United States v. Arnold
| Decision Date | 04 February 1937 |
| Docket Number | No. 5777.,5777. |
| Citation | 89 F.2d 246 |
| Parties | UNITED STATES v. ARNOLD et al. |
| Court | U.S. Court of Appeals — Third Circuit |
Frank J. Wideman, Asst. Atty. Gen., and Sewall Key, Norman D. Keller, and E. E. Angevine, Sp. Assts. to the Atty. Gen. (Charles D. McAvoy, U. S. Atty., and Thomas J. Curtin, Asst. U. S. Atty., both of Philadelphia, Pa.), for the United States.
A. S. Weill, of Philadelphia, Pa., and Hugh Satterlee, of Washington, D. C. (Weill, Blakely & Nesbit, of Philadelphia, Pa., and Weill, Satterlee, Blakely & Green, of Washington, D. C., of counsel), for appellees.
Before DAVIS and THOMPSON, Circuit Judges, and FORMAN, District Judge.
This is an appeal from a judgment of the District Court allowing recovery of an overpayment of income tax by the trustees.
In 1928 the trustees sold some of the assets of the Nirdlinger Estate and reported a profit of $169,656.51 on which they paid the income tax for that year. When their account was filed with the orphans' court of Philadelphia County in 1932, it decreed that $23,805.23 of the profit resulting from the sale did not belong to the estate, but to the life tenants or beneficiaries, and was "currently" distributable to them.
Accordingly the tax thereon should have been paid by the beneficiaries and not by the trustees for the estate. Seasonable demand for the return of the overpayment was made and refused and suit was brought to recover it.
Income "currently" distributable to a beneficiary is, within the meaning of taxing statutes, income of the beneficiary as of the time of its receipt by the fiduciary and is returnable by and taxable to the beneficiary, whether or not distributed to him. McCaughn v. Girard Trust Co. (C.C.A.) 19 F.(2d) 218; Freuler v. Helvering, 291 U.S. 35, 54 S.Ct. 308, 78 L.Ed. 634. Consequently the income of $23,805.23 distributable in 1928 to the beneficiaries, but retained for some time by the trustees, was income of, and taxable to, the beneficiaries.
But the government says that it would be inequitable to allow the trustees to recover, for the reason that the statute of limitations has run and it cannot recover from the beneficiaries. Therefore, it says, the trustees are estopped. But the trustees made demand for the return of the overpayment and this was refused by the Commissioner before the statute had run. Estoppel, however, as Judge Dickinson, in the following quotation, well said, in disposing of this case, is not a defense to this action:
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