Estate of Goetz v. United States
| Decision Date | 04 April 1968 |
| Docket Number | Civ. No. 1437. |
| Citation | 286 F. Supp. 128 |
| Parties | ESTATE of M. Karl GOETZ, Deceased, Nancy R. (Goetz) Ryan, Executrix, and Nancy R. (Goetz) Ryan, an Individual, Plaintiffs, v. UNITED STATES of America, Defendant. |
| Court | U.S. District Court — Western District of Missouri |
Joseph A. Hoskins and Philip J. Erbacher, Kansas City, Mo., O. W. Watkins, Jr., St. Joseph, Mo., for plaintiff.
Mitchell Rogovin, Asst. Atty. Gen., Jerome Fink, John W. Debruyn, Dept. of Justice, Washington, D. C., and Calvin K. Hamilton, U. S. Atty., Kansas City, Mo., for defendant.
MEMORANDUM AND ORDER SUSTAINING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT.
Plaintiffs instituted this suit against the defendant for the return of the sum of $8,367.80 paid by the plaintiffs to the Internal Revenue Service following statutory notice of deficiency of income tax alleged to be due against the estate of M. Karl Goetz and Nancy R. Goetz, his widow.
In their complaint the plaintiffs base their right to recovery upon the ground first, that the money upon which the Government seeks to recover the tax was a gift under Section 102(a) I.R.C.19541 to plaintiff Nancy R. Goetz and not subject to tax, and second, that the assessment of the tax was not made until after the statute of limitations. Section 6501(a) Title 26 U.S.C.2 had expired.
The plaintiffs have filed a Motion for Summary Judgment on the ground that the statute of limitations had run before the tax was assessed.
The undisputed facts, as shown by the pleadings and the answers to interrogatories are, that prior to his death on January 17, 1960, M. Karl Goetz was President of the Goetz Brewing Company, a corporation, located in St. Joseph, Missouri, as well as a stockholder therein, and at the time of his death was receiving the sum of $30,000.00 per year as salary.
Following his death, the Board of Directors of the Goetz Brewing Company resolved to pay to Nancy R. Goetz, his widow, the sum of $28,750.00, that figure being the difference between the amount of the salary that Mr. M. Karl Goetz had earned prior to his death, and the amount that he would have earned had he lived and worked the remainder of that year.
On or before April 15, 1961, the estate of M. Karl Goetz and Nancy R. Goetz, his widow, filed a joint return on form 1040 for the calendar year 1960 showing the receipt of the $28,750.00 by Nancy R. Goetz, and claiming it as a non-taxable gift under Section 102(a) I.R.C.1954.
The applicable statute of limitations, Title 26 § 6501(a) would have expired three years from the date of the filing of the above mentioned return. However, prior to such expiration and on November 6, 1963, form No. 872 was executed by the plaintiffs and accepted by the Government on the following day. The effect of the execution of form No. 872 was to extend the period of the statute of limitations to June 30, 1965.
In May of 1965 the Government requested that the taxpayers sign a further waiver which would have had the effect of extending the period of limitations to June 30, 1966. This the taxpayers declined to do. Thereafter, on June 18, 1965, the Government mailed to the taxpayers a statutory notice of deficiency (as provided for in Title 26, § 6212(a)3 rejecting the claim of the taxpayers for the exemption status of the $28,750.00.
On August 24, 1965, Nancy R. Goetz Ryan (she had in the meantime remarried), mailed her check for the sum of $6,631.60 to the Internal Revenue Service, which was received by the Service on August 26, 1965, and held by it until December 20, 1965, at which time it was deposited for collection.
Under the provisions of § 6213(a) Title 26 U.S.C.,4 a ninety day notice requirement having the effect of extending the period of limitations for an additional ninety days, and Section 6503(a) Title 26 U.S.C.,5 a sixty day notice requirement to the same effect, the period of limitations was extended for a total of one hundred fifty days from June 30, 1965, or until November 27, 1965.
A supporting affidavit submitted by the defendant indicates that an assessment of the tax was made on December 23, 1965, whereas the answers to plaintiffs' interrogatories reveal that the assessment was made on January 21, 1966.
Interest in the amount of $1,736.20 was also assessed and on February 2, 1966, the said Nancy R. Goetz Ryan mailed her check to the Internal Revenue Service for that amount, said check having been received by the Service and deposited by it on February 11, 1966.
This action was instituted by the plaintiffs to recover the amount of the assessment together with the interest, on July 5, 1967.
It is the contention of the plaintiffs in their Motion for Summary Judgment that regardless of the fact that the money in question was transferred to the Service prior to the running of the statute of limitations, that said money was not due or owing until it had been properly assessed as a tax liability and that such an assessment was not made until a time after the statute of limitations had expired. (Although we have before us two different dates on which it is claimed that the assessment was made, both of those dates are admittedly beyond the period of limitations, and therefore have no bearing on the legal question which is before us.)
The defendant, on the other hand, contends that Title 26 § 6401(a)6 which entitles the taxpayer to recover any amount "assessed or collected after the expiration of the period of limitation" does not embrace amounts had and received before the running of that period, or in other words, that there has been an actual payment of taxes duly collected. With this interpretation we cannot agree.
It does not follow from the fact that the Service had the taxpayers' money in hand prior to the running of the statute of limitations, that the money was duly collected. In order for the tax liability to have been duly collected it must have been properly assessed and such was not the case here in that the assessment was made at a time subsequent to the running of the statute of limitations.
It is this reasoning which apparently impelled the defendant to admit that the plaintiffs are entitled to recover the $1,736.20 interest payment in that said payment was not in the hands of the Service prior to the running of the statute (nor was it in their hands...
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