Nichols v. Leach
| Decision Date | 10 June 1931 |
| Docket Number | No. 2554.,2554. |
| Citation | 50 F.2d 787 |
| Parties | NICHOLS v. LEACH. |
| Court | U.S. Court of Appeals — First Circuit |
William T. Sabine, Jr., Sp. Atty., Bureau of Internal Revenue, of Washington, D. C. (Frederick H. Tarr, U. S. Atty., and J. Duke Smith, Sp. Asst. to the U. S. Atty., both of Boston, Mass., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, of Washington, D. C., on the brief), for appellant.
O. Walker Taylor, of Boston, Mass. (Everett S. White and White & White, all of Taunton, Mass., on the brief), for appellee.
Before BINGHAM, ANDERSON, and WILSON, Circuit Judges.
This is an appeal from the District Court in an action originally brought by the executor to recover an overpayment of a federal estate tax on the estate of William E. Walker, late of Taunton, Mass., who died in November, 1918.
In May, 1919, the executor filed a return and paid an estate tax of $37,700.68 assessed upon his return. He later received a notice from the Commissioner of Internal Revenue's office that an additional tax would be claimed, and in March, 1922, the Commissioner made a final decision that the total tax due from the estate was $89,735.64; whereupon the executor, having previously paid $50,000 to stop the running of interest, paid the additional amount claimed by the government, together with the interest due.
The difference between the executor and the Commissioner as to the amount of the tax due arose in the first instance over a large amount of property given by the testator within two years of his death to members of his family. The value of the gifts totalled over $400,000.
A claim for refund was filed by the executor in June, 1925, to the amount of $49,634.70, and interest to the amount of $10,423.39, setting forth as grounds for the claim (1) that none of the gifts were made by the decedent in contemplation of death, and (2) that a deduction should have been made of the amount of the federal estate tax.
At a conference in Washington between the Commissioner and the executor and his attorneys on November 16, 1925, at which they were advised that, by the executor filing what is denominated an Estate Tax Deposition in November, 1921, he had barred the estate from obtaining any refund on the grounds claimed, and the case was thereby closed; whereupon, on December 1, 1925, the executor brought this action, and on March 16, 1926, filed the original declaration in the suit which was based on the grounds set forth in his claim filed in June, 1925. The case was heard on this declaration in the District Court in November, 1926, and, on the ground that the Estate Tax Deposition barred the plaintiff from recovery, judgment was ordered for the defendant.
On appeal this judgment was reversed in December, 1927 23 F.(2d) 275, and the case sent back for further hearing.
In March, 1928, following the decision of this court reversing the judgment of the District Court, counsel for the executor requested the Commissioner to reopen the case and sought an interview with him in Washington, at which interview the question of the refund was discussed with other members of his staff, and the Commissioner's attention was for the first time called to the fact that no allowance had been made for the payment of the Massachusetts inheritance taxes. Counsel, however, were informed that under a ruling by the Treasury Department, No. 2524, it was not deductible.
In July, 1928, the Commissioner, having reopened the case, ordered that a refund be made to the amount of $43,865.37, on the ground that the gifts were not in contemplation of death, but no deduction was made for the federal estate tax, which was in accordance with the holding of this court in Old Colony Trust Co. v. Malley, 19 F.(2d) 346.
In September, 1928, the plaintiff presented an amendment to his declaration in the original suit, which was allowed in the District Court, setting forth as further grounds of recovery that, since the original assessment, additional compensation had been paid to the executor and to his attorneys in the settlement of the estate; and the executor had also paid other miscellaneous administration expenses in addition to those deducted by the Commissioner in the original assessment; and that, in arriving at the net estate upon which the estate tax was computed, the Commissioner has refused to deduct the amount paid by the executor to the state of Massachusetts as inheritance taxes to the amount of $34,158.59.
To the amended declaration the appellant filed an answer, and set up as a defense that in the claim for a refund filed in June, 1925, the only ground set forth was that certain gifts were improperly included in the gross estate as being made in contemplation of death, and that no deduction was allowable for a federal estate tax; and that the original claim filed in June, 1925, did not furnish a sufficient ground for the recovery of any additional amounts due to any sums paid to the executor, to attorneys, and for administration expenses after the four-year limitation period for filing a claim for a refund, or for any amount, because of a failure to deduct the Massachusetts inheritance taxes; and that as to the above items the claim for a refund filed in June, 1925, did not conform to section 3228, R. S., as amended by the Rev. Act of 1924, § 1012 (26 USCA § 157), and to Treasury Regulation 68, art. 99.
In May, 1929, three years after the time for filing a claim for a refund had expired under the statute, and more than three years after this action was brought, and seven months after the amendment to his declaration was allowed, in which it was not set forth that a claim for a refund on the new grounds had been filed, the executor filed with the collector what he described as an "Amendment to Claim for Refund of Taxes illegally collected," which set up a claim for overassessment of $1,000 in the original assessment, and also for a refund based on the last four grounds set forth in his amended declaration.
In July, 1929, the Commissioner issued his certificate for a refund of $1,000, which overassessment was due to mathematical errors in computing the refund allowed in July, 1928.
In February, 1930, the case came on for trial before the District Judge; a jury being waived in writing. Before the trial and at its close, the defendant moved to dismiss the action for lack of jurisdiction on the ground that the action was prematurely brought, which was refused.
The defendant also filed a motion at the opening of the second trial that the action be dismissed on the ground that the declaration failed to set up that any claim for refund on the new grounds set forth in the amended declaration had been filed with the Commissioner prior to the commencement of the action or prior to the date of the amendment to the declaration in September, 1928, and at the close of the evidence renewed the motion on the ground that the evidence showed that no claim for a refund on the new grounds was presented within four years of the payment of the tax, or prior to the bringing of the action or the date of the amendment.
After the hearing, which was based in part on an agreed statement of facts, and in part on evidence oral and documentary, the District Judge held that jurisdiction of the District Court was established, since the evidence disclosed a decision by the Commissioner denying the claim for a refund within six months of the filing of the claim and prior to the beginning of the action, though the Commissioner's formal certificate of denial was not issued until January, 1926, after the action was begun on December 3, 1925.
The only real issues in the case are: (1) Whether after four years from the date of a payment of a tax a new claim for a refund based on new grounds in the guise of an amendment to the original claim satisfies the statute; (2) whether the taxpayer can recover on a declaration which does not allege that a claim for a refund on the grounds relied upon in the declaration has been filed with the Commissioner before action was brought, or the amendment to the declaration setting up the new grounds was allowed; (3) whether a verbal suggestion at a conference with the Commissioner that there were other grounds for a refund not presented in the original claim is sufficient, because the Commissioner is required to determine the estate tax; and (4) whether, if the statute requiring the filing of a claim stating the facts on which the refund is claimed has been complied with, the Massachusetts inheritance tax should be deducted from the gross estate in arriving at the estate tax.
That amendments to a claim may be allowed within the four-year period, and that a Commissioner may waive the provision of the regulations as to the form of a claim, is settled; but whether the four-year period is a period of limitation as to any new grounds not included in the original claim, which cannot be waived, is not clear. United States v. Felt & Tarrant Mfg. Co., 51 S. Ct. 376, 75 L. Ed. ___, decided April 13, 1931; United States v. Swift & Co., 282 U. S. 468, 51 S. Ct. 202, 75 L. Ed. 464; Finn v. United States, 123 U. S. 227, 8 S. Ct. 82, 31 L. Ed. 128.
The cases in which the Supreme Court has considered this statute are Rock Island, etc., R. R. Co. v. United States, 254 U. S. 141, 41 S. Ct. 55, 65 L. Ed. 188; Maryland Casualty Co. v. United States, 251 U. S. 342, 353, 354, 40 S. Ct. 155, 64 L. Ed. 297; Kings County Savings Inst. v. Blair, 116 U. S. 200, 6 S. Ct. 353, 29 L. Ed. 657; Nichols v. United States, 7 Wall. 122, 130, 19 L. Ed. 125; Tucker v. Alexander, 275 U. S. 228, 48 S. Ct. 45, 72 L. Ed. 253; U. S. v. Felt & Tarrant Mfg. Co., supra; and United States v. Swift & Co., supra.
However, it is unnecessary to determine whether a claim for refund can be amended by inserting entirely new grounds after the four-year period of limitation has expired, as we think the District Court erred in holding that the Massachusetts...
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