Verckler v. United States, 361-57.

• Decision Date: 04 March 1959
• Docket Number: No. 361-57.,361-57.
• Citation: 170 F. Supp. 802
• Parties: Stewart P. VERCKLER, as Executor of the Estate of Margaret Stewart Verckler v. UNITED STATES.
• Court: U.S. Claims Court

170 F. Supp. 802

Stewart P. VERCKLER, as Executor of the Estate of Margaret Stewart Verckler v. UNITED STATES.

No. 361-57.

United States Court of Claims.

March 4, 1959.

Graham Loving, Oklahoma City, Okl., for plaintiff. L. Karlton Mosteller and Mosteller, Fellers, Andrews & Loving, Oklahoma City, Okl., on the briefs.

Jack F. Blair, Washington, D. C., with whom was Asst. Atty. Gen. Charles K. Rice, for defendant.

LARAMORE, Judge.

This is a suit for the refund of $20,863.74 in estate tax paid by the plaintiff as executor of the estate of Margaret Stewart Verckler. Claim is made under the provisions of Public Law 417, 84th Congress, 2d Session, 70 Stat. 26, approved February 20, 1956, retroactively amending the Internal Revenue Code of 1939 by adding new section 814, 26 U.S. C.A. § 814, which provided in pertinent part as follows:

"* * * If the executor so elects, the tax imposed by sections 810 and 935 in the case of a decedent (but only if the decedent was a citizen or resident of the United States at the time of his death) dying after December 31, 1951, shall be credited with all or a part of the amount of the Federal estate tax paid with respect to the transfer of property * * * to the decedent by or from a person * * * who was the spouse of the decedent at the time of such person's death and who died within two years before the decedent's death * * *."

The remaining portions of the act deal with the method of computing the credit and a provision that no interest shall be allowed in case of refund resulting from relief under the act.

The uncontroverted facts in this case show that the decedent Margaret Stewart Verckler died on February 25, 1952, which was within two years of the death of her lawful spouse. On May 21, 1953, an estate tax return was filed together with payment of $175,858.74 as shown due by that return. On April 23, 1956, a deficiency assessment was made against the estate in the amount of $2,194.65 together with interest. This deficiency assessment was paid in full on April 27, 1956. On September 19, 1956, plaintiff filed a claim for refund of estate taxes in the amount of $23,058.39 alleging entitlement to the provisions of P.L. 417, supra, because that sum represented estate tax paid on property previously taxed to the estate of decedent's husband. The Commissioner of Internal Revenue allowed plaintiff's claim to the extent of $2,194.65 which was equal to the deficiency payment, less interest, made on April 27, 1956, but denied refund for the remaining $20,863.74 for which plaintiff has instituted this suit. Both parties have moved the court for summary judgment stating that there is no issue as to any material fact and that they are entitled to judgment as a matter of law.

The Government's sole defense to this action is that the claim is now barred by the applicable statute of limitations. This arises in the following manner:

Section 7422(a) of the Internal Revenue Code of 1954, 26 U.S.C.A. § 7422(a) provides:

"No suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected * * or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Secretary or his delegate, according to the provisions of law in that regard, and the regulations of the Secretary or his delegate established in pursuance thereof."

Section 910 of the Internal Revenue Code of 1939, 26 U.S.C.A. § 910 under which this claim arises provides that:

"All claims for the refunding of the tax imposed by this subchapter alleged to have been erroneously or illegally assessed or collected must be presented to the Commissioner within three years next after the payment of such tax. The amount of the refund shall not exceed the portion of the tax paid during the three years immediately preceding the filing of the claim, or if no claim was filed, then during the three years immediately preceding the allowance of the refund.¹"

Defendant contends, and the facts clearly show, that with respect to the $20,863.74, this amount was paid to the Commissioner more than three years prior to making a claim for refund on September 19, 1956. This defendant says is a complete bar to any recovery because under the provisions of section 3774 of the 1939 Code, 26 U.S.C.A. § 3774 the Commissioner is barred from making any refund after the period for filing claim has expired. Defendant then cites many cases holding for the proposition that timely filing of a claim for a refund of tax is a procedural prerequisite to the bringing of a lawsuit. We are in complete agreement with the defendant, and the cases it has cited, and do not feel that any further discussion of this point is either necessary or warranted. However, this does not dispose of the instant suit.

The 1939 Code under which plaintiff's original estate tax liability arose was retroactively amended by P.L. 417 on February 20, 1956, in order that the estates of persons dying subsequent to December 31, 1951, would receive substantially the same tax treatment afforded estates by section 2013 of the Internal Revenue Code of 1954, 26 U.S.C.A. § 2013. The amendment as passed by Congress contained no provision as to a time limit for filing claims thereunder. Defendant says that this is significant in itself and can only mean that Congress intended that claimants should be bound by the law and regulations promulgated under the 1939 Code without reference to the effect of the amendment. The net result of such a construction is that sections 910 of the 1939 Code and 7422(a) of the 1954 Code would deny benefits of P.L. 417 to those estates which settled their tax bill more than three years prior to February 20, 1956.

However, it is the opinion of this court that neither section 910 of the 1939 Code nor section 7422(a) of the 1954 Code, supra, should be so construed as to create a legal bar to the intended relief of the statute. Prior to the passage of the amending act, the action of the Commissioner in assessing and collecting estate taxes upon property previously taxed in the estate of decedent's spouse was both correct and legal. Therefore, no claim for refund could possibly be filed upon the grounds that there had been an erroneous or illegal collection of tax. In short, no cause of action existed. Certainly no authority exists for filing contingent claims based upon the possible action of Congress in passing remedial legislation. Not until February 20, 1956, when P.L. 417 came into effect, did plaintiff have a right to claim and receive refund of the tax. This was not a claim for taxes previously erroneously or illegally collected, but an election to receive the benefits of a relief statute.²

The result contended for by defendant would be harsh indeed because in order to qualify under its theory plaintiff's claim would have had to have been on file by May 21, 1956, just over three months from the enactment of P.L. 417. This seems to us an arbitrary and unwarranted construction of a relief statute.

It is commonly held among the courts that statutes intended to relieve persons of hardships should be construed in favor of those who are the intended beneficiaries. Hollander v. United States, 2 Cir., 248 F.2d 247. To require the filing of a claim for refund within three years from the date of payment of the tax, for which P.L. 417 provides relief, would in some cases completely negate any and all benefits provided by that act. Such would have been the case if this plaintiff had paid its tax three months and one day earlier. This would necessarily reward taxpayers who delay payment of their...