Thompson v. United States

• Decision Date: 31 July 1925
• Docket Number: No. 1420.,1420.
• Citation: Thompson v. United States, 8 F.2d 175 (D. Minn. 1925)
• Parties: THOMPSON et al. v. UNITED STATES.
• Court: U.S. District Court — District of Minnesota

8 F.2d 175 (1925)

THOMPSON et al. v. UNITED STATES.

No. 1420.

District Court, D. Minnesota, Third Division.

July 31, 1925.

Ira C. Oehler and Chas. W. Briggs, both of St. Paul, Minn., for Horace E. Thompson.

Lafayette French, Jr., U. S. Atty., and L. W. Scott, Asst. U. S. Atty., both of St. Paul, Minn.

MOLYNEAUX, District Judge.

The plaintiffs base their claim for a refund, on two grounds:

(1) That certain specific lands belonging to the estate, and referred to in the complaint as being situated in the counties of Blue Earth, Cottonwood, Jackson, Martin, Murray, Nobles, Rock, and Watonwan, were overvalued as of May 1, 1919.

(2) That the taxpayer is entitled to a deduction by reason of real estate taxes that had become a lien upon the real property of the deceased at the time of his death, under the laws of Minnesota, a part only of which deduction having been allowed by the government.

First. I do not think that the court would be justified in holding that the lands in question were overvalued as of May 1, 1919. The administrators of the estate placed that valuation upon the property after a thorough investigation.

On February 25, 1920, the administrators of the estate, who are the plaintiffs herein, filed a return with the collector, Mr. Lynch, in which all of the above-mentioned lands were stated, on information and belief, to be worth $4,281,993.75. This valuation was placed upon the lands in question by the appraisers appointed by the probate court of Ramsey county, Minn. By agreement between the state of Minnesota and the administrators, two appraisers were appointed in each of said counties to appraise the lands, and they placed the valuation above stated upon the lands, for the purposes of the administration of the estate in the probate court. This was done after a thorough investigation, and the Thompson heirs swore that these appraisers, who were appointed, were the best that could be found. A great deal of testimony has been introduced by the plaintiffs and by the defendant upon the question of the value of these lands. The valuation of land is always a question of judgment, and men's judgments generally differ upon valuation. The executors of the estate, after a thorough examination, investigation, and consideration, made their return to the Internal Revenue Department, placing the valuation now disputed upon the land. The Revenue Department may not accept such valuation; it is subject to their approval, but the voluntary return ought under ordinary circumstances to be of great weight against the taxpayer on valuations. The natural presumption is that he will not overvalue the estate. His interest would make him conservative.

It is not necessary to here consider how far a voluntary return is conclusive against the taxpayer. The government accepted the return on this valuation after investigating the matter. The court would hardly be justified in disturbing the valuation so placed upon this land under the testimony introduced in this case. It is a well-known fact that lands appreciated above their true value in this state during the years 1918, 1919, and 1920, and that there was much dealing in lands at that time. The evidence shows that there was a land boom in those years, covering this and other states. It is contended here by the plaintiffs that the valuation placed upon the land was a boom value, and was not the real value of the lands.

Commencing in the fall of 1920, lands depreciated in value, and that is a well-known fact, and probably went far below their real value. Lands were heavily dealt in during the years 1918, 1919, and the early part of 1920, and by reason of the numerous purchases and the indebtedness of those who had purchased lands, many lands came back upon the sellers, and that probably caused depreciation of the lands below their true value, and such depreciation still continues to a certain extent.

I am satisfied from the whole of the testimony that the valuation placed upon the lands in question is conservative. It is not the value that would be placed upon them now in the depreciated condition of lands, but the fact remains that lands were worth more in 1919 than they were previously thereto or since, for the reason that they would sell for more upon the market at that time. I have therefore come to the conclusion that the court would not be justified in disturbing the valuation which was voluntarily returned as the value of the land, and that the values as returned are the reasonable values of the lands as of May 1, 1919.

Second. At the time of the death of the decedent on May 1, 1919, there was a lien upon the real estate in question of $12,925.54, for taxes for the year 1918, which became due the 1st day of January, 1919. The administrator paid these taxes. There was assessed against these lands as taxes for the year 1919 the sum of $45,144.14, which under the statutes of Minnesota became a lien upon real estate on May 1, 1919, payable January 1, 1920, making a total tax lien on May 1, 1919, of $58,069.68. The government allowed a deduction of $15,957.95 for taxes.

I think the full amount of these taxes should have been deducted. Section 2171, Gen. Stat. of Minn. 1913, provides:

"Lien of...