Court Opinion

ID: 9453223
Source: CourtListenerOpinion
Date Created: 2023-08-04 18:07:28.273286+00
Date Added: 2024-06-11T17:33:34.049217
License: Public Domain

DAVIS, Judge
(concurring):
I would adopt the whole of Commissioner (now Judge) Maletz’s opinion (with minor modifications it is unnecessary to state now.) The taxpayer’s concession, as I understand it, is not that the gift-tax statute, properly construed, covers the situation before us but merely that the statute is broad enough in its literal terms. To me that position still leaves in dispute the correctness of the construction adopted by the Internal Revenue Service, and the court should resolve that dispute. Since I agree, in largest part, with Commissioner Maletz’s treatment of the question, I would follow it *973and make it part of the opinion of the court.
DURFEE, Judge, concurs in the foregoing concurring opinion.
COLLINS, Judge, took no part in the decision of this case.
FINDINGS OF FACT
1. This is a timely suit for refund of a gift tax and interest thereon totaling $12,390.87, paid by plaintiff in 1961 pursuant to a deficiency assessment for the taxable year 1949.
2. Robert F. Wagner, Sr., deceased, retired as a member of the United States Senate in June 1949. At the time of his retirement the decedent was a contributing member of both the United States Civil Service Retirement System and the Employees’ Retirement System of the State of New York. Contemporaneously with his retirement, the decedent made an irrevocable election under each of said retirement systems pursuant to which he became entitled to a reduced retirement allowance for life and, at his death, the plaintiff, as the designated survivor-annuitant, became entitled to an annuity for his life. The two annuities payable to plaintiff under the decedent’s election had a value of $44,429.17 in 1949.
3. Under the federal laws and regulations governing U. S. Civil Service retirement benefits in 1949, the election to designate (and the designation of) a survivor-annuitant by any federal government employee in 1949 became irrevocable at the time such election was filed with, and accepted by, the Civil Service Commission.
4. At the time of the decedent’s retirement and the irrevocable designation of plaintiff as survivor-annuitant in 1949, there were in operation, in addition to the United States Civil Service Retirement System, pension plans provided by federal law for the various branches of the Armed Services of the United States, the pension plan for the railroad industry authorized by the Railroad Retirement Act, as well as retirement plans established by many large industrial organizations in the United States, and others, regarding which the government had full knowledge, including its knowledge of the almost innumerable designations of survivor-annuitants made under the provisions of many such plans prior to the designation by the decedent of the plaintiff as survivor-annuitant under the provisions of the United States Civil Service Retirement System and the Employees’ Retirement System of the State of New York involved here.
5. The only witness at the trial of the case was Ellis W. Manning, who was called by plaintiff in an effort to establish that in 1949 it was the practice or policy of the then Bureau of Internal Revenue not to treat the designation of a survivor-annuitant under a pension plan as subject to the gift tax provisions of the Internal Revenue Code of 1939. His testimony showed the following:
(a) Manning was head of the Interpretative Division, Chief Counsel’s Office, Bureau of Internal Revenue, from 1940 until his retirement from government service in 1949. This division functioned in an advisory capacity to the Chief Counsel or to the Commissioner of Internal Revenue in matters of establishing or changing policies or administrative practices with respect to taxability and, therefore, tried to keep abreast of all existing policies and administrative practices in order to discharge its advisory and interpretative function. However, the Interpretative Division was not the only unit within the then Bureau that functioned in an advisory capacity to the Commissioner in matters of establishing or changing policies or administrative practices with respect to taxability. For example, estate and gift taxes were administered by an Estate and Gift Tax Unit that was independent of the Chief Counsel’s Office and was headed by a Deputy Commissioner who was directly answerable to the Commissioner. The Deputy Commissioner in charge of the unit had discretion as to whether or not to refer a matter to the Chief Counsel’s *974Office for advice and frequently did so. However, he frequently made decisions for himself without consulting with anyone in the Chief Counsel’s Office or its Interpretative Division. Thus, in the estate and gift tax field, the Interpretative Division was not always involved when it was contemplated that the Bureau would resolve a debatable issue of taxability by ruling or otherwise.
(b) It was one of Manning’s responsibilities as head of the Interpretative Division to approve all recommendations issuing from the Division. He had three assistants who had different jurisdictions, and he himself personally handled income and estate tax matters, and perhaps gift tax matters, although he “never was very conscious of the gift tax.”
(c) Manning had no knowledge or recollection as to whether, during his tenure in the Interpretative Division, there was any administrative policy or practice, by ruling or otherwise, with respect to the taxability of survivor-beneficiary designations under the gift tax provisions of the 1939 Code.
6. At the time of Manning’s retirement in 1949, there was on file with the United States Civil Service Commission a designation of his wife as survivor-beneficiary. Since then Manning has received payments under the Civil Service Retirement Plan. However, Manning never filed a gift tax return with respect to the 1949 designation of his wife as survivor-annuitant with respect to such filing; in his words, “I never gave it a thought to my knowledge.”
7. It is concluded that Manning was not in a-position to, nor did he in fact, possess any meaningful knowledge or information as to the practice or policy of the Bureau of Internal Revenue with respect to the taxability of survivor-beneficiary designations under the gift tax provisions of the 1939 Code.
8. On February 9, 1945, the Deputy Commissioner of Internal Revenue who headed the Bureau’s Estate and Gift Tax Unit, in response to a taxpayer’s letter of December 29, 1944, issued a private letter ruling to that taxpayer holding that “the election of a survivorship pension under a provision of the * * * [taxpayer’s] Pension Plan then in effect, constituted a gift to the employee’s spouse.” The ruling also prescribed the method of computing the value of the gift. On March 12, 1948, the Deputy Commissioner of Internal Revenue issued another private letter ruling to the same taxpayer, which letter noted that certain amendments were made to the plan in 1946, and responded to general collateral questions prompted thereby in regard to the effective date of the gift and its valuation.
9. The decedent herein, Robert F. Wagner, Sr., died in 1953. On or about July 10, 1958, the plaintiff, as executor of the decedent’s estate, filed a gift tax return for 1949, the Commissioner of Internal Revenue having demanded such filing after determining that the decedent’s 1949 designations of plaintiff as survivor-annuitant constituted gifts to plaintiff. Thereafter, by letter dated December 6, 1960, the Commissioner assessed against plaintiff as transfereedonee a gift tax deficiency of $7,368.31 with respect to that return and collected the tax, plus interest of $5,022.56, on August 28, 1961. Plaintiff’s claim for refund was timely filed, on or about October 13, 1961.
CONCLUSION OF LAW
On the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that plaintiff is not entitled to recover, and his petition is dismissed.