Levin v. Commissioner of Corporations and Taxation

• Decision Date: 07 April 1965
• Citation: 349 Mass. 20,206 N.E.2d 69
• Parties: Haroid LEVIN et al., Executors, v. COMMISSIONER OF CORPORATIONS AND TAXATION.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 69

206 N.E.2d 69

349 Mass. 20

Haroid LEVIN et al., Executors, v.COMMISSIONER OF CORPORATIONS AND TAXATION.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued March 1, 1965.

Decided April 7, 1965.

David Burstein, Boston, for petitioners.

Edward W. Brooke, Atty. Gen., Herbert E. Tucker, Jr., Asst. Atty. Gen., and William A. Shue, Dorchester, for the respondent.

Before WILKINS, C. J., and SPALDING, CUTTER, SPIEGEL and REARDON, JJ.

CUTTER, Justice.

The executors of the will of Israel M. Levin(the testator) seek declaratory relief against the commissioner.Upon a case stated, the executors appeal from a Probate Court decree declaring that the commissioner's claim against the testator's estate for an income tax assessed upon income received by the testator in 1957 is not barred by G.L. c. 197, § 9(as amended through St. 1954, c. 552, § 1).

The testator filed a Massachusetts income tax return reporting income received in 1957.This return was due on April 15, 1958(seeG.L. c. 62, § 24, as amended throught St.1954, c. 70, § 1).He died on August 14, 1960.The executors gave bond on October 13, 1960.Following a notice (received by one of the executors) of a proposed assessment, given on March 27, 1961(seeG.L. c. 62, § 37, as amended through St.1956, c. 310, § 2,)¹ the commissioner on April 14, 1961, assessed an additional tax of $6,206.37 (including interest) on 'Israel M. Levin(dec.)'in care of one of the executors with respect to income received by the testator in 1957.In behalf of the executors on March 14, 1962, an application for abatement was filed with the State tax commission.This application is still pending.The commissioner has not commenced any action against the executors in respect of the additional tax.

Declaratory relief is sought only to determine whether, in assessing the additional tax under G.L. c. 62, §§ 9, 25, and 37, as amended, the commissioner 'is barred from any recovery of such taxes by' the so called short statute of limitations.SeeG.L. c. 197, § 9, as amended, which reads, in part, 'Except as provided in this chapter, an executor * * * shall not be held to answer to an action by a creditor of the deceased which is not commenced within one year from the time of his giving bond for the performance of his trust * * *.'

General Laws c. 62, § 9(as amended bySt.1957, c. 644, § 2), reads, in part, 'Estates of deceased persons, if assessed within the time limited by section thirty-seven, shall be subject to the taxes imposed by this chapter upon all income received by such persons during their lifetime * * *.'(emphasis supplied).²Section 37 afforded the commissioner as to 1957 income (fn. 1) three years from the date (April 15, 1958) when the testator's return of 1957 income was due, in which to assess additional taxes upon that income.³Section 41(as amended through St.1933, c. 350, § 4; see later amendment by St.1964, c. 460, § 2) gives the commissioner 'for the collection of taxes assessed under * * * [c. 62] all the remedies provided by [c. 60] for the collection of taxes on personal estate by [town] collectors of taxes' with an exception not here pertinent.Section 41 also provides that '[a]ny action * * * brought to recover any such [income] tax shall be brought in the name of the commonwealth.'⁴In connection with c. 62, § 41, there must be considered G.L. c. 60, §§ 35 and 36, dealing with the recovery of local property taxes.⁵Those sections are applicable also to the collection of income taxes (which, of course, are also property taxes;seeState Tax Commn. v. Wheatland, 343 Mass. 650, 652-653, 180 N.E.2d 340).

In Stow v. Commissioner of Corps. & Taxn., 336 Mass. 337, 341-342, 145 N.E.2d 720, this court, upon an inadequate record and because the issue had not been fully argued, refrained from deciding the question now presented.We said (p. 341, 145 N.E.2d p. 722) that 'there is a substantial question * * * whether the provisions of the short statute of limitations * * * c. 197, § 9, and the related §§ 10-18,28-31(as amended), do not control the present case rather than the limitation provisions of * * * c. 62, in view of the very strong public policy in favor of 'limiting the time within which creditors of an estate may bring actions to enforce their claims' which will, of course, tend 'to expedite the settlement of estates.'' We pointed out (p. 342, 145 N.E.2d 720) that determination of the question might involve consideration of various provisions of G.L. c. 62 and c. 197, and especially of c. 60, § 36(fn. 5).The Stow case, however, does establish that declaratory relief in the Probate Court is available to executors as an appropriate method of bringing about final resolution of State income tax matters.⁶

Several cases discuss the relation of the short statute of limitations to the collection of local property taxes affecting a decedent's estate.These cases distinguish between (a) texes which became a liability of the decedent before his death (seeRich v. Tuckerman, 121 Mass. 222;Bartlett v. Tufts, 241 Mass. 96, 134 N.E. 630) and (b) taxes assessed upon the decedent's executor or administrator by virtue of ownership of the property on a date after the decedent's death.SeeDallinger v. Davis, 149 Mass. 62, 20 N.E. 696;Milford v. Casamassa, 339 Mass. 702, 704-707, 162 N.E.2d 284.Some of these cases were referred to in City of Boston v. Gordon, 342 Mass. 586, 590, 175 N.E.2d 377.See alsoNewhall, Settlement of Estates(4th ed.) §§ 175-176, 179-196, esp.§ 190; Nichols, Taxation in Massachusetts (3d ed.) 383-384.

These cases in effect hold that taxes assessed upon property, based upon its being owned by the decedent on a date prior to his death, are barred by the short statute of limitations (c. 197, § 9).They also hold that the short statute does not bar an action to recover taxes which have been assessed upon the property of an estate because it was owned by the estate's representative on a date after the decedent's death.

Bartlett v. Tufts, 241 Mass. 96, 134 N.E. 630, heard on a case stated, dealt briefly with what is now G.L. c. 60, § 36(then St.1909, c. 490, Part II, § 34).In that case(seep. 97, 134 N.E. 630)the defendant, sued individually, was an executrix whose testator had died on May 15, 1916.The testator had made no return of his personal property on which a local property tax should have been assessed on April 1, 1916.A poll tax and a real estate tax were seasonably assessed to him and paid by the executrix.When the inventory of the estate was filed, the assessors (acting under what is now G.L. c. 59, § 75, as amended through St.1946, c. 339) made on December 20, 1916, a so called 'omitted assessment' on certain personal property subject to tax.On April 4, 1919, the collector of taxes brought an action against the executrix 'individually' to collect the tax due under the 'omitted' assessment, and obtained a judgment in the Superior Court for $477.90.It appeared (p. 99, 134 N.E. p. 632) that the executrix had received over $16,000 as part of the estate.⁷Concerning this amount, the opinion, in an obvious reference to what is now c. 60, § 36(fn. 5), said, 'In the absence of any statement that this [amount] had been expended before the demand, she was in receipt of money applicable to, and sufficient for the payment of the tax.'Nevertheless, this court(pp. 99-100, 134 N.E. p. 63) held that the short statute of limitations (now c. 197, § 9) barred the action against the executrix because it was not 'begun within one year after the bond had been given.'The court regarded the town collector of taxes as having only 'the remedial rights of a creditor' and treated the limitation of the short statute as being 'as applicable to him as to other creditors of [that] testator.'The judgment for the tax collector was reversed and judgment for the executrix was ordered.The court thus in effect construed c. 60, § 36, as making the executrix personally liable in an action at law to pay a property tax for which the decedent himself had been liable only if an action to recover the tax had been brought by the collector prior to expiration of the period set by the short statute.

Reliance upon the analogy of the property tax cases just cited would lead to the conclusion that the short statute(c. 197, § 9) would bar an action to recover income taxes for which a decedent had become liable prior to his death, but would not bar an action to recover taxes upon income received by a decedent's executor or administrator after the decedent's death.In determining, however, whether this analogy is applicable to the collection of a decedent's income taxes, attention must be given to the effect of the portions of G.L. c. 62, already mentioned, especially c. 62, § 9(already quoted in part), which subjects the estate of a decedent, 'if assessed within the' three years provided by § 37(fn. 3), to liability for taxes upon income received by the decedent during his lefe, § 25(fn. 2), and § 37.

The several relevant provisions of c. 62 do not define at all clearly how additional assessments on income received by a decedent during his life shall be made after his death and collected.Sections 9and25(fn. 2 and accompanying text) subject decedent's estates to the taxes imposed by c. 62.Section 25 specifies not only that an executor is liable for the taxes payable on taxable income received by him but also that the estate is to be subject to the taxes imposed by c. 62.The section explicitly requires an executor to 'file a return * * * if his decedent received * * * income not returned by the decedent as to which a tax under this chapter may still be assessed within the time limited by'§ 37.Under § 37, with respect to unreported income, the commissioner may assess an additional tax after notice to the person to be assessed.Under §§ 9and25, the estate apparently is to be assessed for such an additional tax.This is...