tion of a deficiency or any part thereof, the form of agreement consenting to assessment which will be forwarded with the letter of notification should be executed and returned to the Commissioner of Internal Revenue.

If a deficiency is disclosed as the result of the audit of a return in the collector's office, the taxpayer will be notified by letter and the same period given in which to file a letter of protest and to show cause or reason why such deficiency should not be assessed. The procedure in connection therewith will be the same as hereinbefore provided in the case of deficiency letters originating in respect of returns audited in the Income Tax Unit, except that the taxpayer's letter of protest should be addressed to the collector of internal revenue who has the return under consideration, and the taxpayer's conference prior to any reference of the matter to the Solicitor of Internal Revenue should be a conference with the collector or his representative.

OVERPAYMENTS

SEC. 272. If the taxpayer has paid as an installment of the tax more than the amount determined to be the correct amount of such installment, the excess shall be credited against the unpaid installments, if any. If the amount already paid, whether or not on the basis of installments, exceeds the amount determined to be the correct amount of the tax, the excess shall be credited or refunded as provided in section 281.

ART. 1221. Overpayments. If upon examination of the return the Commissioner finds that the taxpayer has paid as an installment an amount greater than the correct amount of such installment, the excess of such payment over the correct amount of such installment shall be credited against any unpaid installments. If the amount already paid exceeds the amount determined to be the correct amount of the tax, the excess shall be credited against any other income, war-profits, or excess-profits tax or installment due from the taxpayer, or, if there is no such tax or installment against which such credit may be made, the excess shall be refunded in accordance with the provisions of section 281 of the statute. See article 1302.

DEFICIENCY IN TAX

66

SEC. 273. As used in this title the term deficiency" means

(1) The amount by which the tax imposed by this title exceeds the amount shown as the tax by the taxpayer upon his return; but the amount so shown on the return shall first be increased by the amounts previously assessed (or collected without assessment) as a deficiency, and decreased by the amounts previously abated, credited, refunded, or otherwise repaid in respect of such tax; or

(2) If no amount is shown as the tax by the taxpayer upon his return, or if no return is made by the taxpayer, then the amount by which the tax exceeds the amounts previously assessed (or collected without assessment) as a de

ficiency; but such amounts previously assessed, or collected without assessment, shall first be decreased by the amounts previously abated, credited, refunded, or otherwise repaid in respect of such tax.

SEC. 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 title, the taxpayer, except as provided in subdivision (d), shall be notified of such deficiency by registered mail, but such deficiency shall be assessed only as hereinafter provided. Within 60 days after such notice is mailed the taxpayer may file an appeal with the Board of Tax Appeals established by section 900. (b) If the Board determines that there is a deficiency, the amount so determined shall be assessed and shall be paid upon notice and demand from the collector. No part of the amount determined as a deficiency by the Commissioner but disallowed as such by the Board shall be assessed, but a proceeding in court may be begun, without assessment, for the collection of any part of the amount so disallowed. The court shall include in its judgment interest upon the amount thereof at the rate of 6 per centum per annum from the date prescribed for the payment of the tax to the date of the judgment. Such proceeding shall be begun within one year after the final decision of the Board, and may be begun within such year even though the period of limitation prescribed in section 277 has expired.

(c) If the taxpayer does not file an appeal with the Board within the time prescribed in subdivision (a) of this section, the deficiency of which the taxpayer has been notified shall be assessed, and shall be paid upon notice and demand from the collector.

(d) If the Commissioner believes that the assessment or collection of a deficiency will be jeopardized by delay such deficiency shall be assessed immediately and notice and demand shall be made by the collector for the payment thereof. In such case the assessment may be made (1) without giving the notice provided in subdivision (a) of this section, or (2) before the expiration of the 60-day period provided in subdivision (a) of this section even though such notice has been given, or (3) at any time prior to the final decision by the Board upon such deficiency even though the taxpayer has filed an appeal. If the taxpayer does not file a claim in abatement as provided in section 279 the deficiency so assessed (or, if the claim so filed covers only a part of the deficiency, then the amount not covered by the claim) shall be paid upon notice and demand from the collector.

(e) If the taxpayer has elected to pay the tax in installments and a deficiency has been assessed, the deficiency shall be prorated to the four installments. Except as provided in subdivision (d) of this section, that part of the deficiency so prorated to any installment the date for payment of which has not arrived, shall be collected at the same time as and as part of such installment. That part of the deficiency so prorated to any installment the date for payment of which has arrived, shall be paid upon notice and demand from the collector.

(f) Interest upon the amount determined as a deficiency, or, if the tax is paid in installments, upon the part of the deficiency prorated to each installment, shall be assessed at the same time as the deficiency, shall be paid upon notice and demand from the collector, and shall be collected as a part of the tax, at the rate of 6 per centum per annum from the date prescribed for the payment of the tax, or the payment of such installment, to the date the deficiency is assessed.

(g) Where it is shown to the satisfaction of the Commissioner that the payment of a deficiency upon the date prescribed for the payment thereof will

t

C

P

I

result in undue hardship to the taxpayer the Commissioner, with the approval of the Secretary (except where the deficiency is due to negligence, to intentional disregard of rules and regulations, or to fraud with intent to evade tax), may grant an extension for the payment of such deficiency or any part thereof for a period not in excess of eighteen months. If an extension is granted, the Commissioner may require the taxpayer to furnish a bond in such amount, not exceeding double the amount of the deficiency, and with such sureties, as the Commissioner deems necessary, conditioned upon the payment of the deficiency in accordance with the terms of the extension. In such case there shall be collected, as a part of the tax, interest on the part of the deficiency the time for payment of which is so extended, at the rate of 6 per centum per annum for the period of the extension, and no other interest shall be collected on such part of the deficiency for such period. If the part of the deficiency the time for payment of which is so extended is not paid in accordance with the terms of the extension, there shall be collected, as a part of the tax, interest on such unpaid amount at the rate of 1 per centum a month for the period from the time fixed by the terms of the extension for its payment until it is paid, and no other interest shall be collected on such unpaid amount for such period.

ART. 1231. Deficiency defined.-Section 273 of the statute by its definition of the word "deficiency " provides a term which will apply to any additional amount of tax determined to be due in respect of any taxable year or taxable period in excess of the amount of tax reported by the taxpayer for such year or period; or in excess of the amount reported by the taxpayer as adjusted by way of assessments, credits, refunds, or collections without assessment resulting from any previous determination. In defining the term "deficiency" section 273 recognizes two classes of cases-one, where the taxpayer makes a return showing some tax liability; the other, where the taxpayer makes a return showing no tax liability or where the taxpayer fails to make a return.

When a case is considered for the first time the deficiency is the excess of the amount determined to be the correct amount of the tax over the amount shown as the tax by the taxpayer on his return, or if it is a case where no tax was reported by the taxpayer, the deficiency is the amount determined to be the correct amount of the tax. Subsequent information sometimes discloses that the amount previously determined to be the correct amount of the tax is less than the correct amount, and that a redetermination of the tax is necessary. In such a case the deficiency on redetermination is the excess of the amount determined to be the correct amount of the tax over the sum of the amount of tax reported by the taxpayer and the deficiency disclosed by the previous determination. Or if it is a case where no tax was reported by the taxpayer, the deficiency is the excess of the amount determined to be the correct amount of the tax over the amount of the deficiency disclosed by the previous determination. If the previous determination resulted in a credit or

refund to the taxpayer, the deficiency upon the second determination is the excess of the amount determined to be the correct amount of the tax over the amount of tax reported by the taxpayer decreased by the amount of the credit or refund.

To restate the definition, a deficiency is the excess of the amount determined to be the correct amount of the tax over the amount of tax reported by the taxpayer. If, however, there have been one or more determinations of the tax, the amount reported as the tax by the taxpayer must be increased by the deficiency or deficiencies previously determined and decreased by any credits or refunds previously made or amounts otherwise repaid in respect of such tax, in which case the deficiency is the excess of the amount determined to be the correct amount of the tax over the amount of tax reported by the taxpayer as adjusted by such previous determinations. If it is a case where the taxpayer reported no tax, the deficiency is the excess of the amount determined as the correct amount of the tax over the sum of any deficiency or deficiencies previously determined decreased by the sum of all credits, refunds, and amounts otherwise repaid in respect of such tax.

ART. 1232. Assessment of a deficiency.-If the Commissioner determines there is a deficiency in respect of the income tax imposed by this title (see sections 271 and 273 of the statute and articles 1211 and 1231; and with respect to assessments under prior acts, section 280 and article 1291), the taxpayer, except in the cases where the Commissioner believes the assessment and collection of the deficiency will be jeopardized by delay (see section 274 (d)), shall be notified of the deficiency by registered mail and advised that an appeal from the determination of the Commissioner to the Board of Tax Appeals (see section 900 of the statute) may be filed within 60 days after such notice is mailed. If an appeal is filed with the Board within that period and the Board after hearing the taxpayer and the Commissioner (see section 900 (h) of the statute) determines there is a deficiency, the amount so determined shall be assessed by the Commissioner. No part of the amount determined as a deficiency by the Commissioner, but disallowed as such by the Board, shall be assessed. Where an appeal is filed with the Board the taxpayer should notify the Commissioner that an appeal has been taken in order to prevent assessment by the Commissioner of the amount determined by him as the deficiency. If, however, no appeal is filed with the Board of Tax Appeals within the period prescribed, the Commissioner shall assess the amount determined by him as the deficiency and of which he has notified the taxpayer. If the Commissioner believes that the assessment or collection of a deficiency will be jeopardized by delay, the deficiency

as determined by him shall be assessed immediately and in sucn cases the assessment may be made (1) without giving the notice provided in section 274 (a) of the statute as outlined in this article, or (2) before the expiration of the 60-day period provided in section 274 (a) even though such notice has been given, or (3) at any time prior to the final decision of the Board upon such deficiency, even though the taxpayer has filed an appeal.

ART. 1233. Collection of a deficiency.-Where a deficiency as determined by the Board has been assessed, or where the taxpayer has not filed an appeal and the deficiency as determined by the Commissioner has been assessed, the amount so assessed shall be paid upon notice and demand from the collector. If, however, the taxpayer has elected to pay his tax in installments, the deficiency assessed, except in case of jeopardy assessments, shall be prorated to the four installments and the amount prorated to installments, the dates for the payment of which have arrived, shall be paid upon notice and demand from the collector. The amount prorated to installments, dates for the payment of which have not yet arrived, shall be paid at the same time and as a part of the installments to which such amounts are prorated.

In the event that a part of the deficiency determined by the Commissioner is denied by the Board, the Commissioner may without assessment bring a proceeding in court for the collection of the whole or any part of the amount disallowed by the Board, but such a proceeding must be begun within one year after the final decision of the Board and may be begun within such year even though the period of limitation for collecting tax by a proceeding in court has expired. See section 277 of the statute and article 1272.

Where the Commissioner makes an assessment as provided in section 274(d) of the statute because he believes that the assessment and collection of the deficiency will be jeopardized by delay, notice and demand shall be made by the collector for the payment of the deficiency. The taxpayer may then file a claim for the abatement of the assessment of the deficiency or any part thereof. If, however, the taxpayer acquiesces in the assessment or a part thereof, the amount so acquiesced in by the taxpayer shall be paid upon notice and demand from the collector. If the taxpayer files a claim for the abatement of the whole or a part of such assessment, such amount shall not be collected until the claim is adjudicated, and then only in the amount the claim for which was denied. This amount shall be paid on notice and demand from the collector. See section 279 of the statute and article 1281.

ART. 1234. Extension of time.-Where it is shown to the satisfaction of the Commissioner that the payment of a deficiency upon the