12 F.2d 194 (1st Cir. 1926), 1902, United States v. Ayer

Docket Nº:1902.
Citation:12 F.2d 194
Party Name:UNITED STATES v. AYER et al.
Case Date:April 23, 1926
Court:United States Courts of Appeals, Court of Appeals for the First Circuit
 
FREE EXCERPT

Page 194

12 F.2d 194 (1st Cir. 1926)

UNITED STATES

v.

AYER et al.

No. 1902.

United States Court of Appeals, First Circuit.

April 23, 1926

George R. Farnum, of Boston, Mass. (Harold P. Williams, of Boston, Mass., and A. W. Gregg and T. H. Lewis, Jr., both of Washington, D.C., on the brief), for the United States.

Sherman L. Whipple and Edward O. Proctor, both of Boston, Mass. (Charles K. Dobb, of Boston, Mass., on the brief), for defendants in error.

Page 195

This is an action of contract brought by the United States against the executors of Frederick Ayer. judgment for defendants. The declaration contains the following allegations:

'1. That at all times hereinafter mentioned, the plaintiff was, and now is, a corporation sovereign and body politic.

'2. That this is an action arising under a law providing for internal revenue, brought to recover taxes due from the defendants.

'3. That on or about the 14th day of March, 1918, Frederick Ayer, being then a resident of (Pride's Crossing) Beverly, in the state and district of Massachusetts, died testate, seized and possessed of real and personal property, tangible and intangible.

'4. That the defendants, James C. Ayer, Charles F. Ayer, and Frederick Ayer, are and at all times herein mentioned were the lawfully appointed, qualified, and acting executors of the estate of Frederick Ayer, deceased, having been appointed executors under the last will and testament of the said Frederick Ayer, deceased, dated the 15th day of January, 1912, having duly qualified as such executors, and letters testamentary upon the estate of the said Frederick Ayer, deceased, having duly issued to the said defendants by the probate court of Essex county, at Salem, Mass.

'5. That the net estate of the said decedent Frederick Ayer, when determined in accordance with the provisions of the Revenue Act of 1916, being an act of Congress entitled 'An act to increase the revenue and for other purposes,' approved September 8, 1916 (39 Stat. 756), as amended by an act of Congress entitled 'An act to provide increased revenue to defray the expenses of the increased appropriations for the army and navy and for the extensions of fortifications and for other purposes,' approved March 3, 1917 (39 Stat. 1000), and the Revenue Act of 1917, being an act of Congress entitled 'An act to provide revenue to defray war expenses, and for other purposes,' approved October 3, 1917 (40 Stat. 300), amounted to $17,923,669.74, and that upon this net estate under the provisions of the aforesaid acts there became due and payable as a federal estate tax the sum of $3,183,614.77.

'6. That the said executors, under the provisions of the aforesaid acts and pursuant to the regulations of the Commissioner of Internal Revenue, duly promulgated by him and approved by the Secretary of the Treasury, on or about the 8th day of September, 1919 (an extension of time having been duly granted), filed with the United States collector of internal revenue for the Third district of Massachusetts a return for federal estate taxes in and on behalf of the estate of Frederick Ayer, deceased, which return discloses the following:

Real estate ........................... $1,084,935.70
Gifts and transfers ...................... 120,000.00
Stocks and bonds ....................... 3,565,019.11
Shares in jointly owned property 0.00
Mortgages, notes and miscellaneous 1,392,381.45
-------------
Total gross estate ................. $6,162,336.26
Funeral expense ............ $5,618.42
Adminstration expense:
Executor's fee ............ 15,000.00
Attorney's fee ............ 25,000.00
Miscellaneous ............. 11,409.87
Claims against estate:
Mortgages ...................... 0.00
Debts of decedent ...... 1,167,133.06
Net losses during administration.................. 0.00
Support of dependents 0.00
State inheritance tax 0.00
Other charges allowed 0.00
by local law 0.00
Specific exemption ......... 50,000.00
------------
Total deductions 1,274,161.35
-------------
Net estate .......................... $4,888,174.91
'7. That upon the filing of said return, to wit, on or about the 8th day of September, 1919, the said executors paid to the United States collector of internal revenue for the Third district of Massachusetts, the sum of $661,871.48, such sum being the amount of the tax on said estate as computed by said executors and shown on said return. '8. That the aforesaid return was incorrect and misleading in that a gross estate Page 196 was returned in the sum of $6,162,336.26, whereas in truth and in fact the gross estate was the sum of $19,207,719.45; that deductions were taken in the return in the sum of $1,274,161.35, wherein in truth and in fact the true and correct deduction allowable by law was the sum of $1,284,049.71; that a net taxable estate in the sum of $4,888,174.91 was returned, whereas the true and correct net taxable estate was the sum of $17,923,669.74; and that the tax due on said estate was returned as being $661,871.48, whereas in truth and in fact the correct tax liability was the sum of $3,183,614.77. '9. That thereafter on or about October 25, 1923, the Commissioner of Internal Revenue, upon review and audit of the said return and upon information obtained by him, determined that the gross estate, deductions, net estate, and the federal estate tax were as follows:

Real estate ....................... $1,080,935.70
Gifts and transfers ............... 13,103,948.26
Stocks and bonds ................... 3,612,921.04
Mortgages, notes, and miscellaneous ..................... 1,409,914.45

Total gross estate ............. $19,207,719.45
Total deductions ................. 1,284,049.71

Net estate ..................... $17,923,669.74
Total tax ........................ 3,183,614.77
Total tax discharged on basis of return ......................... 661,871.48

Additional tax due .............. $2,521,743.29
'10. That thereafter due notice and demand upon said defendants for the payment of the aforesaid additional tax was made but that the said defendants failed and refused and still refuse to pay the said sum or any part thereof. '11. That there is due and unpaid from the said defendants to the plaintiff the sum of $2,521,743.29, together with interest thereon from March 14, 1919, to date of payment at the rate of 6 per cent. per annum. '12. That the Commissioner of Internal Revenue authorizes and sanctions these proceedings. 'Wherefore the plaintiff demands judgment against the defendants James C. Ayer, Charles F. Ayer, and Frederick Ayer, as executors of the estate of Frederick Ayer, deceased, in the sum of $2,521,743.29, together with interest thereon from March 14, 1919, to date of payment at 6 per cent. per annum, together with the costs and disbursements of this action.' To this declaration the defendants demurred substantially on the following grounds: (1) That the matters contained in the declaration were insufficient in law to enable the plaintiff to maintain its action; (2) that it did not set forth an appropriate proceeding to subject the property of the decedent to be sold under the judgment or decree of the court; (3) that the facts stated in the declaration do not show a right on the part of the plaintiff to maintain an action in the present or any form under the existing provisions of the Revenue Act of 1916, approved September 8, 1916, and acts in amendment thereof, in addition thereto and in repeal thereof; (4) that the averments in paragraph 8 of the declaration alone or in connection with other averments therein do not state any grounds of liability of the defendants, either as individuals or in their representative capacity; (5) that the declaration nowhere alleges that the collector or deputy collector made a return and that the Commissioner assessed a tax thereon as by law required in case of a return containing 'an incorrect statement of a material fact'; (6) that it appears from the declaration that the total tax shown to be due in the return by the defendants as executors to the collector was paid by the executors and accepted as the payment of a sum of money sufficient in the opinion of the collector to discharge the tax and that the Commissioner did not determine an additional tax due until on or about October 25, 1923, which was not within four years after such tax became due; (7) that it does not appear that the Commissioner made an assessment of the tax in accordance with the statutory requirement that the Commissioner shall make all assessments of the tax under the authority of existing administrative, special and general provisions of law relating to the assessment and collection of taxes; and (9) that it does not appear that the Commissioner made an assessment of the tax within four years after such tax became due. In the District Court the demurrer was sustained, and judgment was entered for the defendants, from which this writ is prosecuted. Page 197 Before BINGHAM, JOHNSON, and ANDERSON, Circuit Judges. BINGHAM, Circuit Judge (after stating the facts as above). If the United States can maintain this action it was seasonably brought, for it was begun within five years from the time the tax was due. Revenue Act of 1921, title 13, Sec. 1320 (Comp. St. Ann. supp. 1923, Sec. 6371 4/5i). The liability for the tax that accrued under the act of 1916 was not remitted by the act of...

To continue reading

FREE SIGN UP