Two questions are presented for decision by the record in this case. First, was a letter written to the tax collector by respondent taxpayer and lodged with the Commissioner a claim for refund of overpaid taxes so as to stop the running of the statute of limitations against the claim? Second, did a judgment refunding taxes paid to the collector in 1925 upon profits from the sale of certain shares of stock in 1919 bar a later suit for a further recovery of 1919 taxes overpaid in 1920 to a different collector upon profits from the same transaction?
In 1919 respondent was the owner of 525 shares of the stock of the Ford Motor Company which she had acquired before March 1, 1913. In anticipation of the sale of the stock she requested and obtained in 1919 from the Commissioner of Internal Revenue a ruling that the March 1st, 1913 value of the stock was $9,489 per share. She then sold the stock for $12,500 a share and reported in her income tax return for 1919 the profit over the March 1, 1913 value thus established. In 1920 she paid the tax so computed, amounting to $1,216,086, to Collector Grogan, since deceased.
In March, 1925, the Commissioner made a jeopardy deficiency assessment against respondent for an increase of profit on the sale of the stock in 1919, on the ground that respondent had overstated the 1913 value of the stock in her 1919 tax return. Respondent paid the additional assessment, amounting to $2,627,309, to Collector Woodworth on March 24, 1925. At the same time she lodged with the collector and the Commissioner a written protest, dated March 23, 1925, against the jeopardy assessment on the ground, among others, that the Commissioner was without authority in law to reopen and set aside the 1913 valuation of the stock as determined in 1919 by the then Commissioner, on the basis of which respondent had sold her stock. By paragraph 9 of the protest respondent also advised the collector, the Commissioner and the Government, that while it was respondent's position that the deficiency assessment was illegal and void for this and other reasons stated, if the Internal Revenue Department, the Board of Tax Appeals or any court having jurisdiction should hold that the assessment of March 1, 1913 value of her stock, made in 1919, should be vacated, set aside, reopened or reversed, then respondent would insist that the valuation fixed by the Commissioner in 1919 was less than the fair market value as of March 1, 1913, that the 1919 tax which she had paid in 1920 was correspondingly excessive and that she should recover the tax to the extent of such excess when the fair value had been determined. She added in paragraph 10 that 'if for any reason a revaluation shall be had', she 'will insist' that the stock was greatly undervalued by the Department and 'will claim the right to a refund' of the excess tax collected.
After a claim duly filed for refund of the amount of the jeopardy assessment, paid in 1925, respondent brought suit in the district court against Collector Woodworth, which resulted in a judgment for the taxpayer for the full amount of the assessment with interest. The Circuit Court of Appeals for the Sixth Circuit affirmed the judgment, Woodworth v. Kales, 26 F.2d 178, which was satisfied in November, 1928.
September 24, 1928, respondent filed a formal claim for refund of the taxes paid in 1919, stated to be an amendment of the claim for refund contained in her letter of protest of March 23, 1925. By the amendment respondent sought an additional refund of income taxes, paid for the year 1919, in the amount of $195,710 with interest, upon the ground that the Ford stock, as the Board of Tax Appeals had then determined in James Couzens v. Commissioner of Internal Revenue, 11 B.T.A. 1040, had a March 1, 1913 value of $10,000 per share, and that she should accordingly have the benefit of this higher basis in computing her profit. At a hearing granted by the General Counsel for the Bureau of Internal Revenue on June 13, 1929, the amended claim was considered on the merits. Again in January, 1933, a member of his staff, at a conference with respondent's attorney, advised the latter that the informal claim was filed in time and was good as an informal claim.