Kieferdorf v. Commissioner of Internal Revenue, 10484.
| Decision Date | 02 June 1944 |
| Docket Number | No. 10484.,10484. |
| Citation | 142 F.2d 723 |
| Parties | KIEFERDORF v. COMMISSIONER OF INTERNAL REVENUE. |
| Court | U.S. Court of Appeals — Ninth Circuit |
G. D. Schilling and Kenneth M. Johnson, both of San Francisco, Cal., for petitioner.
Samuel O. Clark, Jr., Asst. Atty. Gen., and Sewall Key, A. F. Prescott and Maryhelen Wigle, Sp. Asst. Attys. Gen., for respondent.
Before GARRECHT, DENMAN, and MATHEWS, Circuit Judges.
The question here is whether petitioner is liable as a transferee under Section 311 of the Internal Revenue Code, Title 26, U.S.C.A. Int.Rev.Code, § 311, for income taxes due from the decedent whose estate is insolvent by reason of petitioner's receipt of insurance proceeds under a California statute authorizing the probate court to set over to the surviving spouse all or any part of the property of the decedent "exempt from execution". The insurance proceeds were payable to the estate and were property "exempt from execution" under California law.
The facts were found to be as stipulated. W. J. Kieferdorf, a resident of California, died testate December 3, 1939 and left his widow, May R. Kieferdorf, the petitioner, and minor children surviving. A family allowance of $250 per month during the settlement of the estate was paid.
The executor filed an income tax return covering income received by the decedent from January 1, 1939 to December 3, 1939. No payment was ever made on the taxes. Notice and demand for payment of this income tax payment was served on the executor June 1, 1940, and again July 31, 1940.
An order was made April 24, 1940, setting apart to May R. Kieferdorf and her children $11,914.52 as property in the estate exempt from execution under California law, being the proceeds of insurance policies.
The executor was discharged October 9, 1940. All assets were disposed of, leaving unpaid federal and state taxes and other claims.
On September 21, 1941 the tax liability was assessed against the petitioner as transferee of the assets of the estate of W. J. Kieferdorf. The petitioner paid the taxes, and later filed a petition for relief from this assessment and for refund of the amount paid.
The petitioner bases her review in this court on the ground that the insurance moneys were ordered paid to her from her husband's estate, in probate, by virtue of section 6601 of the California Probate Code authorizing the Superior Judge, in his discretion, to make such disposition of such moneys, and were not distributed to her under the statute for distribution of personal property of an intestate defendant. Since she is not a distributee under the California statutes for distribution of personal property of an intestate decedent, she claims she is not a transferee within the meaning of Section 311(a) (1), (f)2 of the Revenue Code.
The petitioner cites the statement of this Court in Parrott Estate Co. v. McLaughlin, 9 Cir., 89 F.2d 188, 190, in support of her contention that she is not a distributee under the California law. In that case we defined the word "distributee" as used in Section 703 of the Revenue Act of 1928, 26 U.S.C.A. Int.Rev.Acts, page 467, to mean "one entitled to the personal property of an intestate under the laws of distribution."
We do not agree that the word "distributee" as used in section 311 (a) (1) and (f) of the Internal Revenue Code has the limited meaning of that word held by us in construing its use in section 703 of the Act of 1928.
Treasury Regulations 94 for the Act of 1936, at page 440, defines the terms "transferee" and "distributee" as follows:
"The term `transferee' as used in this section includes an heir, legatee, devisee, distributee of an estate of a deceased person, the shareholder of a dissolved corporation, the assignee or donee of an insolvent person, the successor of a corporation, a party to a reorganization as defined in section 112, and all other classes of distributees." Emphasis supplied Subsequent to this very broad interpretation of the word "distributee" by the regulations of 1936, Congress reenacted section 311 (a) (1) and (f) in identical words in the Revenue Act of 1938 and succeeding Acts. The interpretation of the statute is binding upon us. National Lead Co. v. United States, 252 U.S. 140, 146, 40 S.Ct. 237, 64 L.Ed. 496. We are of the opinion that the order by which the insurance moneys are "set apart to the surviving spouse" is such a transfer and distribution to her as to constitute her a transferee within the Treasury Regulation, supra.
Petitioner also argues that when the court makes its order the order is a mere recognition of a vested right — that is, at all times she had the same vested interest in the insurance moneys that a wife has in the community property, and hence she owns the moneys at her husband's death just as she owns her community interest.
The community interest is owned by the wife without any order setting it aside to her. The insurance moneys are the property of the estate and in the absence of such an order distributing the insurance proceeds to her would continue to be the property of the estate. The administrator collects the insurance after the death of the husband and it never comes into the wife's possession. She can obtain possession and ownership of the insurance proceeds only through a court order.
Furthermore, it is the opinion of this court that in the last analysis the Federal Government can collect the taxes due whether the petitioner is a transferee under the California law or not on the principle that the California law cannot create exemptions from execution or attachment for the collection of Federal taxes.
An early case, United States v. Howell, C. C., 9 F. 674, held that state exemption laws were inapplicable to debts due from a citizen of the United States. The Government has relied on Peyton v. Commissioner of Internal Revenue, 44 B. T. A. 1246, which does not decide the issue in question here, but states:
* * *"
The question of whether a tax lien should be enforceable against the homestead of the taxpayer was before the court in Staley v. Vaughn, Tex.Civ.App., 50 S.W.2d 907, 912. The court said:
To continue reading
Request your trial
-
Jones v. Kemp
...exemptions in his search for property or property rights of a delinquent taxpayer to satisfy his tax liability. Kieferdorf v. Commissioner, 9 Cir., 142 F.2d 723; Staley v. Vaughn, Tex.Civ.App., 50 S.W.2d 907; Shambaugh v. Scofield, 5 Cir., 132 F.2d 345; Cannon v. Nicholas, 10 Cir., 80 F.2d ......
-
Shaw v. United States
...P. 335. 8 The reason for this result is that state exemption laws do not protect property from federal tax liens. Kieferdorf v. Comm'r of Internal Revenue, 9 Cir., 142 F.2d 723. 9 United States v. Brandenburg, S.D.Cal., 106 F.Supp. 82; United States v. Borcia, S.D.Cal., 1 A.F.T.R.2d 319; Un......
-
United States v. Truax, 15356.
...liability. Pearlman v. Commissioner, 3 Cir., 153 F.2d 560, noted with disapproval on this point, 94 U.Pa.L.Rev. 434; Kieferdorf v. Commissioner, 9 Cir., 142 F.2d 723, certiorari denied 323 U.S. 733, 65 S.Ct. 69, 89 L.Ed. 588. Following the language of these cases, the Tax Court and several ......
-
Bigley v. Jones
...exemptions in his search for property or property rights of a delinquent taxpayer to satisfy his tax liability. Kieferdorf v. Commissioner, 9 Cir., 142 F.2d 723; Staley v. Vaughn, Tex.Civ.App., 50 S.W. 2d 907; Shambaugh v. Scofield, 5 Cir., 132 F.2d 345; Cannon v. Nicholas, 10 Cir., 80 F.2d......