#### MARY S. ALDRIDGE, EXECUTRIX OF THE LAST WILL AND TESTAMENT OF W. O. ALDRIDGE, DECEASED, v. THE UNITED STATES

[No. F-61.

Decided January 16, 1928]

*On the Proofs*

*Income tax; statute of limitations; waiver by executrix; decisions of State courts as to validity.-*— A waiver in due form, agreeing to an extension of one year within which an additional Federal income tax might be assessed, in order to avoid immediate assessment, filed within the statutory time with the Commissioner of Internal Revenue by the executrix of an estate, is valid, and decisions of State courts, construed as holding otherwise, do not affect its validity.

*Same; additional claim for refund; discovery of duplication m return.*— Where on February 11, 1924, a taxpayer waives the statute of limitations as to the time within which an additional assessment of income tax for the year 1918 may be made, and therewith files claim for refund of a specific amount “ or such greater amount as is legally refundable,” which is paid in the amount specified, and on December 27, 1924, files an additional claim based on a mistake of duplication discovered after the first claim was made, the second claim was not settled by the first refund, and being filed before April 1, 1925, was not barred.

*The Reporters*statement of the case:

*Mr. Andrew J. Aldridge*for1 the plaintiff.

*Mr. Fred K.*Dyar, with whom was *Mr. Assistant Attorney General Hernum J.*Galloway, for the defendant.

The court made special findings of fact, as follows:

I. W. O. Aldridge died prior to December 16, 1920. On that day letters testamentary were duly issued by the Chancery Court of Washington County, Mississippi, to Mary S. Aldridge, as executrix under the last will and testament of William O. Aldridge, deceased, formerly a citizen and resident of the State of Mississippi.

II. On April *17,*1919, said William O. Aldridge filed his income-tax return for the year 1918 as required by law. Said return reported a net income of $102,539.84 and a tax *425due thereon of $36,655.50. On April 17, 1919, William O. Aldridge paid to the collector of internal revenue the sum of $9,259.39; on June 12, 1919, $9,068.35; on September 14, 1919, $9,163.88; and on December 12, 1919, $9,163.88, a total of $36,655.50 as income tax on his income fol the year 1918.

III. On February 4, 1924, M. O. Carter, an accountant of Memphis, Tennessee, addressed a letter to the Commissioner of Internal Revenue, signed “M. O. Carter, agent, estate of W. O. Aldridge, Mary S. Aldridge, administra-trix,” requesting a hearing on the report of Inspector Banks relating to the income tax of decedent for the year 1918 and inclosing a waiver for that year, in order to avoid an additional arbitrary assessment and to protect the Government’s interest. Said waiver bears the date of February 7, 1924, and is signed “ Mary S. Aldridge, Admx., taxpayer, by M. O. Carter, agent.”

IY. On February 5, 1924, the Deputy Commissioner of Internal Revenue addressed a letter to “Mr. W. O. Aldridge,” the deceased taxpayer, notifying him of his liability for an additional tax in the sum of $13,491.38 for the yeai 1918, and that in the event he should desire to appeal requested that he sign and return the form of waiver inclosed therewith, agreeing to an extension of time of one year beyond the statutory period of limitation within which the additional tax might be assessed in order to avoid immediate assessment.

Y. On February 9, 1924, in response to said letter, Mary S. Aldridge wrote the Commissioner1 of Internal Revenue, inclosing a waiver dated February 11,1924, of said statutory period, to remain in effect for a period of one year after the expiration of the statutory period of limitation, signed “Mary S. Aldridge, executrix, taxpayer.”

YI. On February 9, 1924, prior to the receipt of the waiver, last mentioned, said executrix, by her agent, filed a request with the collector of internal revenue at Jackson, Mississippi, for a reaudit and a claim for refund in the sum of $4,611.65, “ or such greater amount as is legally refundable ” of decedent’s income tax for the year 1918.

YII. In March, 1924, an additional assessment in the sum of $13,491.88 was made against said William O. Aldridge, making a total assessment of $50,146.88.

*426VIII. Under date of March 28, 1924, a second and substituted claim for the refund of said sum of $4,611.65 and the abatement of $13,491.38 was filed by said Mary S. Aldridge as executrix.

IX. On November 28, 1924, the Commissioner of Internal Revenue determined the tax liability of said William O. Aldridge for the year 1918 to be $32,043.85 and a certificate of overassessment in the sum of $18,103.03 was duly issued.

X. Thereafter said additional assessment in the sum of $13,491.38 was wholly abated, and a refund of $4,611.65, with interest thereon amounting to $1,335.54, - was allowed? and paid to said Mary S. Aldridge as executrix of the estate of W. O. Aldridge, deceased.

XI. If either or both of the waivers filed February 1,1924, and February 11, 1924, respectively, were valid and effective waivers, and the claim for refund filed December 27, 1924, was sufficient in law and was riot barred by the statute of limitations, then judgment should be entered for the plaintiff in the sum of $20,911.71 with interest thereon as provided by law, the decedent, William O. Aldridge, having overstated his income for the year 1918 in the amount of $44,589.60 and overpaid his income tax in said year in. the amount of $25,523.36, of which $4,611.65 with interest thereon has been repaid to the plaintiff, making a net overpayment of $20,911.71.

XII. On December 27, 1924, said executrix, by M. O. Carter, her agent, filed with the collector of internal revenue for the district of Mississippi a further claim for refund in the sum of $25,523.36, *“*or such greater amount as is legally refundable, plus interest,” which contained the following statement:

“ This claim is supplemental to a claim filed for $4,611.65 under date of 2-7-1924 and is supported by the attached brief and is occasioned by the finding of certain records which were thought to have been destroyed at the time of making original tax report for the year 1918. Also at the time the brief and protest regarding Í918 taxes was filed.”

XIII. On June 6, 1925, Deputy Commissioner of Internal Revenue Bright wrote the said Mary S. Aldridge, executrix, as follows:

*427“ Your claim for the refund of $25,523.36, individual income tax for the year 1918 on the return filed by W. O. Aldridge, has been examined.

“ It is noted that your claim was not filed until December 1, 1924.

“ You are advised that your claim is barred by .the statute of limitations in accordance with the provisions of section 281 of the revenue act of 1924, which reads in part as follows:

“£ That no such credit or refund shall be allowed or made after four years from the date when the tax was paid unless before the expiration of such four years a claim therefor is filed by the taxpayer.’

“ and further that: *

“ ‘ If the taxpayer has within five years from the time the return for the taxable year 1917 was due, filed a waiver of his right to have the taxes due for such taxable year determined and assessed within five years after the return was filed, or if he has, on or before June 15, 1924, filed such a waiver in respect of the taxes due for the taxable year 1918, then such credit or refund relating to the taxes for the year in respect of which the waiver was filed shall be allowed or made if claim therefor is filed either on or before April 1, 1925, or within four years from the time the tax was paid. If the taxpayer has, on or before June 15, 1925, filed such a waiver in respect of the taxes due for the taxable year 1919, then such credit or refund relating to the taxes for the taxable year 1919 shall be allowed or made if claim therefor is filed either on or before April 1, 1926, or within four years from the time the tax was paid. If any such waiver so filed has, before the expiration of the period thereof, been extended either by the filing of a new waiver or by the extension of the original waiver, then such credit or refund relating to the taxes for the year in respect of which the waiver was filed shall be allowed or made if claim therefor is filed either (1) within four years from the time the tax was paid, or (2) on or before April 1, 1926, in the case of claims or refunds relating to the taxes for the taxable years 1917 and 1918 or on or before April 1, 1927, in the case of credits or refunds relating to the taxes for the taxable year 1919.’

“A waiver for the year 1918, dated February 11, 1924, signed by you as administratrix, is on file in this office. You are advised, however, that it is held by this office that personal representatives in the State of Mississippi have no authority to waive or toll the statute of limitations. Accordingly the waiver is not valid and can not operate to validate the claim filed after the expiration of the statutory period of limitations.

*428“ It is stated in your claim that:

*“*‘ This claim is supplemental to a claim filed for $4,611.65 under date of February 7, 1924, and is supported by the attached brief and is occasioned by the finding of certain records which were thought to have been destroyed at' the time of making original tax report for the year 1918, also at the time the brief and protest regarding 1918 taxes were filed.’

“ You are advised that the claim filed on December 1, 1924, is a separate and distinct claim based on facts unknown to you at the time the original claims dated February 7, 1924, and March 28, 1924, were filed. It is held by this office that to permit the filing of additional claims setting up new grounds for refund as amendments of an original claim with no limit as to the time for such filing after the original claim has been disallowed and after the statutory period has expired would, to a large extent, nullify the intent of Congress in providing a statute of limitations for filing all claims. The claim in question can not, therefore, be accepted as supplementary or amending the claims for 1918 which have been previously allowed.

“ Since your claim was not filed within five years after the return for 1918 was due, and since a valid waiver was not executed within that period, and the only amount of deficiency in tax assessed within the past four years has been allowed in a previous certificate of overassessment, your claim is outlawed, as stated above.

“ The rejection will officially appear on the next schedule to be approved by the commissioner.”

The court decided that plaintiff was entitled to recover $20,911.71 with interest on $2,583.95 from June 12, 1919; on $9,163.88 from September 14, 1919; and on $9,163.88 from December 12, 1919, all to date of judgment.

Graham, *Judge,*

delivered the opinion of the court:

This is a suit brought by Mary S. Aldridge, executrix of the will of William O. Aldridge, deceased, to secure a refund of $20,911.71, on account of a duplication in the income tax for the year 1918 paid by said William O. Aldridge. The latter died prior to December 16, 1920, and on that date plaintiff qualified as executrix in the Chancery Court of Washington County, Miss. William O. Aldridge was at the time of hijs death a citizen and resident of the State of Mississippi.

On April 17, 1919, William O. Aldridge filed his income-tax return f,or the year-1918, which showed a tax due thereon *429of $36,655.50, and between April *17*and December 2,1919, he paid said amount.

Upon a review and reaudit of the return, the Commissioner of Internal Revenue determined that the decedent was liable for an additional tax for the year 1918 in the sum of $13,491.38, and on February 5, 1924, addressed a letter to decedent to this effect and requested, in the event he should desire to appeal, that he sign and return the form of waiver inclosed therewith agreeing to an extension of time of one jear beyond the statutory period of limitation within which the additional tax might be assessed in order to avoid immediate assessment. In response to this letter Mary S. Aldridge, as executrix, -wrote to the commissioner inclosing the waiver dated February 11, 1924. It does not appear that it was ever returned or that any exception was taken to it until the 6th of June, 1925.

On February 9, 1924, prior to the receipt of the waiver, the executrix filed a claim for refund in the sum of $4,611.65 *“*or such greater amount as i(s legally refundable ” of decedent’s income tax for 1918. In March, 1924, an additional assessment of $13,491.38 was made by the commissioner against William O. Aldridge. On March 28, 1924, plaintiff filed a second and substituted claim for refund of the said sum of $4,611.65 and the abatement of $13,491.38, and at some time, not proved, after November 28, 1924, the commissioner abated said additional a,ssessment and made a refund to plaintiff of $4,611.65, with interest. On December *27,*1924, the executrix, through her agent, filed a claim for refund of $25,523.36, with interest.

The defendant in its brief recited:

> “ The United States concedes that W. O. Aldridge overstated his income in his 1918 return in the amount of $44,589.60 and overpaid his income tax for said year to the extent of $25,523.36, and that after refunding $4,611.65, with interest, there remained a net overpayment of $20,911.71.”

> The questions involved are stated in defendant’s brief as follows:

> “ I. Can an executrix in the State of Mississippi execute a valid agreement waiving the statute of limitations running against the assessment of a Federal income tax ?

> *430“ II. If the execution by claimant of the instrument dated February 11,1924, was valid, is this instrument such a waiver as is contemplated by section 281 of the revenue act of 1924 ?

> “ III. If the claim for refund filed December 21, 1924, is barred by the statute of limitations, are the claims for refund filed on February 9, 1924, and March 28, 1924, ¡sufficient to. support the refund now demanded? ”

Let us first consider the question of the validity of the waiver. The objection interposed to its validity is that the courts of Mississippi have held that a personal representative could not waive the statute of limitations as to a debt asserted against an estate, and certain decisions of the supreme court of the State of Mississippi are relied upon in support of this.

There was no statute of the State of Mississippi at the time on the subject. The opinions of the court are not harmonious but conflicting. But, aside from this, we know of no case where it has been held or even contended that a decision of a State court can nullify, modify, limit, or obstruct a right granted by an act of Congress within its constitutional power. The tax system of the United States is regulated by the Federal statutes and practice and is not controlled by State .enactments. *United States*v. Snyder, 149 U. S. 210, 215. Congress having undertaken to regulate the whole subject, its legislation is necessarily exclusive. *Arnson*v. *Murphy,*109 U. S. 238, 243.

This is not the ordinary case of waiver of a debt asserted against an estate. The act of Congress was intended for the accommodation of both the Government and the taxpayer. It was in the nature of an agreement to give time for further consideration of claims. The taxpayer in this case had filed a claim for a refund. The Government in reply had asserted a claim for additional tax. The period of limitation for the enforcement of the Government tax wTas about to expire. The statute provided for a waiver. The waiver was prepared by the Commissioner of Internal Iievenue, filled in by him, and sent to the plaintiff. It did not originate with the plaintiff. The commissioner sent it to plaintiff with the suggestion that in case an appeal was desired from the additional assessment the plaintiff should sign and re*431turn it, agreeing to an extension of one year beyond the statutory period within which the additional assessment could be asserted and to avoid immediate assessment. The waiver contained the following provision:

“This waiver is in effect from the date signed by the taxpayer and will remain in effect for a period of one year after the expiration of the statutory period of limitations.”

Plaintiff signed and returned it to the commissioner, and it was accepted by him, as shown by his subsequent action in not only withdrawing the claim for additional tax but allowing the claim of plaintiff for refund.

Section .281 (e) of the revenue act of 1924, 43 Stat. 302, involved here, is as follows:

“ If the taxpayer has, within five years from. the time the return for the taxable year 1917 was due, filed a waiver of his right to have the taxes due for such taxable year determined and assessed within five years after the return was filed, or if he has, on or before June 15, 1924, filed such a waiver in respect of taxes due for the taxable year 1918, then such credit or refund relating to the taxes for the year in respect of which the waiver was filed shall' be allowed or made if claim therefor is filed either on or before April 1, 1925, or within four years from the time the tax was paid.”

As it turned out, there was no debt against the estate of plaintiff’s decedent. On the contrary, a reaudit showed, as stated, that the claim for additional tax by the Government was erroneous, and, more than that, that plaintiff was entitled to the refund she was then claiming. By filing the waiver plaintiff was enabled not only to establish her claim for refund but to convince the commissioner that the claim for additional tax was invalid.

The provision for refunding taxes illegally collected, just as the provision for laying them, is a part of an act of Congress passed in the exercise of its constitutional power under the 18th amendment to lay and collect income taxes. It had power not only to provide the method of laying and collecting taxes but the method of refunding taxes illegally collected. It had the power in prescribing that method to provide not only a statute of limitations but the right to *432waive the limitation, and this right was given to the taxpayer. It can not be contended that the power of Congress to confer the right can be taken away by a State statute, much less by the decision of a State court. To say that the right can be granted but the privilege of exercising it can be limited or taken away by a State statute or a decision of a State court would be in effect to destroy the right and thus nullify the act of Congress. The principle here involved was established many years ago in the case of *Gibbons*v. Ogden, 9 Wheat. 1, and is too well known to need discussion.

We, therefore, hold that the waiver was valid and effective so far as this case is concerned.

We next come to the question as to whether the claim for refund filed December 27, 1924, was sufficient in law and not barred by the statute of limitations. The waiver was dated February 11, 1924, and was binding and effective for one year from its date. The act of Congress above quoted provides that if the waiver of the statute of limitations running against additional assessment for 1918 is filed before June 15, 1924 (and in this case it was), the claim for refund of 1918 taxes may be allowed if filed before April 1, 1925, and in this case it was filed on December 27, 1924. We conclude that the claim of December 27, 1924, was valid and not barred by the statute of limitations.

We think there is no merit in the contention that the claim here was settled by the payment of the previous claim for refund of $4,611.25. The claim .involved in this case was not known to either of the parties at that time. It did not come to plaintiff’s knowledge until November 24, 1924, when it developed from an examination of his papers and reaudit of his accounts that the plaintiff’s decedent by mistake of duplication had overpaid h,is tax in the amount of $25,523.36. Inasmuch as $4,611.65 was refunded, the plaintiff is entitled to a judgment for the difference between the two sums, or $20,911.71, with interest, as shown by the following stipulation between the parties:

“It is agreed that if the court shall find that either or both of the waivers filed February 7,1924, and February 11, 1924, respectively, * * * were valid and effective waivers and that the claim for refund filed December 27, 1924, was sufficient in law and was not barred by the statute of limita*433tions, then judgment may be entered for the plaintiff in the sum of $20,911.71, with interest thereon as provided by law.”

Judgment should be entered for $20,911.71, with .interest, and it is so ordered.

Moss, *Judge;*Booth, *Judge;*and Campbell, *Chief*Justice, concur.