Under corporation act, New Jersey (P. L. 1896, p. 295), sections 53-55, which provide that corporations, however dissolved, are "continued bodies corporate for the purpose of prosecuting and defending suits by or against them and of enabling them to settle and close their affairs," but may not continue their business, and make the directors trustees to settle the business, the officers of a corporation which has dissolved after becoming subject to the special tax imposed by act of August 5, 1909, on its business of the preceding year, who are also directors, have authority, and it is their duty, to make the return of such business required by the act. (United States v. General Inspection & Loading Co., 192 Fed. 223, 1911.) (Appealed, on the question of notice only, in 204 Fed. 657.)

Interest on policy loans.

* * *

A mutual life insurance company is not under necessity to return as part of its gross income interest accruing on policy loans, as such loans and the interest are not obligations which the policyholder is bound personally to liquidate with interest. (Northwestern Mutual Life Ins. Co. v. Fink, 248 Fed. 569, 1917.)

Accrued interest.

* *

A mutual life insurance company's tax return under corporation tax act * should not include premium and interest items. accrued and due but not actually collected and received. (Northwestern Mutual Life Ins. Co. v. Fink, 248 Fed. 569, 1917.)

SUBDIVISION IV, SECTION 38.

Fourth. Whenever evidence shall be produced before the Commissioner of Internal Revenue which in the opinion of the commissioner justifies the belief that the return made by any corporation, joint stock company or association, or insurance company is incorrect, or whenever any collector shall report to the Commissioner of Internal Revenue that any corporation, joint stock company or association, or insurance company has failed to make a return as required by law, the Commissioner of Internal Revenue may require from the corporation, joint stock company or association, or insurance company making such return, such further information with reference to its capital, income, losses, and expenditures as he may deem expedient; and the Commissioner of Internal Revenue, for the purpose of ascertaining the correctness of such return or for the purpose of making a return where none has been made, is hereby authorized, by any regularly appointed revenue agent specially designated by him for that purpose, to examine any books and papers bearing upon the matters required to be included in the return of such corporation, joint stock company or association, or insurance company, and to require the attendance of any officer or employee of such corporation, joint stock company or association, or insurance company, and to take his testimony with reference to the matter required by law to be included in such return, with power to administer oaths to such person or persons; and the Commissioner of Internal Revenue may also invoke the aid of any court of the United States having jurisdiction to require the attendance of such officers or employees and the production of such books and papers. Upon the information so acquired the Commissioner of Internal Revenue may amend any return or make a return where none

has been made. All proceedings taken by the Commissioner of Internal Revenue under the provisions of this section shall be subject to the approval of the Secretary of the Treasury.

Where a corporation in its return deducts taxes paid not by it but in its behalf by other corporations on stock owned by it in such other corporations and such deduction is not allowed, as there was no refusal or neglect to make a return within the meaning of the act, no penalty will be allowed. (United States v. Aetna Life Ins. Co., 260 Fed. 333, 1919.)

SUBDIVISION V, SECTION 38.

Fifth. All returns shall be retained by the Commissioner of Internal Revenue, who shall make assessments thereon; and in case of any return made with false or fraudulent intent, he shall add one hundred per centum of such tax, and in case of a refusal or neglect to make a return or to verify the same as aforesaid he shall add fifty per centum of such tax. In case of neglect occasioned by the sickness or absence of an officer of such corporation, joint stock company or association, or insurance company, required to make said return, or for other sufficient reason, the collector may allow such further time for making and delivering such return as he may deem necessary, not exceeding thirty days. The amount so added to the tax shall be collected at the same time and in the same manner as the tax originally assessed, unless the refusal, neglect, or falsity is discovered after the date for payment of said taxes, in which case the amount so added shall be paid by the delinquent corporation, joint stock company or association, or insurance company immediately upon notice given by the collector. All assessments shall be made and the several corporations, joint stock companies or associations, or insurance companies shall be notified of the amount for which they are respectively liable on or before the first day of June of each successive year, and said assessments shall be paid on or before the thirtieth day of June, except in cases of refusal or neglect to make such return, and in cases of false or fraudulent returns, in which cases the Commissioner of Internal Revenue shall, upon the discovery thereof, at any time within three years after said return is due, make a return upon information obtained as above provided for, and the assessment made by the Commissioner of Internal Revenue thereon shall be paid by such corporation, joint stock company or association, or insurance company immediately upon notification of the amount of such assessment; and to any sum or sums due and unpaid after the thirtieth day of June in any year, and for ten days after notice and demand thereof by the collector, there shall be added the sum of five per centum on the amount of tax unpaid and interest at the rate of one per centum per month upon said tax from the time the same becomes due.

Notice by mail.

The notice of assessment required to be given to the corporation may lawfully be given by mail, and a notice so sent by the collector in a franked envelope bearing a return card, addressed to the corporation at the place of its principal office, and not returned, was presumptively received, and the burden rests on the corporation to prove to the contrary, to avoid the penalty for nonpayment within the time prescribed. (United States v. General Inspection & Loading Co., 204 Fed. 657, 1913.)

"False" returns.

An incorrect return is "false" although made in good faith under a mistake of law, and the Commissioner has power to amend such return even after the tax under the original return has been paid. The corrected assessment is not required to be made within the three years. (Eliot National Bank v. Gill, 210 Fed. 933, 1913, and affirmed in C. C. A. decision, 218 Fed. 600, 1914.)

Construing the provisions in subdivisions 3, 4, and 5 together, the word "false" as used in subdivision 5 is not to be construed as meaning intentionally or fraudulently false, but the same as "not true," or the equivalent of "incorrect," and the Commissioner has power in such case to amend a return at any time within three years. (National Bank of Commerce in St. Louis v. Allen, 223 Fed. 472, 1915.)

The word "false" as used in section 38 (5), means "untrue" or "incorrect" and does not necessarily mean intentionally or fraudulently false. (United States v. Nashville, C. & St. L. Ry., 249 Fed678.)

See also Camp Bird v. Howbert (248 U. S. 590, reversing 249 Fed. 27.)

Reassessment.

Neither the limitation contained in this paragraph nor any other statute of limitations bars an action by the United States to recover the difference between the amount of the tax levied and paid and the amount which should have been levied and paid, if the corporation's return had correctly stated its income. (United States v. Minneapolis Threshing Machine Co., 229 Fed. 1019, 1915.)

The three-year clause of section 38 is not a limitation upon the right of the Government to sue for unpaid taxes but a limitation upon the right of the collecting officers to make assessment and to enforce payment by the summary statutory proceedings. (United States v. Grand Rapids & Indiana Ry. Co., 239 Fed. 153, 1915.)

The act of August 5, 1909, does not make the remedy by way of a reassessment by the Commissioner exclusive of all other remedies for collection of excise tax imposed on corporations, and suit may be brought under section 3213 Revised Statutes. (United States v. Nashville, C. & St. L. Ry., 249 Fed. 678, C. C. A. 1918.) Reversing decision of the district court.

In view of Revised Statutes, section 3213, Held that, under act of August 5, 1909, section 38, subdivisions 5, 8, United States may maintain action against corporation for excise taxes based on income omitted, though Commissioner of Internal Revenue made no reassessment, etc., within time prescribed. (U. S. v. Nashville, C. & St. L. Ry., 249 Fed. 678.)

Excise taxes under act of August 5, 1909, are specific taxes, differing from State ad valorem taxes, as to which no tax is imposed until the officers act, and no suit for any tax will lie until after such action. (Id.)

Limitations.

The three-year clause of section 38 is not a limitation upon the right of the Government to sue for unpaid taxes but a limitation upon the right of the collecting officers to make assessment and to enforce payment by the summary statutory proceedings. (United States v. Grand Rapids & Indiana Ry. Co., 239 Fed. 153, 1915.)

Neither the limitation contained in this paragraph nor any other statute of limitation bars an action by the United States to recover the difference between the amount of the tax levied and paid and amount which should have been levied and paid, if the corporation's return had correctly stated its income. (United States v. Minneapolis Threshing Machine Co., 229 Fed. 1019, 1915.)

In view of Revised Statutes, section 3213, Held that, under act of August 5, 1909, section 38, subdivisions 5, 8, United States may maintain action against corporations for excise taxes based on income omitted, though Commissioner of Internal Revenue made no reassessment, etc., within time prescribed. (U. S. v. Nashville, C. & St. L. Ry., 249 Fed. 678.)

The corrected assessment on an incorrect return is not required to be made within the three years. (Eliot National Bank v. Gill, 210 Fed. 933, 1913, and affirmed in 218 Fed. 600, 1914.)

Returns, false. (See "False" returns.)

SUBDIVISION VIII, SECTION 38.

Eighth. If any of the corporations, joint stock companies or associations, or insurance companies aforesaid shall refuse or neglect to make a return at the time or times hereinbefore specified in each year, or shall render a false or fraudulent return, such corporation, joint stock company or association, or insurance company shall be liable to a penalty of not less than one thousand dollars and not exceeding ten thousand dollars.

Any person authorized by law to make, render, sign, or verify any return, who makes any false or fraudulent return, or statement, with intent to defeat or evade the assessment required by this section to be made, shall be guilty of a misdemeanor, and shall be fined not exceeding one thousand dollars or be imprisoned not exceeding one year, or both, at the discretion of the court, with the costs of prosecution.

All laws relating to the collection, remission, and refund of internal-revenue taxes, so far as applicable to and not inconsistent with the provisions of this section, are hereby extended and made applicable to the tax imposed by this section.

Jurisdiction is hereby conferred upon the circuit and district courts of the United States for the district within which any person summoned under this section to appear to testify or to produce books as aforesaid shall reside, to compel such attendance, production of books, and testimony by appropriate process.

Collection of Tax by Government.

Where a corporation's return incorrectly stated its net income and the tax based upon such return had been paid, an action of indebitatus assumpsit would lie to recover the balance of the tax, which should have been levied and paid, without formal assessment of such additional tax. (United States v. Minneapolis Threshing Machine Co., 229 Fed. 1019, 1915.)

Evidence sustaining allegations of incorrectness in returns by a corporation subject to excise tax need not be set out in the declaration in a suit to recover such tax. (United States v. Nashville, Chattanooga & St. Louis Ry., 249 Fed. 678, C. C. A. (Reversing the district court decision; T. D. 2697.)

A common-law action of debt lies in favor of the Government whenever by accident, mistake, or fraud, taxes have not been paid; thus the Government may recover a personal judgment for a tax whenever there exists a duty to pay, provided another remedy has not been made exclusive by clear and specific declaration. (Id.)

The remedy by suit against the collector where internal revenue taxes have been wrongfully collected under the Federal corporation tax law of August 5, 1909, section 38, is not made exclusive by the provision of that section that all laws relating to the collection, remission, and refund of internal revenue taxes, so far as applicable, are extended to this tax. (United States v. Emery, Bird, Thayer Realty Co., 237 U. S. 28.)

The provision in the act of October 3, 1913, that the repeal of existing laws or modifications thereof embraced in the act should not affect any act done or right accruing, or any suit or proceeding had or commenced, in any civil case before such repeal or modification, but all rights and liabilities under such laws should continue and might be enforced in the same manner as if such repeal or modification had not been made was held to be intended to relate only to rights and liabilities in respect to taxes which had accrued under the act of 1909, and not intended to cover excise taxes upon corporations for the months of January and February, 1913, which were imposed by the income tax act, as the constitutional amendment of March 1, 1913, designed to permit taxation of incomes without apportionment was not adopted until March 1; this being apparent from the provision in the act that excise taxes for two months shall be ascertained in accordance with the provisions of section 2 G. Consequently exemptions in the corporation tax act are not applicable to taxes imposed for those two months. (Butterick Co. v. United States and Federal Publishing Co. v. Same, 240 Fed. 539, 1917; dismissed on motion of United States, 248 U. S. 587.)