Rosenman v. United States, 45197.

• Decision Date: 07 February 1944
• Docket Number: No. 45197.,45197.
• Citation: 53 F. Supp. 722
• Parties: ROSENMAN et al. v. UNITED STATES.
• Court: U.S. Claims Court

53 F. Supp. 722

ROSENMAN et al. v. UNITED STATES.

No. 45197.

Court of Claims.

February 7, 1944.

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Carter T. Louthan, of New York City (Mitchell, Taylor, Capron & Marsh, of New York City, on the brief), for plaintiffs.

J. W. Hussey, of Washington, D. C., and Samuel O. Clark, Jr., Asst. Atty. Gen. (Robert N. Anderson and Fred K. Dyar, both of Washington, D. C., on the brief), for defendant.

Before WHALEY, Chief Justice, and WHITAKER, MADDEN, LITTLETON, and JONES, Judges.

WHITAKER, Judge.

Plaintiffs, as the executors of the last will and testament of Louis Rosenman, sue to recover estate taxes alleged to have been erroneously exacted. The claim is based upon their right to deduct from the gross estate sums for executors' commissions, attorneys' fees, miscellaneous expenses, and an item of $25,000 paid to Martin Rosenman in settlement of a claim he presented against the estate.

The items of executors' commissions, attorneys' fees, and miscellaneous expenses are not in dispute, but defendant denies that the estate is entitled to the deduction of the $25,000 paid to Martin Rosenman in settlement of his claim. The defendant also says that the plaintiffs are barred from collecting all of the amount claimed, except $10,497.34, because the balance is barred by the statute of limitations on the filing of claims for refund.

The latter defense we will discuss first.

Louis Rosenman died on December 25, 1933. The executors were due to file an estate tax return on December 25, 1934, but as this date approached plaintiffs saw that it would be impossible by that time to file an accurate return; they, accordingly, on December 11, 1934, requested an extension of time. The Commissioner granted an extension until February 25, 1935, but in his letter, dated December 15, 1934, granting it he stated: "The extension of time for filing the return does not operate to extend the time for payment of the tax. It is suggested that the tax be estimated and paid to avoid delinquency in payment, the consequent liability for penalty and the accumulation of interest at the rate of one per centum per month from the due date until paid."

In response thereto the plaintiffs on December 24, 1934, forwarded the Collector a check for $120,000 "as a payment on account of the Federal Estate tax." On February 25, 1935, plaintiffs filed a return showing a tax of $80,224.24. The Collector applied so much of the $120,000 toward the payment of the tax shown on the return, and retained the balance in the suspense account in which the remittance had been originally deposited, pending an audit of the return. After an audit, the Commissioner, in April, 1938, assessed an additional tax of $48,534.84. The balance remaining in the suspense account, $39,775.76, was applied toward the satisfaction of this deficiency, and demand was made on the plaintiffs for the payment of the balance, together with interest. The plaintiffs paid this amount, $10,497.34, on April 22, 1938.

When plaintiffs filed the return showing the tax due of $80,224.24, they did not immediately demand refund of the balance they had remitted on account of the tax, to wit, $39,775.76; but, no audit of its return having been made by March 26, 1938, plaintiffs on that date did file a claim for refund of the balance. This was about three years and three months after the remittance. Then, after payment of the additional tax assessed, plaintiffs filed another claim for refund on May 20, 1940, on the ground that the Commissioner had not allowed deductions of $91,685.45 for executors' commissions, $31,000 for attorneys' fees, $25,483.69 for miscellaneous administration expenses, and $25,000 which was paid in settlement of Martin Rosenman's claim.

Plaintiffs' right to recover depends on whether or not these two claims were filed within the statutory period of three years.¹

Plaintiffs say that the remittance of $120,000 was merely a deposit and was not a payment of tax, and that the date the statute began to run was the date the deposit was applied in settlement of the tax found to be due. This position is untenable. The $120,000 was paid in response to the abovequoted statement in the Commissioner's letter granting the extension of time for filing the return, in which he stated that the extension of time for filing the return did not extend the time for payment of the tax, and in which he suggested that the tax be estimated and paid to avoid delinquency in payment and the consequent liability for penalty and interest. In the letter transmitting the $120,000 the executors said that it was being transmitted "as a payment on account of the Federal Estate tax."

If it had not been a payment, but was merely a deposit, it would not have prevented the accrual of the penalty for nonpayment when due, nor stopped the running of interest. It was a payment of the amount of tax estimated to be due.

The fact that the Collector put the money in a suspense account to the credit of the executors seems to us immaterial. At the time the Collector received the money there was no charge on his books against plaintiffs against which the remittance might be credited; hence, he merely put it in a suspense account until the amount of plaintiffs' liability could be determined.

The $120,000 was a payment of estate tax, and the statute, therefore, began to run on the day it was paid. Atlantic Oil Producing Co. v. United States, 35 F.Supp. 766, 92 Ct.Cl. 441.

The first claim for refund was not filed until more than three years thereafter. Plaintiffs, therefore, are barred from the recovery of...