Moore v. Commissioner of Internal Revenue

• Decision Date: 18 January 1945
• Docket Number: No. 3.,3.
• Citation: 146 F.2d 824
• Parties: MOORE v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Second Circuit

146 F.2d 824 (1945)

MOORE v. COMMISSIONER OF INTERNAL REVENUE.

No. 3.

Circuit Court of Appeals, Second Circuit.

January 18, 1945.

Courtland Kelsey, of New York City (Whitney North Seymour and Richard D. Duncan, both of New York City, of counsel), for petitioner.

Henry Maynard Kidder, of New York City (Gove B. Harrington, of New York City, of counsel), amicus curiae.

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

Before SWAN, AUGUSTUS N. HAND, and FRANK, Circuit Judges.

AUGUSTUS N. HAND, Circuit Judge.

This is an appeal from the Tax Court of the United States which imposed a tax of $104,864.73 upon Evelyn N. Moore, a transferee of her husband Edward S. Moore, for a deficiency to that amount in gift taxes due from him in the year 1935.

During the year 1935 Edward S. Moore made taxable gifts of securities to the petitioner Evelyn Moore of the value of $410,500. On March 11, 1936 he filed a gift tax return with the Collector and paid the amount of the tax therein shown to be due. Although the donor has always been financially able to satisfy any deficiency in gift taxes for 1935 the Commissioner never made an assessment against him with respect to his liability for gift taxes for that year but assessed the taxes against his transferee, in spite of the fact that the three year statutory period for determining any deficiency against him had expired on March 11, 1939. On February 20, 1940 the Commissioner sent a notice to the petitioner of her alleged liability as a transferee of the property of her husband. In determining her tax deficiency he made no change in the gifts of the donor in 1935, but found the 1935 gifts subject to higher rates of tax because there were increases in gifts over those he had reported for prior years, and assessed the deficiency of $104,864.73 accordingly. This assessment by the Commissioner was sustained by the Tax Court. We think that its decision was required by the terms of the Revenue Act and should be affirmed.

The petition for review by the taxpayer raises three questions:

1. Whether the assessment against her is barred by the statute of limitation.

2. Whether she ever became personally liable for any gift tax.

3. Whether if any gift tax was due the amount of her tax should be applied to reduce the value of the gift to her.

Section 510 of the Revenue Act of 1932, 26 U.S.C.A. Int.Rev.Code, § 1009, provided as follows:

"Sec. 510. Lien for tax.

"The tax imposed by this title shall be a lien upon all gifts made during the calendar year, for ten years from the time the gifts are made. 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. * * *"

Section 517, 26 U.S.C.A. Int.Rev.Code, § 1016, fixes the period of limitation upon assessment and collection in 517(a) thus:

"(a) General rule. Except as provided in sub-section (b), the amount of taxes imposed by this title shall be assessed within three years after the return was filed, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of three years after the return was filed."

Section 526, 26 U.S.C.A. Int.Rev.Code, § 1025, contains the following provisions as to "Transferred Assets":

"(a) Method of Collection. The amounts of the following liabilities shall, except as hereinafter in this section provided, be assessed, collected, and paid in the same manner and subject to the same provisions and limitations as in the case of a deficiency in the tax imposed by this title * * *

"(1) Transferees. The liability, at law or in equity, of a transferee of property of a donor, in respect of the tax (including interest, additional amounts, and additions to the tax provided by law) imposed by this title.

* * * * *

"Any such liability may be either as to the amount of tax shown on the return or as to any deficiency in tax.

"(b) Period of Limitation. The period of limitation for assessment of any such liability of a transferee or fiduciary shall be as follows:

"(1) Within one year after the expiration of the period of limitation for assessment against the donor.

* * * * *

"(f) Definition of `Transferee.' As used in this section, the term `transferee' includes donee, heir, legatee, devisee, and distributee. * * *"

In view of the terms of the Revenue Act of 1932 it seems impossible for the petitioner to escape gift tax liability. We start out with the definition in Section 526(f) defining "transferee" as including "donee," and the provision of Section 510 that "the donee of any gift shall be personally liable for such tax to the extent of the value of such gift." There is also the provision of Section 526(a) (1) for assessment and collection of: "The liability, at law or in equity, of a transferee of property of a donor, in respect of the tax * * *." Clearer language could hardly be used to impose a tax liability upon the transferee.

In respect to the statute of limitations, Section 517(a) governing any assessment against the donor and providing that it should be "within three years after the return is filed" is carefully denominated the "General Rule," while subdivision (b) (1) of Section 526 specifies a different period for assessing the tax liability of a transferee, namely, "Within one year...