Burnet v. Chicago Railway Equipment Co.

Background

A Chicago company that made railway equipment filed its income tax return for 1918 on June 16, 1919. In March 1925 the Commissioner determined a deficiency and the company appealed to the Board of Tax Appeals in May 1925. On December 10, 1925 the company and the Commissioner signed a written waiver extending the time to assess until December 31, 1926 and providing a further extension for the days the case was before the Board. The Board largely confirmed the deficiency in July 1926, a court of appeals remanded, and later the time-bar defense was raised and treated differently by the Board and the Circuit Court, leading to Supreme Court review.

Reasoning

The Court addressed whether a waiver signed after five years and while an appeal was pending could revive the assessment period. It concluded the Commissioner had authority to accept such waivers for administrative purposes and that the waiver’s language and surrounding circumstances showed the parties intended the extension to apply. The Court rejected the company’s claim that the waiver was invalid because it was obtained by duress, noting the Commissioner could lawfully make a jeopardy assessment and that the taxpayer agreed to the waiver to avoid that action. The practical winner was the government: the waiver was effective and assessment and collection could proceed.

Real world impact

The ruling means written waivers given to the Commissioner can extend assessment time even after the ordinary five-year limit when properly signed and intended. Taxpayers and the Treasury may rely on such waivers in contested cases, affecting the timing of assessments and collections.