346 F.2d 213 (5th Cir. 1965), 21464, United States v. Simmons

Docket Nº:21464.
Citation:346 F.2d 213
Party Name:UNITED STATES of America, Appellant, v. Gordon SIMMONS and I. V. Simmons, Executors of the Estate of B. Hill Simmons, Appellees.
Case Date:May 27, 1965
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 213

346 F.2d 213 (5th Cir. 1965)

UNITED STATES of America, Appellant,

v.

Gordon SIMMONS and I. V. Simmons, Executors of the Estate of B. Hill Simmons, Appellees.

No. 21464.

United States Court of Appeals, Fifth Circuit.

May 27, 1965

Page 214

James F. Flug, Atty., Dept. of Justice, Louis F. Oberdorfer, Asst. Atty. Gen., Lee A. Jackson, Atty., Dept. of Justice, Washington, D.C., Donald H. Frazer, U.S. Atty., Savannah, Ga., Richard M. Roberts, Acting Asst. Atty. Gen., David O. Walter, Michael I. Smith, Attys., Dept. of Justice, Washington, D.C., for appellant.

Louis A. Thompson, Savannah, Ga., for appellees.

Before WISDOM and GEWIN, Circuit Judges, and BREWSTER, District Judge.

WISDOM, Circuit Judge:

This taxpayer's suit for an estate tax refund grew out of executors' settling for $42,000 an estate's claim for an income tax refund of $60,000, listed in the estate tax return as having 'no value' at the date of the decedent's death.

The decedent, B. Hill Simmons, died December 27, 1955. Some time before his death, the Internal Revenue Service began investigating, on a net worth basis, Simmons's income tax returns for the years 1941 through 1953. As a result of the investigation, the decedent paid a deficiency in the amount of $43,000. The decedent never entertained the idea of filing a claim for a refund of these taxes. Shortly after Simmons's death, the executors of the estate employed an attorney, Mr. Louis B. Thompson, counsel for appellee, to investigate the decedent's tax affairs. By November 1956 the attorney decided that a claim for a refund should be filed for the decedent's taxable years 1941 through 1953. February 1, 1957, Mr. Thompson filed the claim for refund amounting to $60,000. Upon the Service's disallowing the claim, Mr. Thompson filed suit on behalf of the estate. In 1960, the Department of Justice approved the executors' offer of compromise for $41,187. Meanwhile, the taxpayer's attorney had filed an estate tax return listing

Page 215

the income tax claim as having no value, but had requested that the estate tax liability be held in abeyance pending the outcome of the claim. The Commissioner determined that the claim was includible in the decedent's estate and valued the claim at the amount of the settlement.

Under Section 2031 of the Internal Revenue Code of 1954, the federal estate tax includes 'all property, real or personal, tangible or intangible' of the decedent. When Simmons died, his 'property' included the claim for refund of federal income taxes. Both parties agree that the claim for refund of income taxes is a part of Simmons's gross estate. But as far as it is possible to disagree as to value, they disagree: the United States contends that the amount of the compromise, $42,000, fixed the estate tax value of the claim; the Estate of B. Hill Simmons (the taxpayer) contends the claim had no value when Simmons died. The taxpayers asserts that at the time of death the executors thought the claim was worthless and would have sold it for $1,000. Allegedly, a key factor in filing the claim was the discovery in October 1956 of a pencil memorandum tending to disprove fraud in that it showed the decedent's intention to report certain cotton sales that had not been reported. The executors paid the tax assessed against the estate and sued for a refund.

The district court submitted the issue of valuation to the jury. The jury found that the claim was valueless at the time of the decedent's death. The district court denied the Government's motions for a directed verdict, a judgment n.o.v., and a new trial. We hold that the trial court correctly denied the motions for a directed verdict and judgment n.o.v., but we reverse the judgment and remand the case for a new trial, because there was no rational basis for the jury's finding that the claim for an income tax refund was valueless on the date of the decedent's death.

I.

Since a motion for a judgment notwithstanding the verdict in effect renews an earlier motion for a directed verdict, the applicable judicial standard is the same for both motions. Fed.R.Civ.P. 50. Professor Wright comments on these two motions and on the motion for a new trial as follows:

'The motion for judgment n.o.v., like the motion for directed...

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