Court Opinion

ID: 4596773
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:17:46.745438+00
Date Added: 2024-06-11T07:51:40.351224
License: Public Domain

JOSEPH P. LEVY, ET AL., EXECUTORS, ESTATE OF ACHILLE LEVY, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Levy v. CommissionerDocket No. 20462.United States Board of Tax Appeals18 B.T.A. 337; 1929 BTA LEXIS 2073; November 25, 1929, Promulgated *2073  1.  A deficiency, notice of which was sent to taxpayer, and which deficiency is in part due to an erroneous refund, will not be increased by an amount equal to the interest paid by Commissioner at time of making refund, though motion to do same is timely made.  2.  Interest paid by the Commissioner to taxpayer at the time of making an erroneous refund, which later forms in part the basis of a deficiency, is not an amount "otherwise repaid" under the terms of section 307(1) of the Revenue Act of 1926.  3.  Nor does such interest fall within the provisions of section 308(e) of the Revenue Act of 1926, which provides that the Board shall have power "to determine whether any additional amount or addition to the tax should be assessed." A. George Bouchard, Esq., for the petitioners.  Frank T. Horner, Esq., for the respondent.  VAN FOSSAN *338  In this proceeding petitioners ask the redetermination of a deficiency in estate tax asserted by the Commissioner in the amount of $86,707.05.  The issues are stated in the opinion.  FINDINGS OF FACT.  The following facts were stipulated: (1) Achille Levy, deceased, a resident of and domiciled in the*2074 State of California, died February 20, 1922, leaving his wife, Lucy Levy him surviving; that all property owned by said decedent and his wife at the time of his death was acquired during coverture and was community property under the laws of the State of California.  (2) Petitioners were the duly appointed and acting executors of the will of Achille Levy, deceased, and as such executors they duly filed with the collector of internal revenue for the sixth California district at Los Angeles, Calif., no February 17, 1923, the Federal estate-tax return showing a tax due of $109,711.92; that in determining the gross estate subject to Federal estate tax the executors included in the gross estate of the decedent the value of the surviving wife's share of the community property; that the amount of tax shown due on said return was duly assessed by the Commissioner of Internal Revenue and the same was paid by the executors on or about February 17, 1923; that thereafter the executors filed with the Commissioner of Internal Revenue a claim for refund of $81,774.28, upon the ground that in determining the gross estate for Federal estate tax the value of the surviving wife's share of the community*2075  property was erroneously included in said gross estate; said claim for refund was duly considered by the Commissioner of Internal Revenue and was allowed by him in part, the letter authorizing said refund being dated April 14, 1925; that on June 25, 1925, the Commissioner of Internal Revenue caused to be refunded to petitioners the sum of $65,853.55 and at the same time paid petitioners interest on the said refund from February 17, 1923, the date of payment of the tax, to June 25, 1925, the date of the allowance of the refund, in the sum of $9,288.06.  That on or prior to April 14, 1925, the Commissioner of Internal Revenue had, pursuant to an investigation by one of his field agents, made certain changes in the value of the gross estate and deductions claimed which changes are set forth in the letter of April 14, 1925.  The petitioners, as executors of the will of said decedent, distributed the funds of said estate, including the moneys refunded and paid to them by the Commissioner of Internal Revenue, to the *339  persons lawfully entitled thereto, provided, however, that the respondent reserves the right to question the materiality to the issues herein of such distribution*2076  of the estate.  3.  That the Commissioner of Internal Revenue determined the fair market value, as of February 20, 1922, of certain real estate described in the Federal estate-tax return as Item 10, to be $65,255; whereas it is hereby agreed that the fair market value of said item of real estate on February 20, 1922, was $55,255.  4.  That the Commissioner of Internal Revenue determined the fair market value as of February 20, 1922, of certain real estate described in the Federal estate-tax return as Item 18, to be $30,000; whereas it is hereby agreed that the fair market value of said real estate on February 20, 1922, was $28,800.  5.  That the Commissioner of Internal Revenue determined the fair market value as of February 20, 1922, of certain real estate described in the Federal estate-tax return as Item 19 to be $40,000; whereas it is hereby agreed that the fair market value of said real estate on February 20, 1922, was $28,000.  6.  That the Commissioner of Internal Revenue determined the fair market value as of February 20, 1922, of certain real estate described in the Federal estate-tax return as Item 21, to be $3,500; whereas it is hereby agreed that the fair market*2077  value of said real estate on February 20, 1922, was $3,125.  7.  That the decedent owned a two-thirds interest in the partnership of A. & H. Levy Co., Oxnard, Calif.; that the fair market value of the interest of the decedent in said partnership was determined by the respondent to be $964,755.35, as of February 20, 1922; whereas it is hereby agreed that the fair market value of said interest in said partnership on February 20, 1922, was $932,294.88.  The respondent determined the alleged deficiency in controversy as set forth in his letter dated August 11, 1926, by including in the gross estate of decedent all of the community property of decedent and his wife, charging petitioners with the amount erroneously refunded.  OPINION.  VAN FOSSAN: Three issues are presented by petitioners in this case.  The first is the properiety, for estate-tax purposes, of including in the gross estate of decedent the wife's share of the community property owned by the marital community at the death of decedent.  This question is ruled adversely to petitioner on the authority of *2078 ; affirmed by the ; certiorari denied,  A.  *340  The second question presented by these petitioners is whether or not a deficiency may be based in part on an erroneous refund previously made, it appearing that of the total deficiency of $86,707.05 determined by respondent the sum of $65,853.55 represents an amount previously refunded.  This precise question was involved in the case of , wherein we held a deficiency so grounded to be validly determined.  In , we observed, "the Commissioner has power at any time within the period of limitations to revise or change his findings unless a settlement has been made pursuant to section 3229 of the Revised Statutes, and * * * in so doing he may determine a deficiency based on an erroneous refund." There is no evidence of such a statutory settlement.  These decisions, to which we adhere, dispose of this issue.  See, also, *2079 ; affd., . The third issue, the determination of the fair market value of certain properties, is settled by the stipulation of the parties.  There remains an issue raised by the respondent, when at the hearing he duly moved to increase the deficiency above that found by the Commissioner by the amount of interest paid to petitioners at the time of the erroneous refund.  That in a proper case the Board may increase the deficiency in estate taxes found by the Commissioner is not open to question.  Section 308(e) of the Revenue Act of 1926 provides: The Board shall have jurisdiction to redetermine the correct amount of the deficiency even if the amount so redetermined is greater than the amount of the deficiency, notice of which has been mailed to the executor, and to determine whether any additional amount or addition to the tax should be assessed, if claim therefor is asserted by the Commissioner at or before the hearing or rehearing.  Section 307 of the same Act defines a deficiency in estate taxes as: (1) The amount by which the tax imposed by this title exceeds the amount shown as the tax by the executor*2080  upon his return; but the amount so shown on the return shall first be increased by the amounts previously assessed (or collected without assessment) as a deficiency, and decreased by the amounts previously abated, refunded, or otherwise repaid in respect of such tax; * * * The Commissioner contends that the amount of interest falls within the above definition as an amount "otherwise repaid in respect of such tax." With this we do not agree.  The word "repaid" presupposes a payment.  The payment of the interest by the Commissioner was an original payment and not a repayment.  Petitioner had never theretofore paid to Commissioner this amount of $9,288.06 as interest or in any other manner.  It could not therefore be "repaid." Similar reasoning is pertinent as to the word "refunded." Clearly, this item is not one that falls within the definition of a statutory deficiency.  *341  There remains for consideration section 308(e), which authorizes the Board to increase a deficiency found by the respondent, "and to determine whether any additional amount or addition to the tax should be assessed," with the consequent question whether this grant of authority is broad enough to admit*2081  the addition to the deficiency of the item of interest erroneously paid petitioners in connection with the refund.  It is the duty of any tribunal engaged in construing an Act of Congress to endeavor to give meaning to every part of the statute before it.  There is also the duty of construing the entire Act in the light of its evidence purpose.  It seems clear that we may redetermine the deficiency in a greater amount than that found by the Commissioner and may also "determine whether any additional amount or addition to the tax should be assessed." The word "assessed" is here used as it is used elsewhere in the Revenue Act - as relating to taxes.  There are many money obligations due to the Government that may not be assessed.  Obviously the "additional amount" or "addition to the tax" must bear such a relation to taxes as properly to be assessable.  But the sum of interest paid by the Government was not taxes.  It was paid by the Government as compensation for the supposed wrongful detention and use of $65,853.55 of petitioners' money for a given period.  In petitioners' hands it was the same as any other interest or rent collected by them.  It is not an item properly to be*2082  catalogued under section 308(e) as an "additional amount or addition to the tax (which) should be assessed." Reviewed by the Board.  Decision will be entered under Rule 50.TRAMMELL and PHILLIPS concur in the result only.  GREEN LOVE GREEN: I dissent as to the rejection of respondent's request to increase the deficiency by interest erroneously paid petitioner.  LOVE, dissenting: I agree with the decision and opinion on all points except that where the holding is made that it is legally correct to include as a part of a deficiency a claim made by the Commissioner for money erroneously refunded to the taxpayer.  That claim is not a claim for taxes, but is a claim for money had and received, as was correctly held in . This Board has not jurisdiction to adjudicate a claim for money had and received.  The refunded money occupies exactly the same status as the interest paid on that refund.