item of income and a different ground for refund. It was not an amendment, but a new claim, filed late. United States v. Andrews, 302 U. S. 517; Hanna Furnace Corp. v. United States, 90 C. Cls. 439; Guantanamo Sugar Co. v. United States (decided April 7, 1941, and not yet reported). The fact that the |