Leach v. Commissioner of Internal Revenue, Docket No. 13416
| Citation | 16 BTA 781 |
| Decision Date | 29 May 1929 |
| Docket Number | 18690.,Docket No. 13416 |
| Parties | MARY W. LEACH, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Board of Tax Appeals |
O. W. Taylor, Esq., for the petitioner.
Arthur H. Fast, Esq., for the respondent.
In these two proceedings, consolidated for hearing and decision, petitioner appeals from deficiencies in income taxes of $7,133.45 for the calendar year 1921, and $1,823.09 for the calendar year 1922, determined and advised of by respondent on January 26 and May 21, 1926, respectively. The issue in each proceeding is the same — the disallowance in each of the taxable years by respondent of deductions from gross income by petitioner of payments made by her on account of estate tax assessed against an estate of which she was the sole residuary legatee.
FINDINGS OF FACT.
Petitioner is a resident of Taunton, Mass., and is the sole residuary beneficiary under the will of her father, William E. Walker, who died on November 9, 1918. Upon the death of William E. Walker, Robert M. Leach, petitioner's husband, qualified as executor of his estate and on May 8, 1919, filed an estate-tax return and paid on November 3, 1919, the tax shown thereon of $37,700.68. Thereafter, on November 14, 1919, all of the known debts of the estate having been paid, and petitioner being the sole residuary legatee, although the period for administration had not expired, the executor transferred and paid over to petitioner all of the assets of the estate and took from petitioner a form of distribution bond by which she bound herself to pay to him any amount for which he might be held liable as executor by reason of deficiencies in taxes later determined or other claims which might yet be filed against the estate. No returns of income were filed for the estate and all of such income for the calendar years 1919, 1920, and 1921 was included by petitioner in her individual returns filed for those years.
No deductions were claimed in any year by the executor in respect to estate taxes paid by him or by petitioner on the estate of William E. Walker.
On April 14, 1921, respondent, upon audit of the estate-tax return filed by the executor, determined a deficiency in estate tax of $79,759.16 over and above the $37,700.68 already paid, and on May 23, 1921, the executor filed a claim in abatement as to all of such deficiency. After several conferences with the representatives of respondent in respect to the claim in abatement, it appearing evident that the claim would only be allowed in part and the final deficiency determined would be in excess of $50,000, and desiring to save the accrual of further interest on the deficiency, the executor secured on December 5, 1921, from petitioner her check for $50,000, drawn in favor of the collector of internal revenue and on the same day delivered it to his attorney, with direction that it be transmitted to the collector as payment on the deficiency to be finally determined. This check was finally delivered to and accepted by the collector on February 21, 1922.
On March 18, 1922, respondent redetermined the estate-tax deficiency to be $52,034.98 instead of $79,759.16, and on March 27, 1922, the executor delivered to the collector, petitioner's check for $6,017.40. Of this sum, $2,034.98 represented that portion of the final deficiency unpaid on that date and $3,982.44 represented interest.
Petitioner, in her individual income-tax return for 1921, deducted from gross income $50,000 and in her return for 1922 deducted $6,017.40, both of these deductions being on account of the payments made as above described. Subsequent to March 27, 1922, Robert M. Leach, as executor, brought suit to recover from the Government the $56,017.40 paid under the deficiency determined, and as a result of this litigation received from respondent in July, 1928, the sum of $60,329.32, of which $43,865.30 represented a refund for excess taxes paid on the estate of William E. Walker and $16,463.95 represented the interest on such refund.
Petitioner during the taxable years here involved maintained her accounts upon the basis of cash received and disbursed.
William E. Walker, petitioner's decedent, died on November 9, 1918. Sections 204 of the Revenue Act of 1916 and 406 of the Revenue Act of 1918 provide that estate taxes "shall be due one year after decedent's death" and section 214 of the Revenue Act of 1921 provides:
(a) That in computing net income there shall be allowed as deductions: * * * (3) Taxes paid or accrued within the...
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