the time it becomes payable in accordance with the terms of such extension."

NOTE:

This section applies on such taxes as are assessed under the Revenue Acts of 1917, 1918 and 1921.

PROBLEM 262

Illustrating Case in Which a Taxpayer Designs Quickly to Depart from the United States-The Rights of the

Commissioner in Such Case

FACTS:

Roberto Santini, a resident alien who owned a retail fruit store, received a letter threatening his life if he did not deposit a thousand dollars in a certain wooden box outside of his house before midnight of December 15, 1921. Mr. Santini immediately sold his business for $4,500 and purchased a ticket for Italy on a ship sailing December 7, 1921. He had paid three installments of his income tax reported for the taxable year 1920 and the last installment of $55 was not due until December 15, 1921.

QUESTIONS:

1. Is the Commissioner authorized to require the payment of the last 1920 tax installment before the usual time it becomes due?

2. When will Mr. Santini be required to pay a tax on income received during 1921 from his business in the United States, in view of the fact that he is leaving the United States prior to the close of his taxable year?

ANSWER:

The Commissioner is authorized to demand immediate payment of the last installment of the 1920 tax, also to declare the taxable period for the year 1921 immediately terminated; and the taxes on the income for such period in 1921 shall become immediately due and payable.

REFERENCE:

Sec. 250 (g): "If the Commissioner finds that a taxpayer designs quickly to depart from the United States or to remove his property therefrom, or to conceal himself or his property therein, or to do any other act tending to prejudice or to render wholly or partly ineffectual proceedings to collect the tax for the taxable year then last past or the taxable year then current unless such proceedings be brought without delay, the Commissioner shall declare the taxable period for such taxpayer immediately terminated and shall cause notice of such finding and declaration to be given the taxpayer, together with a demand for immediate payment of the tax for the taxable period so declared terminated and of the tax for the preceding taxable year or so much of said tax as is unpaid, whether or not the time otherwise allowed by law for filing return and paying the tax has expired; and such taxes shall thereupon become immediately due and payable. In any action or suit brought to enforce payment of taxes made due and payable by virtue of the provisions of this subdivision the finding of the Commissioner, made as herein provided, whether made after notice to the taxpayer or not, shall be for all purposes presumptive evidence of the taxpayer's design....

PROBLEM 263

Illustrating Case in Which a Taxpayer is about to Depart from the United States and May Not be Required to Liquidate All Taxes Due

FACTS:

Mr. Harold A. Warren, a citizen of the United States, owns a large cotton mill in New Orleans. He has arranged to take a trip to England the first week in January, 1922.

QUESTION:

Will it be necessary for the Commissioner to assess the 1921 income tax of Mr. Warren and require its payment or demand security covering the approximate amount of tax to be paid before he is allowed to sail!

ANSWER:

As Mr. Warren is a citizen of the United States the Commissioner at his discretion may waive all the requirements placed upon taxpayers departing from the United States.

REFERENCE:

Sec. 250 (g): “. In the case of a citizen of the United States about to depart from the United States the Commissioner may, at his discretion, waive any or all of the requirements placed on the taxpayer by this subdivision."

See Problem 262 for ordinary requirements in the case of a taxpayer about to depart from the United States.

PROBLEM 264

Illustrating When Receipts for Taxes are to be Given by Collector

FACTS:

The Harbinger Oil and Gas Company issued bonds (which were rather widely distributed) containing the provision that the company agreed to pay the Federal income tax upon the interest disbursements on these bonds due by the recipients thereof (to an amount, however, not in excess of 2% of such interest). These taxes were duly paid to the collector of internal revenue by the company in 1922.

QUESTION:

Is the company entitled to receipts for the taxes thus paid?

ANSWER:

The company is entitled, upon request therefor, to a receipt for the total paid, or to separate receipts on account of each creditor for whom tax payment was made.

REFERENCE:

Sec. 251: "That every collector to whom any payment of any tax is made under the provisions of this title shall upon request give to the person making such payment a full written or printed receipt, stating the amount paid and the particular account for which such payment was made; and whenever any debtor pays taxes on account of payments made or to be made by him to separate creditors the collector shall, if requested by such debtor, give a separate receipt for the tax paid on account of each creditor in such form that the debtor can conveniently produce such receipts separately to his several creditors in satisfaction of their respective demands up to the amounts stated in the receipts; and such receipt shall be suf

ficient evidence in favor of such debtor to justify him in withholding from his next payment to his creditor the amount therein stated; but the creditor may, upon giving to his debtor a full written receipt acknowledging the payment to him of any sum actually paid and accepting the amount of tax paid as aforesaid (specifying the same) as a further satisfaction of the debt to that amount, require the surrender to him of such collector's receipt."

PROBLEM 265

Illustrating Case in Which the Bureau of Internal Revenue Will Make Refund of Overpayment of Tax Without the

FACTS:

Filing of Claim Therefor by Taxpayer

Mr. Andrew Logan, a citizen of the United States, received during the calendar year 1919 a salary of $10,000 and dividends (exempt from the normal tax) amounting to $65,000. In preparing his income tax return for the calendar year 1919 he computed his normal tax at the rate of 8 per cent on his entire net income after deducting the specific exemption of $1,000. (Mr. Logan is married but his wife filed a separate return for 1919 on which was claimed an exemption of $1,000.) In January 1922 Mr. Logan's 1919 return was audited and it was found he had overpaid his tax for 1919 to the extent of $5,360, as the dividends received by him were not subject to normal tax under the Revenue Act of 1918 and the first $4,000 of net income (in excess of the specific exemption) was subject to a normal tax of 4 per cent and only the excess over that amount ($5,000) was subject to a normal tax of 8 per cent. Mr. Logan had paid in full all taxes due the United States as of February 1, 1922. Mr. Logan was not aware of the fact that he had overpaid his income taxes.

QUESTION:

What procedure will the Bureau follow to adjust the above overpayment of 1919 taxes?

ANSWER:

Where an audit of a taxpayer's return reveals an overpayment

of tax, the Bureau will prepare a certificate of overassessment which is sent to the collector for the proper district, who will determine whether the overassessment should be abated, refunded or credited against assessments remaining unpaid. The collector then proceeds in the manner outlined in T. D. 3260. Any portion of the overassessment remaining after the application of such overassessment against any unpaid assessments due from the taxpayer is then refunded to the taxpayer. It should be noted that the Bureau is estopped from refunding overassessments after five years from the date when the return was filed, unless prior thereto a claim was filed therefor by the taxpayer.

REFERENCES:

T. D. 3260, dated December 8, 1921, reads in part as follows: "Reduction of internal revenue assessments and adjustments of overpayments of revenues will hereafter be accomplished in one of three ways: . . .

...

(b) On the basis of a certificate of overassessment prepared by the appropriate administrative unit in the Bureau in each case in which an overassessment of tax is disclosed through the audit of a return. . . . The Disbursing Clerk shall prepare disbursement checks in the amounts of the several net refundable items in favor of the respective taxpayers against whose accounts net refundable amounts shall have been allowed by the Commissioner; forward such checks, together with the certificates of overassessment (which will be transmitted to him) to the respective taxpayers; ..."

excess

Sec. 252: "That if, upon examination of any return of income made pursuant to this Act, the Act of August 5, 1909, entitled 'An Act to provide revenue, equalize duties, and encourage the industries of the United States, and for other purposes,' the Act of October 3, 1913, entitled 'An Act to reduce tariff duties and to provide revenue for the Government, and for other purposes,' the Revenue Act of 1916, as amended, the Revenue Act of 1917, or the Revenue Act of 1918, it appears that an amount of income, war-profits or profits tax has been paid in excess of that properly due, then, notwithstanding the provisions of section 3228 of the Revised Statutes, the amount of the excess shall be credited against any income, warprofits or excess-profits taxes, or installment thereof, then due from the taxpayer under any other return, and any balance of such excess shall be immediately refunded to the taxpayer: Provided, That no such credit or refund shall be allowed or made after five years from the date when the return was due, unless before the expiration of such five years a claim therefor is filed by the taxpayer."