Court Opinion

ID: 4601293
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:27:19.183902+00
Date Added: 2024-06-11T07:52:28.291692
License: Public Domain

MARIAN STEWART HONEYMAN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Honeyman v. CommissionerDocket No. 27792.United States Board of Tax Appeals24 B.T.A. 130; 1931 BTA LEXIS 1687; September 24, 1931, Promulgated *1687  A Federal estate tax was paid in 1924 rather than in 1923, for the purpose of a deduction under section 703 of the Revenue Act of 1928, where Liberty bonds and a check offered in payment in 1923 were not accepted and were returned in 1924, and later in the year 1924 the same or similar bonds were accepted in payment of the tax and interest was adjusted to November, 1923.  Robert B. Honeyman, Esq., for the petitioner.  J. A. Adams, Esq., and Frank A. Surine, Esq., for the respondent.  MURDOCK *130  The Commissioner determined a deficiency of $12,136.45 in the petitioner's income-tax liability for the calendar year 1924.  The only issue is whether or not the petitioner is entitled to deduct $47,400.77 representing Federal income tax paid by the petitioner on the estate of her sister, Jean Stewart.  FINDINGS OF FACT.  The petitioner is an individual residing at Huntington, Long Island, N.Y., with her husband, Robert B. Honeyman, Jr.  She is the only heir at law of her sister Jean Stewart, who died intestate in 1921 and whose estate was all distributed to the petitioner, the final distribution having been made on August 31, 1923.  In October, *1688  1923, the administrators were notified that additional estate tax in the amount of $47,400.77 was due.  They had no funds, so they notified the petitioner who furnished one of the administrators with $45,000 par value of third Liberty Loan bonds on which some interest had accrued and her personal check for the balance.  She had received the bonds from the estate.  The administrator delivered these bonds and the check to the Collector in November, 1923, and received a temporary receipt from the Collector.  In January a receipt stamped "Paid Jan. 23, 1924" was received from the Collector.  The administrators on February 4, 1924, filed a fiduciary return of income for 1923 on Form 1041 showing a deduction for the above tax, *131  gross income of $39,132.07 and a net deficit.  This return showed that the beneficial interest of Marian Stewart Honeyman in the income and credits of the estate was 100 per cent.  No other return was filed for the estate for 1923 or 1924.  The petitioner's husband filed a joint return of income for 1923 and claimed the right to deduct the tax above mentioned.  The Commissioner disallowed the deduction for 1923.  Between February 5, 1924, and March 15, 1924, the*1689  Collector notified the petitioner or the former administrators of Jean Stewart that the tender of payment made in November, 1923, was not accepted, and tried to return the Liberty bonds.  These bonds had been mutilated and the petitioner insisted that new bonds be issued to her.  This was done and she received the interest due March 15, 1924.  Later in 1924 the Collector notified the petitioner that Liberty bonds would be accepted in payment of the tax and a settlement was reached in which interest was adjusted to November, 1923.  In the settlement the petitioner gave Liberty bonds of the par value of $45,000 received from the Jean Stewart estate and a check for a small amount.  The petitioner, who kept her books and made her returns on the cash receipts and disbursements basis, claimed the right to deduct $47,400.77 representing the tax in question on her separate return for 1924.  The Commissioner disallowed the deduction.  The deficiency notice was mailed March 2, 1927.  OPINION.  MURDOCK: Since the mailing of the deficiency notice the Revenue Act of 1928, containing section 703, has been enacted.  The petitioner is entitled to deduct the Federal estate tax of $47,400.77 under*1690  that section if it was paid in 1924.  See . In 1923 and 1924 the petitioner's books were kept and her income was reported on the basis of cash received and disbursed.  She delivered her check and some Liberty bonds to the Collector in payment of the tax.  She probably thought she had paid the tax and a deduction was taken in the joint return filed for that year.  But the tender was not accepted by the Government in 1923 and it was not until late in 1924 that the same or similar bonds were accepted and the tax actually paid.  This settlement was adjusted to November, 1923, but to one on a cash basis a payment can not be dated back.  The Government would not accept payment of the tax in 1923.  How can it successfully contend now that payment was made in that year for the purpose of a deduction under section 703?  The petitioner claimed the deduction for each year and the Commissioner disallowed it in each.  Now the petitioner seeks to take *132  the deduction in 1924 rather than in 1923, probably because it will offset more income in 1924 than in 1923.  The bonds were hers in 1924, and only in that year were they accepted by*1691  the Government.  The disbursement was made in 1924.  We hold for the petitioner.  Reviewed by the Board.  Judgment will be entered under Rule 50.