Herman v. White
| Decision Date | 06 December 1938 |
| Docket Number | 6473.,No. 6472,6472 |
| Parties | HERMAN v. WHITE, Former Collector of Internal Revenue (two cases). |
| Court | U.S. District Court — District of Massachusetts |
Herbert B. Ehrmann, and Goulston & Storrs, all of Boston, Mass., for plaintiff.
John A. Canavan, U. S. Atty., and C. Keefe Hurley, Asst. U. S. Atty., both of Boston, Mass., James W. Morris, Asst. Atty. Gen., and Andrew D. Sharpe and James P. Garland, Sp. Assts. to Atty. Gen., for defendant.
These actions were brought to recover taxes paid by the plaintiff on her income for the years 1929 and 1930. The amounts involved are relatively small. The suits were tried together without jury and, as they present the same issue, they may be considered in one opinion. The facts common to both are stipulated and are as follows:
Joseph M. Herman died, leaving a will wherein he provided that trustees should hold in trust property sufficient to enable the trustees to pay the plaintiff an annual fixed amount of $30,000, together with all taxes thereon, including federal income tax.
Plaintiff, in each of the years 1929 and 1930, included the sum received from the trustees in the return of her income and paid the tax thereon, for which she was fully reimbursed by the trustees.
The trustees, in their returns, did not include as taxable income the annuities paid to the plaintiff. Later, the decision in Helvering v. Pardee, 290 U.S. 365, 54 S.Ct. 221, 78 L.Ed. 365 was handed down, holding in effect that a fixed annuity was chargeable upon the entire estate, and not necessarily payable from income, and that the amount thereof was not deductible by a trustee from the income of the trust.
After the statute of limitations had barred any claim by the government against the trustees, the plaintiff claimed a refund of the taxes paid by her on the amount received by her from the trust. The claims for refund were based upon the decision in Helvering v. Pardee, supra. The claims were rejected on the ground that the taxes paid were not in excess of the correct amount of tax due from the trustees for the same years. It is stipulated that if the trustees had included the income represented by the payments, the income taxes which the trustees would have paid for each year would have been in excess of the amount paid by the plaintiff.
While it may fairly be assumed that the trustees would be under a duty to recall the sums advanced to the plaintiff for these taxes, if recovered from the government, it is not necessary to now decide that question. In any event, if judgment goes for the plaintiff, it will follow that income subject to tax will escape and that either the beneficiary or the trustees will be unjustly enriched at the expense of the government. It is settled law that "statutes providing for refunds and for suits on claims therefor proceed on the same equitable principles that underlie an action in assumpsit for money had and received." United States v. Jefferson Electric Mfg. Co., 291 U.S. 386, 402, 54 S.Ct. 443, 449, 78 L.Ed. 859; Myers v. Hurley Motor Co., 273 U.S. 18, 47 S.Ct. 277, 71 L.Ed. 515, 50 A.L.R. 1181; Lewis v. Reynolds, Collector, 284 U.S. 281, 52 S.Ct. 145, 76 L.Ed. 293; Stone v. White, Former Collector, 301 U.S. 532, 57 S.Ct. 851, 81 L.Ed. 1265; Sanford v. First National Bank of Marysville, Kansas, 8 Cir., 238 F. 298; Portsmouth Cotton Oil Ref. Corp. v. Fourth National Bank of Montgomery, D.C., 280 F. 879; United States Paper Exports Ass'n v. Bowers, 2 Cir., 80 F.2d 82; First National Bank of Birmingham v. United States, D.C., 12 F.Supp. 301; American Newspapers, Inc., v. United States, D.C., 20 F.Supp. 385.
The facts of the case at bar present, in my opinion, a situation which is controlled by Stone v. White, supra. In that case a trustee sought to recover taxes which should have been paid by the beneficiary after...
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Pacific Mills v. Nichols
...and the reversal was upheld in the Supreme Court in Stone v. White, supra. The same result was reached in this court in Herman v. White, D.C., 25 F.Supp. 587, decided December 6, 1938. In both of these last cited cases, there was obviously no new official determination by the Commissioner a......