Opinion
Eugene Cohn, of New York City, for plaintiff.
John A. Rees, of Washington, D. C., and Frank J. Wideman, Asst. Atty. Gen., for the United States.
Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
This case having been heard by the Court of Claims, the court, upon the evidence adduced, makes the following special findings of fact:
1. Plaintiff is the duly appointed, qualified, and acting executor of the estate of Louise Ebling (hereinafter sometimes referred to as the decedent), who died testate March 7, 1927, a resident of the city of New York and a citizen of the United States.
2. A federal estate tax return for the estate of Louis Ebling was executed by plaintiff on March 7, 1928, and duly filed within a few days thereafter. That return reported a gross estate of $617,795.16, a net estate of $479,287.50, and a total tax liability of $16,464.38. The return also claimed a credit of $13,171.50, and thus showed a net tax due, after deducting that credit, of $3,292.88. The full tax of $16,464.38 was assessed by the Commissioner of Internal Revenue on the March (1928) list. Of that sum, $3,292.88 was paid by plaintiff March 10, 1928, and the balance, $13,171.50, was abated by the Commissioner November 10, 1931.
3. September 6, 1930, the Commissioner, after an audit of the above-mentioned return, advised plaintiff of a tentative determination of a net deficiency of $345.43, and December 9, 1930, sent plaintiff a deficiency notice to the same effect, giving the usual information as to the right of appeal therefrom to the United States Board of Tex Appeals. The foregoing deficiency was assessed on the March (1931) assessment list, with accrued interest of $42.53, and such amounts were paid by plaintiff April 7, 1931.
4. December 8, 1931, plaintiff filed a formal claim for refund of $999.97 of the estate tax theretofore paid for the estate of the decedent, predicated upon the ground that the gross estate as reported upon the return inadvertently and erroneously included the sum of $100,000 as the value of an interest in the estate of decedent's brother, William Ebling, who died January 12, 1927; and that this sum had been improperly included in gross estate, for the reason that it had been properly included as a part of the gross estate in determining the federal estate tax liability of William Ebling, deceased, and therefore should be eliminated from the amount of the gross estate of Louise Ebling, deceased, as property previously taxed.
5. Plaintiff's claim for refund was considered by the Commissioner, and the previously taxed property was eliminated as contended for by plaintiff. As a result, the Commissioner computed the correct tax liability on account of the return in question at $2,618.31 instead of $3,680.84 (incuding $42.53 interest), which was paid as set out in findings 2 and 3. The Commissioner accordingly prepared a certificate of overassessment, dated June 4, 1932, which read in part as follows:
Assessments:
March 1928, P. 310, L. 5, tax.................
$16,464.38
March 1931, P. 300, L. 0, tax.................
345.43
March 1931, P. 300, L. 0, interest............
42.53
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Total tax and interest assessed..............
16,852.34
Less prior allowance MTR-8025....................
13,171.50
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Tax remaining................................
3,680.84
Correct tax liability................
$13,091.54
Credit for State estate, inheritance, legacy, orsuccession taxes...............................
10,473.23
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Net tax payable..............................
2,618.31
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Overassessment...............................
1,062.53
Overassessment barred by section
3228,
United States Revised Statutes as amended by section1112 of the Revenue Act of1926.................................
674.57
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Overassessment not barred...................
387.96
A copy of the certificate of overassessment was forwarded to plaintiff by letter dated July 22, 1932, in which plaintiff was advised of the rejection of the balance of the claim. The overassessment of $387.96 was thereafter determined to be an overpayment, and was duly paid to plaintiff with accrued interest of $19.44.
6. August 12, 1932, plaintiff acknowledged receipt of the refund referred to in finding 5, but stated that such amount was being accepted on account and not in full settlement of the claim. In the same communication plaintiff protested the action of the Commissioner in disallowing a part of the claim, and asked for further consideration. The Commissioner treated the foregoing protest as an application to reopen the claim, and October 27, 1932, denied such application.
7. From and after the amendment of section 3228 of the Revised Statutes by section 1316 of the Revenue Act of 1921 effective as of November 23, 1921 (26 USCA § 157 and note), it has been the consistent practice of the Commissioner of Internal Revenue, when acting upon a claim for refund of estate tax collected under the provisions of revenue acts prior to the Revenue Act of 1926, to certify for allowance and payment only such portion of the amount claimed refundable as was not in excess of the total payments made within four years immediately preceding the date upon which that refund claim was filed, and that practice has continued without change at all times since and to the date hereof. Refunds of estate tax collected under the provisions of the Revenue Act of 1926 (section 319(b), of the act, 26 USCA § 1120(b) and later revenue acts have similarly been limited to an amount which did not exceed total payments made within three years prior to the date on which the refund claim was filed. The Commissioner followed the practice so established in refusing to certify for allowance and payment to the plaintiff any sum in excess of $387.96.
PER CURIAM.
The sole question involved in this case is whether under the Revenue Act of 1926 a claim for an estate tax refund otherwise established is limited in amount to the portion of the tax paid within three years of the presentation of the claim. The defense made to plaintiff's case is that under the law and the regulations of the Department it is so limited.
We are not disposed to enter into any further discussion of this question. In Hills v. United States, 50 F. (2d) 302, 55 F. (2d) 1001, 73 Ct. Cl. 128 (submitted on demurrer), in an exhaustive opinion upon hearing and rehearing, this court held that defendant's contention could not be sustained, and in Hills v. United States, 8 F.Supp. 849, this day decided by this court, being the same case submitted upon the facts, we have reaffirmed the opinion in the first-named case. In the meantime no less than three federal courts have rendered decisions to the same effect and have emphasized in their opinions their view that there was no doubt about the correctness of the original decision of this court. A new point has been raised, based upon the fact that the practice of the Bureau of Internal Revenue has been to hold to the contrary of the opinion that we have expressed, but the question arising thereon has been considered and decided adversely to the defendant in Union Trust Co. v. United States (C. C. A.) 70 F. (2d) 629; United States v. Clarke (C. C. A.) 69 F. (2d) 748; Hills v. United States, supra, and Magoon v. United States, 1933 C. C. H. 8755. Moreover, as is pointed out in several of these decisions, Congress has since amended the state in a manner which has, in the language of the case of Magoon v. United States, supra, set 'the seal of congressional approval on the decision in the Hills Case, and furnishes an almost unanswerable argument that the general congressional intent in the earlier enactments was exactly as declared by the Court of Claims.'
United States District Court for District of Hawaii.
Under the findings and law as stated above, plaintiff is entitled to judgment for $674.57, with interest from March 10, 1928, at 6 per cent., as provided by law.