Rev. Rul. 67-94

Advice has been requested as to whether the penalty provisions of section 7271 of the Internal Revenue Code of 1954 are applicable to an individual who misappropriated documentary revenue stamps under the circumstances described below.

A title examiner for a land title guarantee company obtained documentary stamps from the company bookkeeper-cashier ostensibly for the purpose of affixing them to instruments which it was his duty to file with the county recorder. Over a period of several years a number of deeds were filed by the title examiner with no stamps affixed. Investigation disclosed the stamps were appropriated by the title examiner who made unauthorized sales thereof to third parties.

Section 4361 of the Code imposes a tax on each deed, instrument, or writing by which any land, tenements, or other realty sold is granted, assigned, transferred, or otherwise conveyed to, or vested in, the purchaser or purchasers, or any other person or persons, by his or their direction, when the consideration or value of the interest or property conveyed exceeds $100.

Section 4384 of the Code provides in part that the aforesaid tax on conveyances shall be paid by any person who makes, signs, issues, or sells any of the documents and instruments subject to such taxes, or for whose use or benefit the same are made, signed, issued, or sold.

Section 47.6804-1 of the Documentary Stamp Tax Regulations provides, among other things, that all the taxes imposed by section 4361 of the Code shall be paid through the use of the special documentary stamps therein referred to.

Section 7271 of the Code deals with certain offenses relating to stamps and includes the following provisions:

Any person who with respect to any tax payable by stamps-

(1) Failure to attach or cancel stamps, etc .-Fails to comply with rules or regulations prescribed pursuant to section 6804 (relating to attachment, cancellation, etc., of stamps), unless such failure is shown to be due to reasonable cause and not willful neglect; or

*

(3) Instruments .-Makes, signs, issues, or accepts, or causes to be made, signed, issued, or accepted, any instrument, document, or paper of any kind or description whatsoever without the full amount of tax thereon being duly paid;

* shall be liable for each such offense to a penalty of $50.

Section 7343 of the Code defines the term `person' as including an officer or employee of a corporation or a member or employee of a partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs.

In view of the definition of `person' set out in section 7343 of the Code, section 7271 reaches beyond the parties to a transaction and encompasses anyone under a duty by virture of his employment to perform the acts required by law.

Accordingly, it is held that the title examiner, because of his failure to perform the acts required as a duty of his employment, is subject to the provisions of section 7271 of the Code.

The proper procedure to be followed in asserting the various penalties imposed by section 7271 must necessarily be determined by reference to whether such penalties come within the scope of the basic assessment authority set out in section 6201 of the Code. This latter section authorizes the Secretary or his delegate to assess `all taxes (including interest, additional amounts, additions to the tax, and assessable penalties)' imposed by title 26 of the Code `which have not been duly paid by stamp at the time and in the manner provided by law.'

Under the above-quoted language of section 6201 of the Code, only those penalties which the Code otherwise expressly authorizes the Secretary or his delegate to assess by means of the same administrative procedures contemplated for taxes as such can properly be considered `assessable' by administrative action. This conclusion is reinforced by the fact there are two different instances in which the Code makes explicit provision for particular penalties to be assessed `in the same manner as taxes.' Both of these special provisions, which are set out in sections 6659(a) and 6671(a) of the Code, have certain clearly defined limitations in that one refers to no penalties other than those provided for in chapter 68 (sections 6651 through 6679) of the Code, while the other applies only to the penalties and liabilities provided for by subchapter B of chapter 68 (sections 6671 through 6679).

Section 7271 of the Code falls within chapter 75 of the Code and such chapter contains no provision for the direct assessment of any of the penalties therein mentioned. It is therefore concluded that the penalties provided for in section 7271 do not come within the scope of section 6201 and must be treated as nonassessable penalties which can only be enforced by instituting a special court proceeding for that purpose.