Mississippi Valley Tr. Co. v. Commissioner of Int. Rev., 12759.

• Citation: 147 F.2d 186
• Decision Date: 06 February 1945
• Docket Number: No. 12759.,12759.
• Parties: MISSISSIPPI VALLEY TRUST CO. et al. v. COMMISSIONER OF INTERNAL REVENUE.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

147 F.2d 186 (1945)

MISSISSIPPI VALLEY TRUST CO. et al. v. COMMISSIONER OF INTERNAL REVENUE.

No. 12759.

Circuit Court of Appeals, Eighth Circuit.

February 6, 1945.

Abraham Lowenhaupt, of St. Louis, Mo. (Stanley S. Waite, Norman Begeman, and Lowenhaupt, Waite, Chasnoff & Stolar, all of St. Louis, Mo., on the brief), for petitioners.

Helen Goodner, Sp. Asst. to the Atty. Gen. (Samuel O. Clark, Jr., Asst. Atty. Gen., and Sewall Key and Helen R. Carloss, Sp. Assts. to the Atty. Gen., on the brief), for respondent.

G. A. Youngquist, F. W. Thomas, and Fowler, Youngquist, Furber, Taney & Johnson, all of Minneapolis, Minn., amici curiae.

Before GARDNER, WOODROUGH, and JOHNSEN, Circuit Judges.

JOHNSEN, Circuit Judge.

Is a donee liable (to the extent of the value of the gift) for a deficiency in the gift taxes of his donor, where the donor is solvent but no steps to determine a deficiency against him have ever been taken, and the right to make a deficiency assessment against him has become barred by the statute of limitations?

Moore v. Commissioner, 2 Cir., 146 F.2d 824, Baur v. Commissioner, 3 Cir., 145 F.2d 338, and Winton v. Reynolds, D.C. Minn., 57 F.Supp. 565, all answer the question in the affirmative, as does the decision of the Tax Court in the present case, which is here for review. These decisions hold that such a conclusion is compelled by the clear and direct language of the tax statutes. See also Fletcher Trust Co. v. Commissioner of Internal Revenue, 7 Cir., 141 F.2d 36, certiorari denied 65 S.Ct. 36.

Under sections 1000 and 1001 of the Internal Revenue Code,¹ 26 U.S.C.A. Int. Rev.Code, §§ 1000, 1001, a tax is imposed upon transfers of property by gift, subject to the exclusions and deductions in sections 1003 and 1004. Under section 1006, a donor must file a return of all gifts not subject to exclusion, "on or before the 15th day of March following the close of the calendar year." Under section 1008, "The tax imposed by this chapter shall be paid by the donor on or before the 15th day of March following the close of the calendar year." Under section 1009, "The tax * * * shall be a lien upon all gifts made during the calendar year, for ten years from the time the gifts are made", and "If the tax is not paid when due, the donee of any gift shall be personally liable for such tax to the extent of the value of such gift." Under section 1011, in its application to the present situation, the term deficiency means "the amount by which the tax imposed by this chapter exceeds the amount shown as the tax by the donor upon his return." Under section 1012, "No assessment of a deficiency in respect of the tax imposed by this chapter * * * shall be made * * * until * * * notice of such deficiency has been mailed to the donor * * *." Under section 1016, "the amount of taxes imposed by this chapter shall be assessed within three years after the return was filed", except under certain conditions not here material. Under section 1021, "Interest upon the amount determined as a deficiency * * * shall be collected as a part of the tax, at the rate of 6 per centum per annum from the due date of the tax to the date the deficiency is assessed." Under section 1025, "The liability, at law or in equity, of a transferee of property of a donor, in respect of the tax" — the term "transferee" being expressly declared in the section to include a "donee" — shall be "assessed * * * in the same manner * * * as in the case of a deficiency", but assessment of such liability against a transferee may be made "within one year after the expiration of the period of limitation for assessment against the donor."

The argument is made here that the donor's liability for the tax is primary and that of the donee secondary, and that no liability therefore should exist against a donee for any part of a tax which a solvent donor has not admitted in his return, until there has been a deficiency determination against the donor, in the manner and within the time provided by the statute. But the statute itself imposes the tax, fixes its amount, and prescribes the date when payment thereof is legally due. If the full amount of the tax thus imposed is not paid by "the 15th day of March following the close of the calendar year", the tax has not been paid "when due", and the unpaid portion bears interest from that date. And, "If the tax is not paid when due, the donee of any gift shall be personally liable for such tax to the extent of the value of such gift."

Only in the sense that the tax is owing in the first instance from the donor, and that the liability of the donee does not arise unless the donor fails to make payment of the tax by the 15th day of March following the close of the calendar year, and that such liability on the part of the donee is limited to the extent of the value of the gift, can the donee's liability be said to be secondary or qualified. If the donor fails to pay the automatically imposed tax when due, in accordance with the statute, no matter what the reason for his failure, there is an immediate and direct liability on the donee for the legally-owed tax, to the extent of the value of the gift.

Nowhere in its language does the statute make the liability of the donee contingent or dependent upon a formal determination of deficiency against the donor or upon any other steps to collect from him. Compare ...