Court Opinion

ID: 8594527
Source: CourtListenerOpinion
Date Created: 2022-11-23 16:01:31.644428+00
Date Added: 2024-06-11T14:09:38.413721
License: Public Domain

Skelton, Judge,
dissenting:
I respectfully dissent. In my opinion, the majority opinion by failing to hold that Section 662 (a) (2) (B) of the Internal Revenue Code of 1954 (26 U.S.C. § 662(a) (2) (B) (1958)) and the related Treasury Regulations 1.662(a)-3 are unconstitutional and invalid, has placed a stamp of approval upon the acts of the Internal Revenue Service in collecting income taxes from the plaintiff that she did not owe and in exempting the trusts from income taxes that they owed. This has *740caused an unconscionable result to be reached in this case.
Regardless of the elaborate and complicated provisions of the statute and regulations and the involved and sophisticated reasoning of the government, we end up with the following undisputed facts:
1. The plaintiff has been required to pay income taxes on $217,361 of the income of the decedent’s estate that she never received.
2. The trusts were exempted from the payment of income taxes on the $217,361 income of the estate which they received and which taxes they owed.
3. The tax on the $217,361 was levied upon the property of the plaintiff and collected from her under the guise of an income tax, but was actually a direct tax on the corpus of the decedent’s estate that she inherited from him (her husband) under the terms of his will.
4. The direct taxes levied upon and collected from the corpus of the decedent’s estate received by the plaintiff was not a tax that had been apportioned among the several states according to their respective numbers and in proportion to their population as required by the United States Constitution.
5. 'All indirect taxes (estate and inheritance taxes) had already been paid on the transfer of decedent’s estate ($14,500,000 Federal and $4,300,000 to the State of New York).
With these well-established and admitted facts in mind, I will proceed to show that the statute and related regulations, as well as the acts of the Internal Revenue Service, were unconstitutional and invalid, which is the main thrust of plaintiff’s appeal. The majority chose to sidestep this question and refused to decide it. Instead, they decided the case on the narrow basis that the executors of the estate had an option to distribute the corpus and income as they did which resulted in the tax on plaintiff, or to effect distribution a different way without such resulting tax on plaintiff. There is no showing that plaintiff had any control over the executors or that she had anything whatever to do with what they did. It seems unjust to me to place a beneficiary of an estate in a position *741of owing or not owing an income tax 'according to the whim and actions of the executors of the estate. It also appears that this is an unrealistic solution of the problem because ordinarily a person either owes an income tax or he does not owe it according to law and not according to what someone else over whom he has no control does with respect to his property. The court cites Smith v. Westover, 191 F. 2d 1003 (9th Cir.1951), aff'g 89 F. Supp. 432 (S.D. Cal. 1950). That case does not appear to be applicable because it involved the division of trust income for income tax purposes between a trust and a beneficiary of a trust. Whereas, here we are concerned with a formula to allocate estate income among various estate beneficiaries for income tax purposes. Furthermore, in that case, there was an attempt at tax avoidance when the testator tried in his will to convert income to principal by saying such income was principal. None of these facts are present here. Also, the statute in that case did not involve the allocation formula that we have here. The cases are clearly distinguishable.
In my opinion, the court should have decided the constitutional question instead of avoiding it. When it appears that a provision of the Internal Eevenue Code is clearly contrary to the Constitution, it is the duty of a court to declare it unconstitutional. Nicol v. Ames, 173 U.S. 509, 515 (1899). I cannot accept the solution of the majority of the problem involved because it avoids the constitutional questions that should decide the case. All that the majority really decides is that the government wins and the plaintiff loses.
The statute and related regulations involved in this case are contrary to and violate Article I (Section 2, Clause 3) (Section 8, Clause 1) (Section 9, Clause 4), and the Fifth and Sixteenth Amendments of the United States Constitution, as will be clearly shown below.

Section 662(a) (2)(B) and Belated Treasury Regulations Violate the Fifth Amendment by Depriving Plaintiff of Property Without Due Process of Law

The relationship of the Fifth Amendment of the Constitution will be considered first because its violation by the statute *742and regulations is so clearly apparent and obvious. The tax collected from plaintiff was collected as an income tax in connection with her income tax returns. Section 662(a) (2) (B) is an income tax statute and is found in the income tax section of the Code '(subehapter J of Subtitle A) and was used by the District Director in taxing plaintiff on the $217,-361 income of the estate that she never received. He simply added that amount to her gross income. There was no doubt that the IBS considered the tax exacted of the plaintiff to be a tax on income at the time it was collected. In fact, when the case was before our trial judge, the defendant so contended by saying in its brief presented to him:
* * * [IJt is quite clear that Section 662(a) has not imposed a tax upon a distribution of corpus of the estate, but rather the tax has been imposed on the meóme of the estate. [Emphasis supplied.] [Id. at 29.] 1
In fact, the tax exacted of plaintiff was figured and calculated according to the rates applicable to income taxes.
On 'appeal before us the defendant admits in its brief that plaintiff never received the $217,361 of estate income on which she was taxed when it stated:
* * * [TJaxpayer repeatedly states * * * she was entitled to income from only one-half of the corpus of the estate, that she received only this portion of the estate’s income, * * *. The Government here concedes these facts. [Emphasis supplied.] [Id. at 15.] 2
Having conceded that plaintiff did not receive the $217,361 on which she paid an income tax, the act of the government in taxing her on such income flies squarely in the face of the Fifth Amendment as the taking of property without due process of law.
The cases are legion that prohibit the taking of one’s property without due process of law. It hardly seems necessary to cite any of such authorities here because the case is so plain and conclusive that such a taking occurred in this case. *743Simply stated, plaintiff’s property was taken for an income tax on income sbe did not receive and applied to the payment of the income tax owed by the trusts which received the income but who were not required to pay the tax. This appears to be a classic example of the taking of one’s property without due process of law. This amounts to a confiscation of plaintiff’s property and is forbidden by the Fifth Amendment to the Constitution. See also, Nichols v. Coolidge, 274 U.S. 531, 542 (1927); Hoeper v. Tax Comm’n of Wisconsin, 284 U.S. 206 (1931) (decided under the Fourteenth Amendment, but Heiner v. Donnan, 285 U.S. 312, 326 (1932) and Coolidge v. Long, 282 U.S. 582 (1931) hold that legislative restraint imposed by the due' process clause of the Fifth and Fourteenth Amendments is the same). See also, Lewis v. White, 56 F. 2d 390, 391 (D. Mass. 1932), appeal dismissed, 61 F. 2d 1046 (1st Cir.1932) ; and A. Magnano Co. v. Hamilton, 292 U.S. 40, 44 (1934).

Section 662(a) (2) (B) and Belated Treasury Regulations Violate Article I of the Constitution

The government now says in its brief in this court that the tax imposed on plaintiff on the $217,361 of income of the estate was a tax upon the corpus of the estate distributed to the plaintiff. 'In this connection, it says:
* * * [T]he allocation of distributable net income is a measure of a tax upon all distributions including distributions of corpus. [Emphasis supplied.] [Id. at 38.]
In conceding that the tax imposed on plaintiff was a tax on corpus or principal, the defendant runs afoul of Article I of the Constitution by imposing on plaintiff an unapportioned direct tax on principal or capital.
Article I, 'Section 2, clause 3, provides in part:
* * * ’[D]irect Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, * * *.
Article I, Section 8, clause 1, provides:
The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Wei-*744fare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;
Article I, Section 9, clause 4, provides:
No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken. [Footnote omitted.]
The Supreme Court held in the early case of Pollock v. Farmers’ Loan & Trust Co., 158 U.S. 601, 634, 637 (1895), that a tax on capital or principal is a direct tax which must be apportioned among the states in proportion to the population as shown by the census, because of the requirements of the above provisions of Article I.
A direct tax on corpus or principal without such apportionment is unconstitutional, and this cannot be avoided by merely calling it a tax on income. See Richardson v. United States, 294 F. 2d 593, 596 (6th Cir. 1961), cert. denied, 369 U.S. 802 (1962); Commissioner v. Obear-Nester Glass Co., 217 F. 2d 56, 58 (7th Cir. 1954), cert. denied, 348 U.S. 982 (1955), rehearing denied, 349 U.S. 948.
The defendant makes no claim or pretense that the tax imposed on plaintiff as a direct tax on principal or capital had been uniformly apportioned among the states according to the census as required by Article I of the Constitution. Accordingly, Section 662(a) (2) (B) and related regulations are unconstitutional and the levying and collection of such taxes from the plaintiff was invalid. In further support of this proposition, it should be pointed out that it is the universal practice of the IBS in all of the states not to tax beneficiaries of estates on the corpus of such estates when received by them where there has been no income earned by the estate, but in the case before us a beneficiary has been taxed on the corpus of an estate which she received pursuant to the terms of her husband’s will. This has been done despite the requirement of Article I, Section 8, clause 1, that provides in part:
* * * [A] 11 Duties, Imposts and Excises shall le uniform throughout the United States; [Emphasis supplied.]

*745
Section 662(a)(8)(B) and, Related Treasury Regulations Violate the Sixteenth Amendment to the Constitution

The defendant makes the further argument that even if the tax imposed on the plaintiff is a direct tax on the corpus or principal that she received to the extent of a tax on the $217,361, nevertheless, it is a legal tax because such corpus or principal that she received is income and taxable. This is indeed a novel and unreasonable contention. Here again defendant’s argument is contrary to another provision of the Constitution, namely, the Sixteenth Amendment.
Prior to the adoption of the Sixteenth Amendment, the Supreme Court held in Pollock v. Farmers’ Loan & Trust Co., supra, that Congress did not have the power to impose an income tax. In that case the Court held invalid the Act of August 15, 1894 [August 27, 1894], c. 349, § 28, 28 Stat. 509, 553, which included in income subject to tax of “money and the value of all personal property acquired by gift or inheritance.” The Sixteenth Amendment was adopted in 1913. The very first income tax law enacted by Congress after the adoption of the Amendment, provided that the value of property acquired by “gift, bequest, devise or descent” was excluded from net income. Act of 1913, c. 16, § IIB, 38 Stat. 114, 167. The same exclusions have existed ever since. For instance, Section 102 of the Internal Revenue Code of 1954 provides:
§ 102. Gifts and inheritances.
(a) General rule.
Gross income does not include the value of property acquired by gift, bequest, devise, or inheritance. [26 U.S.C. § 102 (1954)]
The attempt of defendant to include the inheritance (corpus or principal) of the plaintiff in her gross income is directly contrary to such section of the Code. The defendant seeks to avoid this provision of Section 102(a) by pointing to Section 102(b) (2), added in 1954, which provides in part:
'(b) Income.
Subsection (a) shall not exclude from gross income—
*746(2) where the gift, bequest, devise, or inheritance is of income from property, the amount of such income.
* * * Any amount included in the gross income of a beneficiary under subchapter J shall be treated for purposes of paragraph (2) as a gift, bequest, devise, or inheritance of income from property. [Emphasis supplied.]
The defendant relies especially on the last paragraph quoted above by arguing that since the corpus of the estate was included by the IRS in the gross income of the plaintiff, at least to the extent of the $217,361, such corpus to that extent became income. I do not agree. The above section of the Code refers to gross income. As will be pointed out below, income is income and not corpus. Income is completely separate and distinct from principal, corpus, or capital. Even if Congress intended the section to have the meaning defendant attributes to it, Congress had no power to convert corpus into income by merely calling it income. I do not think that Congress intended any such meaning. The section refers to income and not to corpus or principal. If it does mean corpus or principal, then it is unconstitutional as a direct unapportioned tax on principal or capital. Furthermore, it violates the Sixteenth Amendment to the Constitution which authorizes an income tax only on income.
The Sixteenth Amendment did not define “income,” but as has been pointed out by the courts, the term had a well-defined meaning at the time the Amendment was adopted. This meaning was separate, apart, -and different from capital, corpus, or principal. In Eisner v. Macomber, 252 U.S. 189 (1920), Mr. Justice Holmes stated:
* * * I think that the word “incomes” in the Sixteenth Amendment should be read in “a sense most obvious to the common understanding at the time of its adoption.” * * * [Id. at 219-20.]
In United States v. Safety Car Heating & Lighting Co., 297 U.S. 88 (1936), Mr. Justice Cardozo said:
Income within the meaning of the Sixteenth Amendment is the fruit that is born of capital, not the potency of fruition. With few exceptions, if any, it is income as *747the word is known in the common speech of men. [Id. at 99.]
It is clear that when the 'Sixteenth Amendment was adopted, the term “income” had a well-defined meaning that was distinguished from principal or capital.
The Supreme Court has held that the meaning of the Sixteenth Amendment cannot “be extended 'beyond the meaning clearly indicated by the language used.” James v. United States, 366 U.S. 213 (1961). In that case, Mr. Justice Whittaker said:
* * * Equally well settled is the principle that the Sixteenth Amendment “is to be taken as written and is not to be extended beyond the meaning clearly indicated by the language used.” Edwards v. Cuba R. Co., 268 U.S. 628, 631.1 * * *
The Sixteenth Amendment authorized Congress to lay and collect taxes on incomes. As shown by the above decisions, income was not and is not the same as principal or capital. Consequently, the attempt of defendant in this case to convert principal or corpus of the estate of the deceased into income of the plaintiff is clearly contrary to the Sixteenth Amendment and to Section 102 of the Internal Revenue Code of 1954.

The Tax Imposed on Plaintiff is not am, Indirect Tax on the Receipt of Property that need not be Apportioned

Defendant makes one last argument which in my opinion has no validity and is completely unrealistic. It argues that in any event the tax imposed on plaintiff is an indirect tax on the receipt of property and it need not be apportioned. This appears to be an exercise in semantics. It is just another way of describing a tax on the transfer of property. An indirect tax is a tax imposed on the transfer of property. The estate or *748inheritance tax is a good example. The receipt oí the corpus of an estate by a beneficiary is an integral part of the transfer of such corpus from the estate. The transfer (estate) taxes had already been paid on the estate of the decedent in the •total sum of $18,800,000 before the tax involved here was collected from the plaintiff. If carried to its logical conclusion, defendant’s argument would lead to double taxation on the transfer of the estate. There is no authority in law that authorizes the government to impose any hind of tax, direct or indirect, on the receipt of the corpus of an estate by a beneficiary without apportionment as required by Article I of the Constitution. The argument of defendant to the contrary is purely theoretical and without support in the ¡Constitution, the Internal Revenue Code, or the decisions of the courts.
Defendant’s theory of an indirect tax on the receipt of property would have one of two results, namely (1) a double tax on the transfer of property, or (2) a tax on the ownership of property, which is a direct tax on the principal or corpus and is invalid unless apportioned as required by the Constitution.
Furthermore, Section 1(a) of the Internal Revenue Code of 1954 imposes a tax “on the taxable income” of every individual. It does not impose a tax on the transfer or receipt of property. The tax here was imposed on the $217,361 included in plaintiff’s taxable income.

Conclusion

The defendant argues that Congress enacted 'Section 662 (a) (2) (B) in order to eliminate the necessity of “tracing” the source of distributed property and to facilitate bookkeeping and auditing by executors and the IRS. Even though this may be a laudable intent, such purpose does not allow the Congress to circumvent or override the provisions of the Constitution. The Constitution is the source of the powers of the Congress and it defines the boundaries within which Congress can function. In the case before us, Congress has *749exceeded its powers and gone beyond the boundaries established for its operation by the Constitution. There can be no doubt that there is a limitation on the taxing power conferred upon Congress by the Constitution. When the enforcement and application of a taxing statute is so arbitrary as to amount to the confiscation of a taxpayer’s property, as is the case here, both the statute and the action should be held to be unconstitutional and invalid. See Nichols v. Coolidge, 274 U.S. 531 (1927) and Heiner v. Donnan, 285 U.S. 312 (1932).
The majority opinion states:
* * * [T]he taxpayer will not be allowed to “trace” in order to show that the source of part of his receipts was in fact not “distributable net income” but corpus.
This is directly contrary to the decision of the Supreme Court in Heiner v. Donnan, supra, when the court said in commenting upon the statute, involved in Schlesinger v. Wisconsin, 270 U.S. 230 (1926):
•* * * a statute which imposes a tax upon an assumption of fact which the taxpayer is forbidden to controvert As so arbitrary and unreasonable that it cannot stand under the Fourteenth Amendment. [Emphasis supplied.] [Id. at 325.]
■The court stated further in that case:
Nor is it material that the Fourteenth Amendment was involved in the Schlesinger case, instead of the Fifth 'Amendment, as here. The restraint imposed upon legislation by the due process clauses of the two amendments is the same. Coolidge v. Long, 282 U.S. 582, 596. That a federal statute passed under the taxing power may be so arbitrary and capricious as to cause it to fall before the due process of law clause of the Fifth Amendment is settled. Nichols v. Coolidge, 274 U.S. 531, 542; Brushaber v. Union Pac. R. Co., 240 U.S. 1, 24-25; Tyler v. United States, supra, p. 504. [Id. at 326.]
■It appears that the majority opinion, contrary to the above decision of the Supreme Court, is upholding a statute which “assumes as a fact which the taxpayer is forbidden to controvert” that the $217,361 was “income” and not “corpus.” The *750statute, given this meaning, clearly violates the due process clause of the Fifth Amendment to the Constitution.3
The majority opinion holds, in effect, that Section 662(a) (2) (B) creates a conclusive presumption that distributions subject to the operation of that section are distributions of income, and, consequently cannot be rebutted by the taxpayer. We held otherwise in the case of Mott v. United States, ante, at 127, 462 F. 2d 512, when we ruled that such a presumption was not conclusive with respect to charitable distributions, and we held that tracing should be allowed to show that the distributions were from corpus and not from income. It is of particular significance that the government in that case argued that such tracing should be allowed, notwithstanding the statute, in order to defeat a charitable deduction, which is exactly contrary to the position it takes in the present case. We agreed with the government in that case that tracing should be allowed in order to prevent injustice and inequity toward the government. Here, equity and justice is on the side of the taxpayer, especially since it is conceded that there was no manipulation of the distribution by the executors to avoid taxes. Yet the majority refuses to make an exception for the taxpayer in this case as we did for the government in the Mott case. As tracing was allowed as an exception in that case, it should be allowed here, although admittedly the facts are different.
Since the majority refuses to face the constitutional issue, an equitable solution of the whole problem would be to interpret the statute in such a way as to hold that it creates a rebuttable presumption that such distributions as we have here are from income, which may be overcome by evidence of the taxpayer.4 On that basis, the plaintiff would prevail in *751this case 'because it is admitted by the government that the distribution of $217,361 to the plaintiff on which she was taxed was to that extent corpus and not income of the estate received by plaintiff during the taxable year in question. Such an interpretation of the statute would remove the constitutional question from the case.
A solution to this whole problem would be for Congress to amend Section 663(c) of the Internal Revenue 'Code so as to make it apply to estates. As now written, it only applies to trusts and is known 'as the “separate share” rule. In other words, where a trust has more than one beneficiary, the separate shares of the beneficiaries are treated as separate trusts. This prevents a beneficiary who receives corpus from being taxed on an amount 'in excess of the distributable net income of the trust of his share. If the separate share rule were extended to estates, the problem we have in the present case would not arise.5 There is no logical reason why Section 663(c) should not apply to estates as well as to trusts. This was no doubt an oversight when the statute was drafted.
When the facts and the arguments of the parties are carefully considered and one arrives at the moment of decision in this case, it is clear that the IRS either taxed the plaintiff on the $217,361 of the income of the estate that she did not receive, or it levied and collected such tax on the corpus of the estate which she did receive under the guise of an income tax. In either case, the tax was unconstitutional and invalid.
For all of the foregoing reasons, I would hold that Section 662(a) (2)(B) and Section 1.662(a)-3 of the Treasury Regulations as applied to plaintiff in this case are unconstitutional and the collection of the tax from the plaintiff was invalid. Alternatively, I would hold that the statute and the regulations create a rebuttable presumption that distributions such as we have here are -from income which might be overcome 'by the taxpayer by credible evidence, and that the taxpayer has overcome such presumption in this case. In either *752oase, I would enter judgment for the plaintiff for the Bum of $248,256.75, plus interest from the date of payment as authorized by law.
FINDINGS OF FACT
The court, having considered the evidence, the report of Trial Commissioner Saul Eichard Gamer, and the briefs and arguments of counsel, makes findings of fact as follows:
1. Plaintiff is a citizen of the United States. Her post office address is in New York, New York.
2. William Hale Harkness (hereinafter referred to as the decedent) was a resident of the State of New York and the husband of plaintiff when he died on August 12,1954. Thereafter, plaintiff remarried and was known as Eebekah Harkness Kean, but at a still later date she was divorced and now uses the name of Eebekah Harkness. At the time of his death, the decedent was also survived by his children, Anne Harkness (now Anne Harkness Mooney) and Edith Hale Harkness, and by his stepchildren (the children of the plaintiff), Allen West Pierce and Anne Terry Pierce, none of whom had then attained the age of thirty years. Anne Harkness Mooney is the child of the decedent by a former marriage, and Edith Hale Harkness is the child of the decedent and the plaintiff.
3. The last will and testament of the decedent was dated May 18,1948, and was admitted to probate in the Surrogate’s Court of New York County, New York, on August 30,1954. On that date letters testamentary and letters of testamentary trusteeship were issued to Malcolm Pratt Aldrich and the New York Trust Company, named in the will as executors thereof and as trustees of the testamentary trusts established thereunder.
4. By Article SECOND, Paragraph A of his will the decedent gave, devised, bequeathed and appointed one-half of his residuary estate to plaintiff. By Article SECOND, Paragraphs B.2 and D he gave, devised, bequeathed and appointed the remaining one-half of his residuary estate, after the deduction therefrom of ¡all the taxes referred to in Article TENTH of his will, to the trustees of four testamen*753tary trusts for Anne Harkness, Edith Hale Harkness, Allen West Pierce and Anne Terry Pierce. The pertinent portions of Article SECOND provided as follows:
SECOND: All the rest, residue and remainder of the property, both real and personal, of every kind and description whatsoever and wheresoever situated which, at the time of my death, shall belong to me or to which I shall be entitled or which shall be subject to my disposal at the time of my death or over which I shall have any power of appointment (all of which is sometimes herein referred to as my ‘residuary estate’), I dispose of as follows:
A. If my said wife, EEBEKAH WEST HAEKNESS, survives me, I give, devise, bequeath and appoint one-half (V¿) of my residuary estate to my said wife.
B. * * *
2. If my said wife survives me and any descendants of hers or of mine also survive me, I give, devise, bequeath and appoint the remaining one-half (1/2) of my residuary estate, after the deduction therefrom of all of the taxes hereinafter referred to in Article TENTH of this my Will, and I direct that the same shall be disposed of, as hereinafter provided in paragraph D of this Article SECOND.
‡ ‡ •]>
D. Any part or all of my residuary estate which upon my death is directed to be disposed of as herein provided in this paragraph D of this Article SECOND shall be divided into such number of equal shares as there shall be children of my said wife and children of mine me surviving and children of my said wife and children of mine who shall have predeceased me leaving descendants me surviving, and I direct that one of such equal shares be segregated for each child of my said wife and for each Child of mine me surviving and that one of such equal shares be subdivided per stirpes among the descendants me surviving of each such deceased child of my said wife or of mine, and that such subdivisions be segregated for such descendants, and I give, devise, bequeath and appoint such shares and subdivisions so segregated as follows:
* * *
I give, devise, bequeath and appoint the share or subdivision, as the case may be, segregated for each descend*754ant of my said wife and for each descendant of mine who shall not have attained the age of thirty (30) years at the time of my death to my Trustees, in trust, to hold, administer and dispose of the same, to collect the profits and income and to pay the net income to the descendant of my said wife or of mine for whom the share or subdivision, as the case may 'be, was segregated, until he shall have attained the age of thiry (30) years, and then to transfer, convey and pay over to him the principal of such share or subdivision, as the case may be; * * *.
5. Article TENTH of the decedent’s will provided as follows:
TENTH: I direct that all legacy, succession, transfer, estate or inheritance taxes, payable by my estate with respect to any property disposed of by this my Will or payable by any recipient of any such property by reason of any laws now or hereafter in force shall be paid by my Executors out of my estate as part of the expenses of administration thereof, provided, however, that if my said wife, REBEKAH WEST HARKNESS, survives me, no part of such taxes shall be deducted from or payable out of the one-half (y2) of my residuary estate disposed of pursuant to the provisions of paragraph A of Article SECOND of this my Will.
6. Article ELEVENTH of decedent’s will provided as follows :
ELEVENTH: All of the income collected by my Executors until the distribution of my residuary estate, less such taxes, expenses and charges as are properly payable and deductible therefrom, shall be distributed proportionately among each of those entitled to the income of a trust or a part of my residuary estate, except that if distribution of my residuary estate shall not be made simultaneously to all of those entitled thereto outright and as Trustees, or if one of those entitled to the income of a trust shall die before distribution of my residuary estate, an adjustment of the income shall be made by my Executors.
7. Decedent’s will did not require the executors thereof to pay out income to residuary legatees at any particular time prior to the ultimate distribution of the decedent’s residuary estate.
*7558. For the year 1955 the income of the estate for estate accounting purposes was $1,022,355.03, computed as follows:
Dividends:
Domestic -_ $863,108.60
Foreign. 5,075.75 $868,184.26
Interest-
State and municipal....... 191,366.60
U.S. Treasury___ — 2,775.00
Other. 2,468.16 196,599.66
Rents.*. 1,437.60
Less maintenance.. 1,385.00 52.60
Total. $1,064,836.41
Less:
Executors' commissions allocable to income for estate accounting purposes..... 31,720.02
Foreign income tax withheld on foreign dividends. 761.36
Total. 32,481.38
Income for estate accounting purposes____ $1,022,355.03
9. (a) At the time of the administration of the decedent’s estate, it was a common practice in New York for executors to make simultaneous distributions of the residuary estate among all the residuary legatees on a basis proportionate to their respective interests therein. This practice was followed with respect to distributions of principal and also distributions of income, whether earned by principal or by undistributed income.
(b) Where wills provided for payment of estate or other death taxes out of one or more shares of the residue, but not out of one or more other shares, it was also a common practice in New York at that time for executors to make distributions of the residuary estate to the residuary legatee or legatees whose interests were not to be reduced by the payment of such taxes, simultaneously with and proportionate to any such tax payments. Since such tax payments were made from principal for estate accounting purposes, the offsetting distributions would also be made from principal for such purposes.
(c) The purpose of executors in making the simultaneous distributions described in paragraphs (a) and (b) was to avoid complicated calculations of shares of income, earned either by principal or by undistributed income, which were due the various residuary legatees and to continue the pro rata division of income to which the residuary legatees would become entitled.
*75610. In tbe administration of tbe 'decedent’s estate, tbe executors followed both of the common practices described in finding 9, in order to avoid complicated calculations of the shares of income to which plaintiff and the four trusts were entitled.
11. (a) During 1955, the executors distributed to the beneficiaries of the residuary estate money or property (i.e., stocks and bonds, valued as indicated) as follows:
Trusts under decedent’s will for:
Anne Harkness Pate Plaintiff Mooney Edith Hale Allen Anne Harkness West Pierce Terry Pierce
Jan. 1. $4,600,000.00 $1,126,000.00 Jan. 13. 40,000.00 10,000.00 Feb. 8. 4,310,000.00 . Mar. 16. 120,000.00 30,000.00 June 6. 26,000.00 6,260.00 July 11. 80,000.00 20,000.00 Aug. 29. 16,000.00 4,000.00 Sept. 16. 60,000.00 16,000.00 Nov. 3. 72,000.00 18,000.00 Nov. 14. 18,146,013.29 881,139.62 Deo. 30. 98,766.22 24,688.80 $1,125,000.00 $1,125,000.00 $1,125,000.00 10,000.00 10,000.00 10,000.00 367666755.367656766.367666756 6,250.00 6,250.00 6,260.60 20,000.00 20,000.00 20,000.00 4,000.00 4,000.00 4,000.00 16,000.00 15,000.00 15,000.00 18,000.00 18,000.00 18,000.00 881,139.62 881,139.63 881,139.62 24,688.81 24,688.81 24,688.81
$27,467,768.61 $2,134,078.42 $2,134,078.43 $2,134,078.44 $2,134,078.43
(b) During 1955 the executors received on behalf of decedent’s estate the following: $854,413.50 in dividends from domestic corporations (of which the sum of $1,305 was a liquidating dividend allocated to estate principal for estate accounting purposes); $5,075.75 in gross dividends from foreign corporations (from which foreign income tax of $761.36 was withheld at the source); $191,356.50 in interest on obligations of states of the United States or their political subdivisions (after deducting $26,481.73 interest accrued to the dates of purchase of certain of those obligations which was paid to sellers of such obligations); $2,775 in interest on United States Treasury obligations (of which the sum of $275 was interest wholly exempt from Federal income tax); $10,144.13 in other interest (of which the sum of $7,675.97 was interest to the date of decedent’s death on a refund of 1941 Federal income tax and was allocated to estate principal for estate accounting purposes); $1,437.50 *757in gross rents from a cooperative apartment; $746.54 in commissions (all of which, was allocated to estate principal for estate accounting purposes); and $1,574,405.71 in net realized gains from the sale or exchange of capital assets (all of which was allocated to estate principal for estate accounting purposes).
(c) During 1955 the executors paid on behalf of decedent’s estate the following: $346.84 in interest (all of which was allocated to estate principal for estate accounting purposes) ; $17,656.33 in New York State income and transfer taxes (all of which was allocated to estate principal for estate accounting purposes); $31,720.02 in executors’ commissions (all of which was allocated to income for estate accounting purposes, and $25,937.70 of which was allocated, for Federal income tax purposes, to the production of income not exempt from Federal income tax); and $1,385 for maintenance of a cooperative apartment. For Federal income tax purposes in 1955 the estate incurred a net loss of $616.42 from a partnership and was entitled to a deduction of $1,616.45 for Federal estate tax attributable to income in respect of the decedent.
12. On February 8, 1955, the executors paid $4,310,000 to the New York State Tax Commission on account of the New York estate tax, and on November 14, 1955, they paid $14,621,454.81 to the District Director of Internal Revenue on account of federal estate tax. When the executors made each of those payments, they also distributed to plaintiff, or to plaintiff and to each of the trusts for the four children, amounts calculated so that the amount distributed to plaintiff equaled the particular estate tax paid plus the aggregate amount, if any, distributed to the four trusts. Thus, the distribution of $4,310,000 to plaintiff on February 8, 1955, equaled the New York estate tax payment made on the same date. The distribution of $18,146,013.29 to plaintiff on November 14,1955, equaled the sum of the federal estate tax payment of $14,621,454.81 made on the same date and the aggregate distribution of $3,524,558.49 which was made, also on the same date, to the four trusts, i.e., $881,139.62 to each trust. *758Whenever the executors made any other distribution to plaintiff during 1955, they also distributed to each of the four trusts amounts calculated so that the amount distributed to plaintiff on any date equaled the aggregate amount distributed to the trusts on that date.
13. The distributions shown in finding 11(a) as having been made to the beneficiaries of the residuary estate on January 1, February 8, and November 14, 1955, were made from principal for estate accounting purposes, as were the payments of New York and federal estate taxes made on February 8 and November 14, 1955, respectively. All other distributions to such beneficiaries set forth in such finding were made from income for estate accounting purposes. The principal distributions consisted of cash, stocks and bonds, and the income distributions consisted entirely of cash. The aggregate principal distributions of $4,500,000 to the four trusts on January 1, 1955 were made in order to fund the trusts initially and the aggregate principal distributions of $3,524,558.49 to the trusts on November 14, 1955 were made for the purpose of further partially funding them.
14. In making the payments of the New York and federal estate taxes as hereinabove described, the executors, for estate accounting purposes, deducted such taxes from the trusts’ aggregate one-half interest in the principal of the residuary estate.
15. The executors’ aocounts with respect to the calendar year 1955, among others, were judicially settled and allowed by decrees of the Surrogate’s Court of New York County, New York, dated February 24, and December 28, 1956. The court appointed a special guardian to represent the infants in the proceedings, including Edith Hale Harkness, Allen West Pierce, and Anne Terry Pierce. The special guardian filed written reports finding that the accounts were in all respects true and correct insofar as the interests of the infants were concerned.
16. In the accounts of the executors referred to in finding 15, the distributions were characterized as distributions of estate principal or estate income as set forth in finding 13. *759Thus in such accounts the distributions were characterized in the aggregate as follows:
Beneficiary Income Principal Total
Plaintiff... $611,765.22 $26,956,013.29 $27,467,768.61
Trusts for:
Anne Harkness Mooney. 127,938.80 2,006,139.62 2,134,078.42
Edith Hale Harkness. 127,938.81 2,006,139.62 2,134,078.43
Allen West Pierce. 127,938.81 2,006,139.63 2,134,078.44
Anne Terry Pierce. 127,938.81 2,006,139.62 2,134,078.43
$1,023,610.45 $34,980,571.78 $36,004,082.23
The aggregate amount of $1,023,510.45 characterized as income was stated in those accounts to consist of $1,022,355.03 of 1955 estate income and $1,155.42 of 1954 estate income theretofore undistributed.
17. The executors filed a timely federal fiduciary income tax return on behalf of the estate for the calendar year 1955 with the District Director of Internal Revenue for the Lower Manhattan District, New York. By letter dated April 9, 1958, the District Director advised the executors that examination of that return by his office had disclosed that no change was necessary and that the return would be accepted as filed.
18. The distributable net income of the estate for 1955 as shown on the federal fiduciary income tax return for that year was $1,005,682.94, computed as follows:
Dividends. $859,489.25
Interest:
U.S. Treasury. $2,609.00
Other..... 10,144.13 12,044.13
Partnership income. .... (616.42)
Rents... 1,437.50
Net capital gains.- 1,574,406.71
Other income — commissions. 746.64
Total..... $2,448,106.71
Less:
Interest.. — $346.84
N. Y. State income and transfer taxes... 17,666.33
Other deductions:
Executors’ commissions on taxable income... $25,937.70
Apartment maintenance. 1,385.00
Estate tax attributable to income in respect of decedent_ 1,616.46 28,939.15
Total... 46,942.32
$2,401,164.39
Add:
Tax-exempt interest (as adjusted). 178,924.26
Total.... $2,680,088.66
Less:
Net capital gains.- 1,574,405.71
Distributable net income. $1,005,682.94
*76019. (a) A deduction of $826,758.68 was taken on the 1955 federal fiduciary income tax return for distributions to estate beneficiaries, consisting of $821,682.93 in dividends from domestic corporations and $5,075.75 in gross dividends from foreign corporations. The difference of $178,924.26 between the estate’s distributable net income of $1,005,682.94 and the distributions deduction of $826,758.68 consisted of tax-exempt income (interest) less expenses allocable to such income.
i(b) An explanatory statement attached to the return stated:
Application of the formula for determining inclusions ■in gross income of beneficiaries prescribed in Section 662(b) of the Internal Bevenue Code, if proper in this case, may result in the following allocations of shares of income and credits:
Income
(including Domestic Tax-Exempt Foreign
tax-exempt Dividends Foreign Income less Tax
income) less Qualifying Dividends Allocable Credit
allocable for Credit Deductions
deductions
a) Rebekah W. Harkness $767,242.62 $626,867.71 $3,872.33 $580.86
Trusts for:
b) Anne H. Mooney_ 59,610.08 48,703.80 300.86 45.13
c) Edith H. Harkness_ 69,610.08 48,703.80 300.86 45.13
d) Allen W. Pierce. 59,610.08 48,703.81 300.85 45.13
e) Anne T. Pierce. 59,610.08 48,703.81 300.85 46.12
$1,005,682.94 $821,682.93 $6,075.75 $178,924.26 $761.36
20. On May 16,1956, plaintiff timely filed a federal income tax return for the calendar year 1955 with the District Director of Internal Bevenue for the Upper Manhattan District, New York, and paid the income tax of $234,980.22 shown on the return to be due. In that return plaintiff included in her gross income, as income received from the estate, domestic dividends in the amount of $410,841.17 and foreign dividends in the amount of $2,537.87, or a total of $413,379.04.1 Plaintiff also claimed a foreign tax credit of $769.78, of which $380.68 was stated to be her proportionate share of the foreign tax of $761.36 paid by the estate.
*76121. In 1961, the District Director of Internal Revenue for the Manhattan District, New York, assessed additional federal income tax for the calendar year 1955 against plaintiff in the amount of $188,153.35, plus interest thereon in the amount of $60,103.40. That assessment was based upon the inclusion in plaintiff’s 1955 gross income of an additional $216,026.54 of the domestic dividends and an additional $1,334.46 of the foreign dividends received in 1955 by the estate, and upon the allowance to plaintiff of an additional foreign tax credit of $200.17 deriving from the foreign tax of $761.36 paid by the estate. Those adjustments resulted in the inclusion in plaintiff’s 1955 gross income of an amount equal to 76.2907 percent of the sum of $826,758.68, the amount taken on the 1955 income tax return of the estate as the deduction for distributions to estate beneficiaries. The total amount included in plaintiff’s 1955 income as being received from the decedent’s estate also represented 76.2907 percent of the distributable net income of the decedent’s estate in the amount of $1,005,682.94 less the tax-exempt interest included therein (less expenses allocable to such interest) in the sum of $178,924.26, or a remainder of $826,758.68. On August 21, 1961, plaintiff paid the additional tax and interest assessed for 1955 in the total amount of $248,256.75.
22. The percentage, 76.2907 percent, expresses the relationship of $27,467,768.51, the total amount of estate principal and income distributed to plaintiff in 1955, to $36,004,082.23, the total amount of estate principal and income distributed to all beneficiaries of decedent’s estate in 1955.
23. On July 25, 1963, plaintiff (under her then name of Rebekah Harkness Kean) timely filed with the District Director a claim for refund of federal income tax for the calendar year 1955 and interest in the total amount of $248,256.75, plus interest on such total amount from the date of payment.
24. Plaintiff has received no notice by certified or registered mail of disallowance of any part of her claim for refund. Plaintiff has filed no written waiver of the requirement of a notice of disallowance by certified or registered mail. No part of the sum of $248,256.75 has been refunded to plaintiff.
*76225. No action on plaintiff’s claim, other than that stated herein, has been taken by the Congress of the United States or by any of the departments of the Government. No transfer or assignment of plaintiff’s claim, or any part thereof, has ever been made. Plaintiff is, and always has been, the sole person entitled to assert such claim.
CONCLUSION 03? Law
Upon the foregoing findings of fact, which are adopted by the court and made a part of the judgment herein, the court concludes as a matter of law that plaintiff is not entitled to recover and the petition is dismissed.

 As will be discussed later, defendant now admits tbe tax was upon tbe corpus and not on income.

 The $217,361 on wbicb plaintiff was taxed was not a portion of tbe one-balf of tbe income plaintiff received, but was a portion of tbe one-balf tbe trusts received.

 “A proper regard for its genesis, as well as its very clear language, requires also that [the Sixteenth] Amendment shall not be extended by loose construction. . . . Congress cannot by any definition [of income] it may adopt conclude the matter, since it cannot by legislation alter the Constitution, from -which alone it derives its power to legislate, and within whose limitations alone that power can be lawfully exercised.” Eisner v. Macomber, 252 U.S. 189, 206. [id. at 248.]

 See George Craven, Taxation of Estate and Trust Income Under the 1954 Code, 103 Univ. of Pa. L. Rev., 602, 614 (1954-1965), where It Is stated: “* * * Hiere is a serious question about the constitutionality of an income tax statute which taxes to a beneficiary receiving principal an amount of income in excess of an amount which may inure to his benefit. This provision requires prompt remedial action by Congress in order to eliminate any requirement that amounts of principal distributed by an estate in process of administration shall be treated as distributions of income.”

 Nor a discussion of the separate share rule, see George Craven, Taxation of lístate and Trust Income Under the 1954 Code, supra, at 616; and ICamin, Surrey & Warren, The Internal Revenue Code of 1954, Trusts, Estates and Beneficiaries, 54 Colum. L. Rev. 1237, 1257-59 (1954).

 It Is obvious that plaintiff intended to report as gross income one-half of the distributions deduction taken on the estate’s federal income tax return for 1955. Thus, plaintiff should have reported $410,841.47 of domestic dividends and $4113,379.34 of total dividends as received from the estate, or an increase of thirty cents in each ease.