Court Opinion

ID: 4615053
Source: CourtListenerOpinion
Date Created: 2020-11-21 02:31:32.998259+00
Date Added: 2024-06-11T07:54:53.526474
License: Public Domain

VICTORIA R. JOHNSTON, EXECUTRIX, ESTATE OF WILLIAM J. JOHNSTON, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Johnston v. CommissionerDocket No. 26743.United States Board of Tax Appeals19 B.T.A. 630; 1930 BTA LEXIS 2361; April 18, 1930, Promulgated *2361  The tender by a taxpayer, made during the year 1925, to a collector of internal revenue and the acceptance by him of checks tendered in full payment of all income taxes of the taxpayer for all previous years is not a valid settlement under section 1006 of the Revenue Act of 1924; neither does such acceptance operate as an estoppel against the United States.  Harold Harper, Esq., and Murray F. Johnson, Esq., for the petitioner.  Bruce A. Lowe, Esq., and L. A. Rushbrook, Esq., for the respondent.  PHILLIPS *630  Respondent has determined a deficiency against petitioner for the fiscal year ending November 30, 1922, in the amount of $13,090.24.  The error alleged is that respondent has determined that there had been no final accord and satisfaction of all liability of the estate of William J. Johnston for income taxes due the United States for the fiscal year involved.  FINDINGS OF FACT.  Petitioner is executrix of the estate of William J. Johnston, deceased, and resides at 131 Riverside Drive, New York City.  During the year 1924, a misunderstanding developed between the above-named executrix and the collector of internal revenue for the*2362  second district of New York, hereafter referred to as the collector, as to the due dates of the quarterly installments of the income tax due from the estate for 1923.  The collector had treated the installments as due *631  upon the basis of a fiscal year ended January 31, 1924, although the return was filed for a fiscal year ended November 30, 1923.  Under date of November 14, 1924, the counsel for the executrix wrote the collector, calling his attention to the confusion as to the due dates of the installments of the tax, to the dates and amounts of previous payments and enclosing their check for $430.09 covering the last installment.  On June 4, 1925, said collector wrote counsel for the executrix that, because of an error in computing the 25 per cent reduction allowed for the year 1923, there was a balance due for the fiscal year ended November 30, 1923, of $71.66, also a penalty of 5 per cent and interest at the rate of 1 per cent per month from the due date of payment.  In reply to this letter, and under date of June 5, 1925, counsel for the executrix wrote the collector stating that they enclosed their check for $78.11, being the amount of tax, penalty and interest demanded*2363  by the collector, and concluded their letter as follows: We have about closed this estate except for this matter and in order to save you and ourselves further annoyance we enclose check for the amount now demanded in your Warrant Unit letter of June 5, 1925, viz., $78.11, in full settlement, compromise and payment of all income taxes due from this estate up to the present time.  The said check so remitted was received by the collector, deposited by him in the Federal Reserve Bank of New York, and collected.  On July 11, 1925, the collector advised the estate that there was due an additional tax of $18.33 for the year 1924.  Counsel for the estate wrote the collector that they wished to dispute liability for such additional tax.  Subsequently and on August 18, 1925, counsel for the estate wrote the collector the following letter: Replying to your letter of August 12, 1925, we enclose our check for $18.33, in full settlement and compromise of any and all claims against the above estate, on account of income taxes to and including the end of the fiscal year 1924.  Enclosed in said letter was a check for $18.33, which was received by the collector, deposited by him in the*2364  Federal Reserve Bank of New York, and collected.  Under date of November 5, 1925, counsel for the estate wrote the collector with reference to the estate of William J. Johnston, deceased, as follows: Dear Sir: We are in receipt of your notice and demand for income tax, which is enclosed herewith, in the above matter.  It is difficult to understand just how you arrive at this additional tax of 55??.  We feel that it is due to the fact that the checking officers failed to recognize that this tax is payable on a fiscal year basis, rather than a calendar year *632  basis; in other words, the installments were due and payable in February, May, August, and November.  However, since the amount is comparatively small, in order to close the matter finally, we enclose check for the amount, which is tendered in full compromise and settlement of all claims against this estate.  Enclosed in the above letter was a check payable to collector of internal revenue in the amount of 55 cents, which check was received by the collector, deposited by him in the Federal Reserve Bank of New York, and collected.  OPINION.  PHILLIPS: The petitioner makes no complaint as to the correctness*2365  of the amount of the deficiency asserted by the Commissioner for 1922.  She asserts as her defense against the assessment of such deficiency that there had been a final accord and satisfaction of the liability of the estate of this deceased for all income taxes due the United States.  It appears from the undisputed facts that during 1925 the collector of internal revenue for the second district of New York made demand upon the executrix for the payment of certain taxes and interest claimed to be due from the estate for the years 1923 and 1924, that payment was made of the amount demanded by the collector, and that in each instance a letter was forwarded with the payment stating in substance that it was in full settlement, compromise and payment of all income taxes due from the estate up to the date of such payment.  Each of the checks were deposited by the collector of internal revenue in the Federal Reserve Bank of New York and collected in due course.  The petitioner takes the position that there was a compromise or accord and satisfaction sufficient to discharge the liability now asserted for income tax for the year 1922.  At the time the alleged compromise was effected the Revenue*2366  Act of 1924 was in effect.  Section 1006 of that act and section 3229 of the Revised Statutes made provision for the offer and acceptance of sums in compromise of liabilities for taxes and penalties.  These sections provide the exclusive method by which Federal taxes might be settled.  ; . Petitioner relies upon the decisions of three Circuit Courts in ; ; and . To the extent that these decisions are contrary to that of the Supreme Court, they are no longer authority.  To the extent that these decisions hold that payment to a collector of an amount offered in compromise and the retention of such payment may raise a presumption that the offer *633  was accepted by the officers empowered to act for the United States, we think they are not in point.  In each of the cases cited the United States was proceeding in a criminal action against the defendant after the defendant*2367  had made an offer in compromise which had been accepted by the collector in two cases and by the Commissioner in the third case.  In each case two judges of the Appellate Court, over the dissent of the third, ruled that evidence of the alleged compromise should have been received and the question submitted to the jury with proper instructions as to whether or not such compromise had been accepted.  These cases were criminal prosecutions in which the burden of proof fell upon the Government.  The offer in compromise, the payment, and its retention may have been sufficient to have required the question to be submitted to the jury as to whether the offer had been communicated to the proper officers and accepted by them.  In the case before us, however, there is nothing in the nature of a criminal prosecution.  The action of the Commissioner in determining the deficiency in question is presumably correct and the burden is upon the petitioner, under both the decisions of the courts and the rules of the Board, to show the contrary.  There is a total lack of any evidence which would indicate that so-called offers in compromise were ever submitted to the officials authorized by statute to*2368  effect a compromise on behalf of the United States.  The circumstances under which the payments were made, being payments of specific amounts demanded as then due and owing and the so-called compromise being submitted merely as a rider to the letter transmitting such payment and not in the manner prescribed by the Commissioner's regulations, render it improbable that the "offers" were treated by the collector as offers in compromise and transmitted to his superiors.  The action of counsel for the estate in making two additional payments in 1925 after the first payment had been made "in full settlement, compromise and payment of all income taxes due from this estate up to the present time" indicates that counsel for the estate did not seriously regard these letters and payments as foreclosing the United States against further demands.  In fact, there is no serious claim made by the estate that any compromise was ever effected with the Commissioner with the consent of the Secretary of the Treasury, as the statute requires, for in the petition in this case the facts upon which the petitioner relies are stated to be "that certain checks were tendered to the collector of internal revenue*2369  and such checks were accepted and collected by the collector in full payment, settlement, compromise and satisfaction of all income taxes due from this estate." The petition was filed before the decision of the Supreme Court in ,*634  was rendered, and the petitioner proceeded upon the theory that a settlement or compromise with the collector was sufficient to bind the United States. Decision will be entered for the respondent.