Davidson v. United States, Civ. A. No. 1135.
| Decision Date | 30 December 1944 |
| Docket Number | Civ. A. No. 1135. |
| Citation | 58 F. Supp. 481 |
| Parties | DAVIDSON et al. v. UNITED STATES. |
| Court | U.S. District Court — Eastern District of Wisconsin |
Wood, Warner, Tyrrell & Bruce, of Milwaukee, Wis., for plaintiffs.
Timothy T. Cronin, U. S. Atty., and E. J. Koelzer, Asst. U. S. Atty., both of Milwaukee, Wis., and Samuel O. Clark, Jr., Asst. Atty. Gen., and Andrew D. Sharpe and George J. Laikin, Sp. Assts. to Atty. Gen., for defendant.
This action is brought to recover $9,966.44, plus interest, by reason of an alleged overpayment of the federal estate tax on the estate of William A. Davidson, deceased.
Mr. Davidson died April 21, 1937. On June 30, 1938, his executors filed a federal estate tax return with the collector of internal revenue, and to cover the tax liability disclosed thereby made a payment of $70,270.85.
Pursuant to the law and regulations then prevailing the executors elected to have the estate valued as of one year after the date of the deceased's death, rather than as of the date of death. Sec. 203(j) of the Revenue Act of 1926, as amended by Sec. 202 of the Revenue Act of 1935, 26 U.S. C.A. Int.Rev.Acts, page 804; Treasury Regulations 80 (1937 Ed.), Article 11. Pursuant to the regulations the executors included as part of the gross estate the sum of $53,469.57 which was the income earned by the estate during the year after deceased's death.
It is the claim of the executors that they are entitled to a refund of so much of the tax paid by them as is attributable to the inclusion in the gross estate of the income for one year after the death of Mr. Davidson; that such income was included in the return pursuant to a treasury regulation which the Supreme Court held to be invalid in Maass v. Higgins, 312 U.S. 443, 61 S. Ct. 631, 85 L.Ed. 940, 132 A.L.R. 1035, decided March 3, 1941. The government desires to retain this tax which was collected pursuant to an invalid treasury regulation and advances several contentions, only one of which needs to be considered here.
In line with normal procedure the return filed by the executors on June 30, 1938, was audited with the result that a "30-day letter," dated April 27, 1939, was sent to the executors proposing a tax deficiency of $65,535.08. This deficiency was afterwards reduced to $20,229.35 by a letter dated January 10, 1940. The executors continued to disagree with the amount of the proposed tax deficiency, and pursuant to their request the matter was referred to the Milwaukee Division of the Technical Staff of the Bureau of Internal Revenue. Further negotiations were then had with discussions being limited to six items. Finally in February, 1941, a proposed deficiency of $11,375.44 was agreed upon. In such negotiations no mention was made by either side of the amount included in the gross estate for the first year's income. The attorney for the estate was unaware any question had been raised as to the validity of the regulation under which the tax on such income was included. The representatives of the bureau knew that a district court, Saks v. Higgins, 29 F.Supp. 996, and the Second Circuit Court of Appeals, 111 F.2d 78, had upheld said regulation and that a petition for certiorari had been granted by the Supreme Court, Maass v. Higgins, 311 U.S. 626, 61 S.Ct. 37, 85 L.Ed. 398.
On February 11, 1941, Mr. Nelson of the Milwaukee Technical Staff prepared Treasury Form 890 to put into effect the agreement he had reached with the attorney for the estate. On February 14 one of the executors signed Form 890 and it was mailed to Nelson. The form provided that the executor "consents to the assessment and collection of a deficiency in estate tax in the sum of $11,375.44, together with interest thereon as provided by law." A typewritten paragraph followed, to wit: "This Waiver of Restrictions is subject to acceptance by or on behalf of the Commissioner of Internal Revenue, on the basis of the adjusted liability as hereinabove proposed, and is to take effect as such only from the date said adjusted liability is accepted by or on behalf of the Commissioner as a basis for closing the case, and if not thus accepted will have no force or effect." The proposal (Form 890), together with a memo from Nelson known as a supporting statement, and other papers were forwarded to Milton E. Carter who was the head of the Technical Staff in Chicago. On March 1, 1941, Carter on behalf of the Commissioner approved the settlement proposed on Form 890 by signing his name and...
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...103 F.Supp. 210, 214, affirmed without discussion of effect of Form 870-TS, 10 Cir., 1952, 198 F.2d 544; Davidson v. United States, D. C.Wis.1944, 58 F.Supp. 481, 483-484; Arthur V. Davis, 29 T.C. 878 (in which the Tax Court, referring to an accepted Form 870-TS, stated: "The parties are ag......
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