Leach v. Nichols

• Decision Date: 14 March 1932
• Docket Number: No. 468,468
• Parties: LEACH v. NICHOLS, Formerly Collector of Internal Revenue
• Court: U.S. Supreme Court

285 U.S. 165

52 S.Ct. 338

76 L.Ed. 681

LEACH

v NICHOLS, Formerly Collector of Internal Revenue.

No. 468.

Argued Feb. 23, 1932.

Decided March 14, 1932.

Mr. O. Walker Taylor, of Boston, Mass., for petitioner.

Mr. Charles B. Rugg, Asst. Atty. Gen., for respondent.

Mr. Justice McREYNOLDS delivered the opinion of the Court.

William E. Walker of Taunton, Mass., died testate November 9, 1918. Petitioner, as executor of the estate, paid the taxes imposed by the state in respect to the property which passed from the decedent. He also paid to respondent the federal estate taxes prescribed by the Revenue Act 1916, 39 Stat. 756, 778, which the Commissiner reckoned without deducting from the gross estate the taxes exacted by the state. The Circuit Court of Appeals denied his right to recover the alleged overpayment-the difference between the sum demanded and what would have been due if the claimed deduction had been allowed. 50 F.(2d) 787. The District Court had held otherwise. 42 F.(2d) 918.

Here the insistence is that to ascertain the net estate under section 203, Revenue Act September 8, 1916, it was necessary to deduct from the gross estate the tax paid to Massachusetts as required by chapter 65 of her General Laws. Also, that in the circumstances the Circuit Court of Appeals should not have decided this question of law.

The record shows that the court below properly considered and ruled upon the point of law. The District Court-where the cause was tried without a jury-had said of the state tax, 'There can be no question that it was legally deductible.' The amended declaration alleges that the Commissioner wrongfully refused to allow the deduction. The answer contains a general denial. The agreed statement of facts points out 'that in arriving at the value of the net estate upon which the said total tax was computed the Commissioner did not make any deduction or allowance for the amount required to pay the Massachusetts inheritance tax, which the estate was required to pay and did pay to the Commonwealth of Massachusetts.' And the defendant asked the court to find as matter of law, 'Plaintiff is not entitled to recover anything of the defendant and his declaration must be dismissed with judgment for the defendant for his costs.' The trial court misconstrued the federal statute. With his petition for appeal from its judgment, the defendant presented, among others, the following assignment of error: The District Court erred in holding: 'It is obvious that the United States had demanded and received a tax levied upon the estate of the plaintiff's testator in excess of the amount lawfully due. It is not the correct tax measured by the net estate in view of decisions of the court.'

The Revenue Act of 1916 (amended as to rates March 3, 1917, 39 Stat. 1000, 1002, and October 3, 1917, 40 Stat. 300, 324) imposed a graduated tax upon the transfer of the net estate, ascertained as directed by section 203, of every person dying thereafter.

'Sec. 203. That for the purpose of the tax the value of the net estate shall be determined—

'(a) In the case of a resident, by deducting from the value of the gross estate—

'(1) Such amounts for funeral expenses, administration expenses, claims against the estate, unpaid mortgages, losses incurred during the settlement of the estate arising from fires, storms, shipwreck, or other casualty, and from theft, when such losses are not compensated for by insurance or otherwise, support during the settlement of the estate of those dependent upon the decedent, and such other charges against the estate, as are allowed by the laws of the jurisdiction, whether within or without the United States, under which the estate is being administered. * * *'

The General Laws of Massachusetts (1921) volume 1, chap. 65, provide:

'Section 1. All property within the jurisdiction of the commonwealth, corporeal or incorporeal, and any interest therein, whether belonging to inhabitants of the commonwealth or not, which shall pass by will, or by laws regulating intestate succession * * * shall be subject to a tax at the precentage rates fixed by the following table: * * *

'Section 6. Administrators, executors and trustees, grantees or donees under conveyances or gifts made during the life of the grantor or donor, and persons to whom beneficial interests shall accrue by...