Leach v. Nichols

• Decision Date: 27 December 1927
• Docket Number: No. 2144.,2144.
• Parties: LEACH v. NICHOLS, Collector of Internal Revenue.
• Court: U.S. Court of Appeals — First Circuit

23 F.2d 275 (1927)

LEACH v. NICHOLS, Collector of Internal Revenue.

No. 2144.

Circuit Court of Appeals, First Circuit.

December 27, 1927.

O. W. Taylor, of Boston, Mass. (White & White, of Taunton, Mass., on the brief), for plaintiff in error.

J. M. Leinenkugel, Sp. Asst. U. S. Atty., of Boston, Mass. (Frederick H. Tarr, U. S. Atty., of Gloucester, Mass., on the brief), for defendant in error.

Before BINGHAM, JOHNSON, and ANDERSON, Circuit Judges.

JOHNSON, Circuit Judge.

This is an action brought by the plaintiff in error, as executor of the estate of William E. Walker, deceased, against Malcolm E. Nichols, as the Collector of Internal Revenue, to recover the sum of $49,634.73 assessed and collected as estate taxes due upon said estate under provisions of the Revenue Act of 1916, as amended and re-enacted October 3, 1917 (Comp. St. §§ 6336½bbb, 6336½bbbb). The case is here upon a writ of error from a judgment of the District Court of Massachusetts.

The sole question presented is whether the court was right in holding that the plaintiff, as executor of said estate, had entered into a valid and binding compromise agreement, whereby he was estopped from maintaining this action.

William E. Walker, late of Taunton, Mass., died November 9, 1918, testate. The plaintiff was appointed executor December 6, 1918, and on or about May 8, 1919, filed the return required by law and paid an estate tax of $37,700.68 assessed according to said return. Later he received a notice from the Commissioner of Internal Revenue that an additional tax would be claimed and assessed, and paid $50,000 before receipt of notice of the final determination of the tax. On March 18, 1922, the Commissioner made a final decision that the total tax due from said estate was $89,735.64. The executor then paid $2,034.96, being the balance of the tax due according to the assessment made by the government, and interest amounting to $3,988.44.

The difference between the amount determined by the government as the gross estate of which the testator died seized and possessed and that returned by the executor was occasioned almost entirely by the claim that transfers made by William E. Walker on or about November 13, 1917, and prior thereto amounting to $404,450.74, were gifts made in contemplation of death, of which the fact that they were made within two years of his death was prima facie evidence under the provisions of said Revenue Acts.

The errors assigned are the direction of a verdict for the defendant, and the admission and exclusion of evidence. Under the conclusion which we have reached, however, it is only necessary to consider the first, which raises the question of whether the alleged agreement entered into by the executor constituted a bar to the maintenance of this action.

On November 23, 1921, the plaintiff filed with the internal revenue agent at Boston what is denominated an "estate tax deposition," in the first paragraph of which this statement appears:

"1. That as the result of a hearing held in the office of the internal revenue agent in charge on the 23d day of November, 1921, he, as executor of the above-named estate, now agrees to and accepts as taxable property in the estate and at the values recommended all the certain contested items in the estate as indicated below, provided: (1) That no portion of the 1,000 shares in the Magee Furnace Company, given by the decedent to Robert M. Leach on November 30, 1917, be included in the gross estate; and (2) that all of the shares of stock of the Weir Stove Company shown in this estate be valued at $1,000 per share, which in his opinion is the full and fair value of said stock as of the date of the decedent's death."

This is followed by a statement of the taxable property of the estate and its value.

On November 30, 1917, the decedent had transferred to Robert M. Leach 1,000 shares of the Magee Furnace Company, and also 100 shares of the Weir Stove Company. In December, 1917, and January, 1918, he had transferred to Mary W. Leach, his daughter and the wife of Robert M. Leach, 285 shares of the Metropolitan Furniture Company, 49 shares of the Atherton Furniture Company, and a note of Le Baron Atherton for the sum of $12,000, with interest from January 4; and on January 21, 1918, he had transferred to his wife, Jennie E. Walker, 200 shares of the Weir Stove Company. All of the property covered by these transfers was claimed by the government to constitute a part of the gross estate of the decedent.

In the alleged agreement signed by Robert M. Leach as executor he agreed that if the Magee Furnace Company stock were not held to be a part of the estate and to have been legally transferred, and, if the Weir Stove Company stock should be valued at $1,000 per share, the other property transferred by the decedent as above stated should be held to be a part of the estate of the decedent and subject to the estate tax, and also agreed that certain increases in the values...