Court Opinion

ID: 4620355
Source: CourtListenerOpinion
Date Created: 2020-11-21 02:42:28.306262+00
Date Added: 2024-06-11T07:55:48.162757
License: Public Domain

A. L. GUMP, FORMERLY EXECUTOR OF THE LAST WILL AND TESTAMENT OF BENJAMIN H. LICHTENSTEIN, DECEASED, MABEL GUMP, FRANCES DAVIS (FORMERLY FRANCES LICHTENSTEIN) AND MILTON LATHAM, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Gump v. CommissionerDocket No. 34532.United States Board of Tax Appeals21 B.T.A. 606; 1930 BTA LEXIS 1824; December 10, 1930, Promulgated *1824  1.  The time within which an additional assessment of estate tax made prior to June 2, 1924, may be collected is not extended by section 311 of the Revenue Act of 1926 even though a deficiency notice on account thereof is mailed pursuant to the Revenue Act of 1926.  2.  An additional assessment of estate tax on account of a return filed on December 11, 1920, was made in August, 1922, but not collected, a claim in abatement being filed.  A part of such additional assessment was paid in February, 1926, when the collection thereof was barred.  Held that the payment made in February, 1926, constitutes an overpayment within the meaning of section 607 of the Revenue Act of 1928.  F. E. Youngman, Esq., for the petitioners.  Frank T. Horner, Esq., for the respondent.  SEAWELL*607  This proceeding involves a deficiency in estate tax as determined by the Commissioner in the amount of $16,286.18 on account of the death of Benjamin H. Lichtenstein, who died on December 12, 1919.  The two principal questions presented are (1) whether the interest of the surviving spouse in community property under the laws of California should be included in the gross*1825  estate of the decedent for the estate-tax purposes and (2) whether the collection of the deficiency proposed is barred by the statute of limitations.  The facts were stipulated.  FINDINGS OF FACT.  Benjamin H. Lichtenstein died testate on December 12, 1919, being at the time of his death a resident of San Rafael, Marin County, Calif.  A. L. Gump, one of the petitioners herein, is a resident of San Francisco, Calif., and was formerly executor of the last will and testament of Benjamin H. Lichtenstein.  On January 9, 1920, A. L. Gump and Frances Davis formerly Frances Lichtenstein), two of the petitioners herein, were duly appointed executors of the last will and testament of Benjamin H. Lichtenstein and duly qualified.  On or about June 6, 1921, Frances Davis resigned as one of the aforesaid executors and thereafter and until August 3, 1926, A. L. Gump was the sole duly appointed, qualified and acting executor of the last will and testament of Benjamin H. Lichtenstein.  On August 3, 1926, A. L. Gump was finally discharged as such executor, but no notice in writing was ever given to the Commissioner under the provisions of section 317 of the Revenue Act of 1926 of such discharge. *1826  Mabel Gump, Frances Davis and Milton Latham, three of the petitioners above named, were and are the residuary legatees named in the last will and testament of Benjamin H. Lichtenstein.  Frances Davis (formerly Frances Lichtenstein) was married to Benjamin H. Lichtenstein in the year 1891, and thereafter and until the death of Benjamin H. Lichtenstein they lived together continuously.  At the date of the death of Benjamin H. Lichtenstein property of a total value of $578,424.28 had been accumulated by the *608  decedent and his wife which, under the laws of the State of California, was community property.  On December 11, 1920, an estate-tax return was filed with the collector of internal revenue for the first district of California by A. L. Gump and Frances Lichtenstein (now Frances Davis) as executors on behalf of the estate of Benjamin H. Lichtenstein.  In determining the value of the gross estate of Benjamin H. Lichtenstein for estate-tax purposes the executors excluded from the value of said gross estate shown in the return the value of the widow's one-half interest in the community property.  On February 9, 1921, the executors paid the estate tax shown on the return*1827  to be due in the amount of $8,279.26.  An audit of the estate-tax return was made by the Commissioner on or about August 11, 1922, as a result of which certain adjustments were made to the value of assets shown and deductions claimed in the estate-tax return and the value of the widow's one-half interest in the community was included in the value of the gross estate.  As a result of these adjustments in the value of the gross and net estates of Benjamin H. Lichtenstein, including the widow's interest in the community property, the Commissioner determined the total estate-tax liability to be $30,028.05.  During the month of August, 1922, the Commissioner, pursuant to his letter of August 11, 1922, assessed against the estate of Benjamin H. Lichtenstein an additional estate tax of $21,748.79.  Thereafter, on or about September 23, 1922, a claim was filed with the collector of internal revenue for the first district of California by A. L. Gump as executor of the estate, for abatement of the full amount of the said additional estate-tax assessment of $21,748.79.  As one ground of the claim for abatement the executor contended that the one-half interest of the widow in the community property*1828  should not be included in gross estate.  By letter of January 7, 1926, the Commissioner advised petitioner A. L. Gump, as executor, of his consideration of the said claim in abatement, concluding such letter with the following statements: As a result of the prior audit, additional tax was assessed in the amount of $21,748.79.  In accordance with the above, it is now determined that this assessment is excessive in the sum of $16,286.18.  Therefore, your claim for abatement of $21,748.29 will be prepared for allowance in the sum of $16,286.18 and is rejected as to $5,462.61.  Such portion of the additional tax, if any, as remains unsatisfied, should be paid to the Collector of Internal Revenue, without further delay, together with interest thereon, at the rate of ten per centum per annum from the expiration of thirty days from notice and demand by the Collector, including such time as is necessary for the remittance to reach the office of the Collector.  On February 12, 1926, petitioner A. L. Gump, as executor, paid to the collector of internal revenue at San Francisco, Calif., the sum *609  of $6,658.48 representing $5,462.61 principal of tax and $1,195.87 interest, pursuant*1829  to the respondent's letter of January 7, 1926.  By letter dated December 8, 1927, the Commissioner notified petitioner A. L. Gump, as executor, that the claim for abatement of $21,748.79 had been reconsidered and the estate-tax liability of the estate of Benjamin H. Lichtenstein redetermined by including in the gross estate the entire value of all community property, and that the claim for abatement was rejected as to the entire amount.  The aforementioned letter was directed to "A. L. Gump, Executor, Estate of Benjamin H. Lichtenstein," and read in part as follows: This office desires to refer to letter dated January 7, 1926, in which it was shown that the total tax due from the above-named estate was $13,741.87.  In view of the decision of the United States Supreme Court in the case of United States vs. Robbins, 269 U.S. 315">269 U.S. 315, decided January 4, 1926, and an opinion of the Attorney General of the United States issued under date of June 24, 1926 (Treasury Decision 3891), your claim for abatement is now reconsidered and the tax redetermined by including in the gross estate the entire value of all the Community property.  * * * In view of the foregoing, the claim*1830  for abatement of $21,748.79 is now rejected in its entirety.  Pursuant to Section 318 of the Revenue Act of 1926, notice of deficiency amounting to $16,286.18 in estate tax with respect to the Estate of Benjamin H. Lichtenstein is hereby given with a view to the collection thereof.  At all times prior to May 8, 1926, petitioner A. L. Gump had in his possession assets of the estate of Benjamin H. Lichtenstein sufficient to pay the additional estate tax of $21,718.79.  On or about May 8, 1926, petitioner A. L. Gump distributed to the residuary legatees of the estate of Benjamin H. Lichtenstein all of the residue and remainder of property of the estate then in his possession.  The said A. L. Gump relied upon the letter of the Commissioner dated January 7, 1926, and particularly the statement therein contained that said claim in abatement would be prepared for allowance in the sum of $16,286.18, and solely by reason of such reliance the balance of said tax, namely, the sum of $6,658.48 (which includes interest as aforesaid), was paid and the estate was finally closed and distributed.  Solely by reason of such reliance as aforesaid, said A. L. Gump paid and delivered to the residuary*1831  legatees, namely, Mabel Gump, Frances Davis, and Milton Latham, all of the rest, residue and remainder of the property of the estate of Benjamin H. Lichtenstein, deceased, then in his possession.  Petitioner A. L. Gump has not had since May 8, 1926, and does not now have in his possession any of the assets of the estate of Benjamin H. Lichtenstein.  The books and records of the collector of internal revenue for the first district of California show an outstanding unpaid balance of *610  estate tax against the estate of Benjamin H. Lichtenstein in the amount of $16,286.18, which is the unpaid balance of the additional assessment of $21,748.79 heretofore referred to as made in August, 1922.  OPINION.  SEAWELL: The petition which gave rise to this proceeding was filed by the individuals shown as petitioners in the caption of this case, though the deficiency notice was directed to "A. L. Gump, Executor, Estate of Benjamin H. Lichtenstein." While A. L. Gump had been discharged as executor prior to the filing of the petition, no notice of such discharge was given to the Commissioner as provided in section 317 of the Revenue Act of 1926 and therefore the deficiency notice was*1832  properly directed to him in the capacity indicated above.  Our jurisdiction is accordingly confined to the petition on the part of A. L. Gump in his capacity as executor (hereinafter referred to as "petitioner"), and the individuals who signed the petitioner as residuary legatees may not be considered as parties to this proceeding, and the proceeding as to them is dismissed.  The petitioner admits that the question as to the inclusion in the gross estate of the decedent of the value of the widow's interest in community property in California for estate-tax purposes has heretofore been decided by the Board (Griffith Henshaw, Executor,12 B.T.A. 1441">12 B.T.A. 1441) and that such decision has been upheld by the Circuit Court of Appeals for the Ninth Circuit (Henshaw v. Commissioner, 31 Fed.(2d) 946; certiorari denied, Henshaw v. Lucas, Commissioner of Internal Revenue,280 U.S. 565">280 U.S. 565), but insists that such action is contrary to the statute.  The contentions now advanced by the petitioner have already been considered by the Board and we are not convinced that incorrect conclusions have been reached with respect thereto.  *1833  In connection with the next issue as to whether the collection of the deficiency is barred by the statute of limitations, a question was raised as to whether the entire deficiency had been abated prior to the issuance of the deficiency notice which gave rise to this proceeding, but we find it unnecessary to discuss this question for the reason that we are of the opinion that in any event the collection of the deficiency is barred.  The decedent's death occurred on December 12, 1919, and on December 11, 1920, the estate-tax return was filed.  The Revenue Act of 1921 provides that any tax due under such return shall be assessed within four years after such tax became due (section 1322) and that no suit or proceeding for the collection of such tax shall be begun after the expiration of five years from the time such tax was due (section 1320).  The foregoing provisions *611  were superseded by section 1009 of the Revenue Act of 1924, but the statutory periods for assessment and collection were not changed.  In August, 1922, or within the four-year period for making assessments, the deficiency with which we are concerned was assessed, but not collected, a claim in abatement being*1834  filed.  No action was taken prior to the issuance of the deficiency notice to extend the time for collection.  Our question is whether the collection of the deficiency was barred when the deficiency notice was mailed on December 8, 1927.  We are unable to distinguish the situation here presented from that before the court in Russell v. United States,278 U.S. 181">278 U.S. 181, where it was held that the collection of a similar outstanding assessment was barred from collection.  We can see no merit in the commissioner's contention that the Russell case is not applicable for the income tax, whereas the case at bar deals with an estate tax, since income tax Whereas the case at bar deals with an estate tax, since the provisions which the court there held insufficient to prevent the running of the statute (section 278(d) and (e) of the Revenue Act of 1924) are similar to the corresponding provisions for estate-tax purposes (section 311(b) and (c) of the Revenue Act of 1924).  Nor do we regard it as material that the deficiency notice was mailed in accordance with the provisions of section 318(d) of the Revenue Act of 1926 instead of under the corresponding provision of the*1835  Revenue Act of 1924.  The case of D. E. Wheeler,16 B.T.A. 96">16 B.T.A. 96, involved a similar situation where the notice was mailed after the passage of the Revenue Act of 1926, and we held the collection barred.  When the Revenue Act of 1926 was passed the collection of the assessment in question was barred (Russell v. United States, supra ) and we do not understand that section 311(b) and (c) of such act was intended to make valid the collection of assessments which were then barred.  The effect of the Commissioner's argument is to say that such section would operate to revive barred collections, whereas it is expressly provided that this section shall not "authorize the assessment of a tax or the collection thereof by distraint or by proceeding in court (1) if at the time of the enactment of this Act such assessment, distraint or proceeding was barred by the statutory period of limitation properly applicable thereto." In view of the foregoing, we are of the opinion that the collection of the deficiency is barred.  The further contention is made by the petitioner that the Board should find an overpayment of tax in the amount of $6,658.48 on account of*1836  the payment of that amount when the collection thereof was barred.  As shown in our findings, an additional assessment was made in August, 1922, in the amount of $21,748.79, and on September 23, 1922, a claim in abatement was filed for the full amount.  *612  On January 7, 1926, the Commissioner advised the petitioner that the claim in abatement would be prepared for allowance in the sum of $16,286.18 and was rejected as to $5,462.61.  Shortly after receipt of the foregoing communication, or on February 12, 1926, the petitioner paid the rejected portion of the claim, together with interest in the amount of $1,195.87, or $6,658.48.  Since the return under which the foregoing assessment was made was filed in 1920 and since the stautory period for the collection of any tax due thereunder was five years, the collection made in 1926 was erroneously made and therefore constitutes an overpayment within the meaning of section 607 of the Revenue Act of 1928.  Cf. Morris Metcalf,16 B.T.A. 881">16 B.T.A. 881, and J. B. Dortch,19 B.T.A. 159">19 B.T.A. 159. Judgment will be entered for the petitioner.