Siegel v. United States, 42616.

• Decision Date: 05 April 1937
• Docket Number: No. 42616.,42616.
• Citation: 18 F. Supp. 771,84 Ct. Cl. 551
• Parties: SIEGEL et al. v. UNITED STATES.
• Court: U.S. Claims Court

18 F. Supp. 771

84 Ct. Cl. 551

SIEGEL et al. v. UNITED STATES.

No. 42616.

Court of Claims.

April 5, 1937.

Harry S. Hall, of New York City, for plaintiffs.

Elizabeth B. Davis, of Washington, D. C., and Robert H. Jackson, Asst. Atty. Gen., for the United States.

Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.

LITTLETON, Judge.

The principal question in this case is whether this suit was barred at the time it was instituted. We are of opinion that it was not. Section 403 (b) (2) and (3) of the Revenue Act of 1921 provided, so far as pertinent here, as follows:

"In the case of a nonresident, by deducting from the value of that part of his gross estate which at the time of his death is situated in the United States * * * an amount equal to the value of any property forming a part of the gross estate situated in the United States of any person who died within five years prior to the death of the decedent where such property can be identified as having been received by the decedent from such prior decedent by gift, bequest, devise, or inheritance, or which can be identified as having been acquired in exchange for property so received: Provided, That this deduction shall be allowed only when an estate tax under this or any prior Act of Congress was paid by or on behalf of the estate of such prior decedent, and only in the amount of the value placed by the Commissioner on such property in determining the value of the gross estate of such prior decedent, and only to the extent that the value of such property is included in that part of the decedent's gross estate which at the time of his death is situated in the United States and not deducted under paragraphs (1) or (3) of subdivision (b) of this section. This deduction shall be made in case of the estates of all decedents who have died since September 8, 1916. * * *

"In the case of any estate in respect to which the tax has been paid, if necessary to allow the benefit of the deduction under paragraphs (2) and (3) of subdivision (a) or (b) the tax shall be redetermined and any excess of tax paid shall be refunded to the executor."

These provisions were continued without change in the Revenue Act of 1924 (section 1100 (c), 43 Stat. 352), and in the Revenue Acts of 1926, 1928, 1932, and 1936, and remain in force at the present time. Section 403 of the Revenue Act of 1921 became effective November 23, 1921, more than five years after the passage of the Revenue Act of 1916, and the same provisions in the Revenue Act of 1924 became effective eight years after the passage of the Revenue Act of 1916. No change was made in the Revenue Act of 1926, which became effective ten years after the enactment of the estate tax provision of the 1916 act, and such retroactive provisions quoted above remain in force at the present time. Since their enactment these provisions have directed that a deduction of the value of property previously subjected to an estate tax within five years shall be made in case of the estates of all decedents who have died since September 8, 1916, and that, in the case of any estate in respect to which the tax has been paid, if necessary to allow the benefit of the deduction the tax shall be redetermined and any excess tax paid shall be refunded to the executor. These provisions clearly made the excess tax previously paid an overpayment within the meaning of other sections of the same statutes, and they were, we think, directed in the first instance to the officials of the Treasury Department charged with the duty of administering the revenue laws. The direction, that in determining the value of a net estate there should be deducted therefrom the value of any property that had been subjected to an estate tax within five years, first appeared in section 403 (a) (2) and (b) (2) of the Revenue Act of 1918 (40 Stat. 1098) which became effective February 25, 1919, but that section was not retroactive and applied only to those cases where the second decedent died after February 24, 1919. In the Revenue Act of 1921 the provision for the deduction was made retroactive to September 8, 1916, and in the case of any estate in respect of which the tax had already been paid Congress directed that the officials charged with the duty of determining, assessing, and collecting taxes, and the refunding of excess taxes paid, should, if necessary to allow the benefit of the deduction under section 403 (b) (2) and (3), redetermine the tax and refund the excess to the executor. It is clear from these sections that Congress intended that all estates which had paid a tax by reason of the inclusion in the net estate of property which had been previously taxed within five years should be entitled to have the benefit of this deduction, the tax redetermined and the excess tax refunded without regard to the limitation of time within which the Commissioner of Internal Revenue could make a refund without claim, or the time within which claims for refund could be filed under section 3228, Revised Statutes (26 U.S.C.A. § 1433). The Commissioner has correctly so held in article 99 of Regulations 70.

Thus far the parties are in accord as to the statute of limitation feature. But counsel for the defendant insists that for the purpose of suit to recover any overpayment resulting from the failure of any estate to receive the benefit of a deduction for property previously taxed within five years where the second decedent died prior to the effective date of the estate tax provisions of the Revenue Act of 1918, the limitation period is six years from November 23, 1921, the date of enactment of section 403 of the Revenue Act of 1921, and that since this suit was not instituted within six years after that date it is barred. In other words, counsel for defendant contends that the provisions of section 3226, Revised Statutes, as amended by section 1014 (a) of the Revenue Act of 1924 (43 Stat. 343) allowing a suit to be brought for the recovery of a tax within two years after the disallowance by the Commissioner of a refund, do not apply to the retroactive provisions of section 403. This position seems to be based on the theory that courts audit returns, determine net estates, and make refunds; that a suit to recover an internal revenue tax is, in effect, an appeal from the Commissioner's decision on a claim for refund and that since the obvious purpose and intent of section 403 of the Revenue Act of 1921, which was continued in force in subsequent revenue acts, were to require a return of the excess tax paid by reason of the failure of an estate to receive the benefit of a deduction provided therein without regard to other provisions requiring the filing of a formal claim for refund within a specified time, the provisions of section 3226 of the Revised Statutes with reference to suit must likewise be discarded in such case. In this we think counsel is in error. The statute, while plainly inconsistent with section 3228, evidences no purpose on the part of Congress to disregard the provisions of section 3226, or any other provision of law, requiring the Commissioner, in the first instance, to audit returns, determine tax liability, and to make refunds of overpayments determined in accordance with the statutes....