#### HELEN DE WOLFE MORGAN AND JOHN W. MORGAN, AS EXECUTORS OF THE ESTATE OF GEORGE F. MORGAN, DECEASED, v. THE UNITED STATES

[No. 42535.

Decided April 26, 1937]

*139
      *Mr. William D. Whitney*and *Mr. Thomas F. Boyle*for the plaintiffs. *Mr. Richard H.*Wilmer, *Mr. Joseph 0.*White, and Oravath, *De*Gersdorf, *Swaine <& Wood*were on the brief.

*Mr. J. H.*Sheppard, with whom was *Mr. Assistant Attorney General Robert H.*Jackson, for the defendant.

*146Littleton, *Judge,*

delivered the opinion of the court:

Counsel for defendant contend that plaintiffs are not entitled to recover the unrefunded excess estate tax computed under Section 322 of the Revenue Act of 1926 for the reason that this suit was not instituted within six years after February 26, 1926, the date of the enactment of Section 325 of the Revenue Act of 1926. This contention is without merit. *Georges Edmond Phillippe Siegel and Andre Phillippe Oscar-Siegel*v. *United*States, No. 42616, and *Detroit Trust*Co., Administrator, v. *United*States, No. 42068, decided by this court April 5, 1937 (84 C. Cls. 551, 561, respectively).

The claim of plaintiffs for interest on the overpayment of $281',700.34 is governed by the decision of this court in *E. Pennington*Pearson, *Administrator of Estate of Frederick F.*Ayer, v. *United*States, No. 41837, decided June 1, 1936, and January 11, 1937, 83 C. Cls. 624, 14 Fed. Supp. 1016, 17 Fed. Supp. 527, in which a similar claim for interest was denied.

At the time of the death of George F. Morgan the Revenue Act of 1924, which prescribed certain estate-tax rates, *147was in effect. The executors filed an estate-tax return showing a net estate of $6,300,811.30 and a total tax of $1,351,-243.39. On this return the executors claimed a credit of $305,324.39 for state inheritance taxes, leaving a net federal estate tax liability of $1,045,919 which was paid in two in-stalments of $375,000 on December 30, 1925, and $670,919 on February 5, 1926. The net estate shown in this return was understated by $474,127.46. The federal estate tax reported on the return filed, computed under Title III of the Revenue Act of 1924 prior to amendment by Section 322 of the Revenue Act of 1926, was likewise understated. Upon the first audit of the return the Commissioner of Internal Revenue made certain adjustments, which included the disallowance of the credit claimed for state inheritance tax in the amount of $305,324.39, and found a net estate of $6,937,830.73. In determining this net estate the Commissioner increased the value of the gross estate from $6,857,750.24 to $7,169,252.55, an increase of $311,502.31. He decreased the deductions claimed from $556,938.94 to $231,421.82, a decrease of $325,-517.12. These adjustments resulted in an increase in the net estate of $637,019.43. Upon this determination the Commissioner applied thereto the estate tax rates specified in section 322 of the Revenue Act of 1926, amending section 303 (a), Title III, of the Revenue Act of 1924. Section 322 (a) of the Revenue Act of 1926 reduced the rates theretofore in effect under the Revenue Act of 1924. As a result, the Commissioner' arrived at an overpayment of $16,852.85, which was refunded December 31, 1927, without interest. Thereafter the estate filed a claim for refund of $293,068.38 on the ground that it was entitled to a credit for state inheritance taxes and to certain deductions from the gross estate determined by the Commissioner. Thereafter certain evidence in support of the claim was submitted to the Commissioner and he made a reaudit of the estate tax return in connection with such evidence. In this final audit he adjusted the net estate from $6,937,830.73, as first determined, to $6,774,938.76, a decrease of $162,891.97, and an increase of $474,127.46 over the net estate of $6,300,811.30 as reported in the return. The tax computed on the correct net estate of *148$6,774,988.76 under Title III of the Revenue Act of 1924 as amended by section 822' of the 'Revenue Act of 1926 • was $996,487.75. From this tax the estate was entitled to' deduct a credit for state inheritance tax paid of $249,121.94, leaving a net tax of $747,365.81 and resulting in a total excess payment of $298,553.19. Inasmuch as $16,852.85 has already been refunded, there exists at present an overpayment of $281,700.34.

Plaintiffs insist that the excess payment of $281,700.34 is due to adjustments in the net estate and to the credit for state inheritance taxes because the Commissioner in his final audit reduced the amount of the net estate determined by him in his original audit. It is therefore contended that the excess payment constitutes an ordinary refund and should bear interest. This contention fails to take into account the fact that the Commissioner in his final audit determined the correct net estate to be $474,-127.46 in excess of the net estate reported in the return and also the fact that had not the estate-tax rates originally provided in the Revenue Act of 1924 been lowered by section 322 of the Revenue Act of 1926 amending Title III of the Revenue Act of 1924 a deficiency of $198,440.69 would have resulted which the estate, even after the allowance of the proper credit for state inheritance taxes paid, would have been called upon to -pay instead of receiving a refund. The entire overpayment in question resulted from a computation of the tax under Title III of the Revenue Act of 1924 and at the amended rates prescribed by section 322 of the Revenue Act of 1926. This is made clear in the following tabulation:



*149RECAPITULATION



From the above it is clear that if the rates enacted in the Revenue Act of 1924 and in force at the time of the decedent’s death, and at the time the tax was returned and paid, had not been amended and reduced by the Revenue Act of 1926 a deficiency of $198,440.69 under Title III of the 1924 Act would have been assessed and collected instead of an overpayment of $298,553.19 being determined. In addition the facts show that if the estate had paid its tax upon the correct net estate at the rates prescribed in the Revenue Act of 1926, such tax would have been $71,119.12 in excess of the tax of $1,045,919 paid. Inasmuch, however, as the estate paid its tax at the rates originally prescribed by Title III of the Revenue Act of 1924 an overpayment under such title resulted after those rates were reduced by the Revenue Act of 1926. Section 325 of the Revenue Act of 1926 specifically provided that any overpayment made under Title III of the 1924 act by reason of the change in the estate-tax rates prescribed in the Revenue Act of 1924 and that act, as amended by the Revenue Act of 1926, should be refunded without interest. It is clear that Congress intended that the difference between the correct tax liability computed under Title III at the original 1924 rates and Section 301 of that title as amended by Section 322 of the 1926 act should constitute the excess referred to. *Pearson*v. *United*States, *supra.*

*150Judgment will be entered in favor of plaintiffs for $281,700.34 without interest. It is so ordered.

■ Whaley, *Judge;*Williams, *Judge;*GreeN, *Judge;*and Booth, *Chief*Justice, concur.