Opinion
No. K-194.
January 18, 1932.
Action by the Colonial Trust Company, executor of the will of Glenn T. Braden, deceased, against the United States.
Judgment for defendant.
This case having been heard by the Court of Claims, the court, upon the evidence adduced and the stipulation of the parties, makes the following special findings of fact:
1. The Colonial Trust Company is a corporation organized under the laws of the state of Pennsylvania with its principal office at Pittsburgh, Pa., and is the executor of the will of Glenn T. Braden, deceased, appointed as such by the register of wills for Allegheny county, Pa., on September 26, 1923.
2. For the calendar year 1917 Glenn T. Braden duly filed an income tax return on June 19, 1918, as provided by the Revenue Act of 1916 as amended by the Revenue Act of 1917, approved October 3, 1917 ( 40 Stat. 300), which return showed a tax due thereon in the amount of $95,706.22. The said tax was paid in due course to the collector of internal revenue at Pittsburgh, Pa.
3. Thereafter the Commissioner of Internal Revenue examined the said return, and on his February, 1924, special list, page O, line 4, dated February 16, 1924, assessed an additional tax of $206,751.87.
4. On or about the 21st day of March, 1923, a waiver signed by the taxpayer and dated March 15, 1923, extending the period for determination, assessment, and collection of any tax due on any return for the year 1917 for one year from the date it was signed, was filed with the Commissioner of Internal Revenue.
5. On or about February 11, 1924, the Colonial Trust Company, as executor under the will of Glenn T. Braden, deceased, and the Commissioner of Internal Revenue executed an income and profits tax waiver extending the period for the determination, assessment, and collection of the amount of income, excess profits, or war profits taxes due under any return made by or on behalf of the said Glenn T. Braden estate for the year 1917 for a period of one year after the statutory period of limitation, or the statutory period of limitation as extended by any waivers already on file with the Bureau, and the said waiver was thereafter duly filed in the Bureau of Internal Revenue.
6. On March 7, 1924, the plaintiff, as executor for Glenn T. Braden, deceased, was advised by the Commissioner of Internal Revenue, that the tax liability of Glenn T. Braden, deceased, for the year 1917, had been determined to be $260,184.34.
On Saturday, May 17, 1924, a check in the amount of the balance of $162,658.17 of the additional tax finally determined to be due was delivered to and received by the collector of internal revenue at Pittsburgh, Pa., and on Monday, May 19, 1924, deposited in bank and credited to the collector's list. Said check was transmitted by plaintiff, as executor of Glenn T. Braden, deceased, to the collector of internal revenue at Pittsburgh, along with the following letter bearing date, May 17, 1924:
"The undersigned, being the executor of Glenn T. Braden, deceased, late of 21 Thorn Street, Sewickley, Pa., is in receipt of your notice and demand for taxes dated May 7, 1924, addressed to Mr. Braden and demanding payment of the sum of $206,751.87 as and for 1917 income, war-profits, and excess-profits tax, your notice stating that to avoid penalty and interest this tax must be paid to you not later than May 17, 1924.
"The undersigned is advised and believes that these taxes are illegally demanded, and the enclosed check of the undersigned executor to your order for the sum of $206,751.87, less credit per certificate of overassessment, commissioner's letter dated March 7, 1924, or $42,306.30 and credit per certificate of overassessment, commissioner's letter dated March 26, 1924, in the sum of $1,787.40, making a net amount of $162,658.17, the undersigned pays to you under protest and hereby gives you notice that the undersigned intends to bring a suit against you to test the validity of your said claim for these taxes."
7. On or about June 4, 1924, the plaintiff, as executor of Glenn T. Braden, deceased, filed a claim for refund of $62,862.76 of the taxes paid for the calendar year 1917. That claim was based upon the ground that any income derived from restricted Osage tribal Indian lands, which was included in the net income upon which the tax for the year 1917 was assessed and paid, was erroneously so included.
On or about December 13, 1924, a letter was addressed by the Deputy Commissioner of Internal Revenue to the plaintiff concerning said claim for refund, which letter is in part as follows:
"Inasmuch as there appears to be no basis, under the income-tax laws for 1917, 1918, or 1921, for holding that such income is non-taxable, the claim is denied, and the formal rejection will officially appear on the next schedule to be approved by the commissioner."
The formal rejection of the said claim for refund of $62,862.76 did thereafter appear on schedule No. 3152, dated January 14, 1925, of the Commissioner of Internal Revenue.
Upon the rejection of said claim a suit was instituted in the District Court for the Western District of Pennsylvania to determine the issue involved. Colonial Trust Co. v. Lewellyn, 12 F.2d 481. A final decision was rendered by the Supreme Court of the United States, on November 21, 1927, in the case of Lewellyn v. Colonial Trust Co., 275 U.S. 232, 48 S. Ct. 65, 72 L. Ed. 256.
8. On or about April 29, 1929, the plaintiff as executor of the estate of Glenn T. Braden executed and filed with the collector of internal revenue for the Twenty-Third district of Pennsylvania, at Pittsburgh, a further and additional claim for refund of the sum of $162,658.17 of the income and profits tax paid for the calendar year 1917, predicating its said claim for refund upon the following grounds:
"The taxpayer believes that this amount was assessed after the period during which assessment could legally have been made had expired; that this amount was collected after the period during which collection could legally have been made had expired; that this amount was assessed and/or collected after the period during which assessment and/or collection could legally have been made had expired.
"This claim is filed to comply with T.D. 4265 and T.D. 4266 and to amend our formal and informal claims previously filed."
On July 23, 1929, a letter was addressed by the Deputy Commissioner of Internal Revenue to the plaintiff concerning said claim for refund, which said letter was in part as follows:
"An examination discloses that the return of Mr. Braden for the year 1917 was filed June 19, 1918. A waiver dated March 15, 1923, expired March 15, 1924, and a second waiver dated February 11, 1924, expired March 15, 1925.
"An additional tax of $206,751.87 was assessed in February, 1924, and $162,658.17 of the additional assessment was paid May 19, 1924, within the statutory period as extended by the waivers on file.
"Inasmuch as this amount was collected within the statutory period properly applicable thereto, your claim for refund will be rejected in full. The rejection will officially appear on the next schedule to be approved by the commissioner."
Thereafter, and on July 31, 1929, the following letter was addressed by the Deputy Commissioner of Internal Revenue to the plaintiff concerning the same said claim for refund:
"Your claim for refund of taxes, above referred to, was disallowed by the commissioner on a schedule dated July 31, 1929."
9. For the current year 1918, Glenn T. Braden, now deceased, filed a tentative income and profits tax return dated March 22, 1919, and filed his completed return on May 17, 1919, which return showed a total tax due the United States of $207,731.17. The said tax was in due course paid to the collector of internal revenue at Pittsburgh, Pa. Thereafter, on the Commissioner's February, 1924, list, under date of May 10, 1924, an additional assessment of $20,574.05 was made. On Saturday, May 17, 1924, a check in payment of the said additional assessment of $20,574.05 was delivered to and received by the collector of internal revenue at Pittsburgh, Pa., and on May 19, 1924, deposited in bank and credited to the collector's list. Said check in the amount of $20,574.05, dated May 17, 1924, was transmitted to the collector of internal revenue along with the following letter also bearing date of May 17, 1924:
"The undersigned, being the executor of Glenn T. Braden, deceased, late of 21 Thorn Street, Sewickley, Pa., is in receipt of your notice and demand for taxes dated May 7, 1924, addressed to Mr. Braden and demanding payment of the sum of $20,574.05 as and for 1918 income, war-profits, and excess-profits tax, your notice stating that to avoid penalty and interest this tax must be paid to you not later than May 17, 1924.
"The undersigned is advised and believes that these taxes are illegally demanded, and the enclosed check of the undersigned executor to your order for the sum of $20,574.05 the undersigned pays to you under protest and hereby gives you notice that the undersigned intends to bring a suit against you to test the validity of your said claim for these taxes."
10. The checks in payment of the said additional taxes of $162,658.17, referred to in finding 6 hereof, and additional tax of $20,574.05, referred to in finding 9 hereof, were delivered to the cashier in the collector's office in Pittsburgh, Pa., on May 17, 1924, by G.H. Matz, plaintiff's assistant trust officer, and proper receipts were obtained therefor by him at that time.
11. On or about June 4, 1924, the Colonial Trust Company as executor of Glenn T. Braden, deceased, filed a claim with the collector of internal revenue for refund of $20,304.05 of the income and profits tax paid for the calendar year 1918, which said claim was based upon the ground that the net income derived from restricted Osage tribal Indian lands which was included in that net income upon which the tax for the year 1918 was assessed and paid was erroneously included in said income subject to income tax. On December 5, 1924, the Deputy Commissioner of Internal Revenue addressed a letter to the plaintiff informing it that the claim was denied and that the formal rejection would officially appear on the next schedule to be approved by the Commissioner. The formal rejection did thereafter appear on the Deputy Commissioner's schedule of rejected claims No. 3152, dated January 14, 1925.
Upon the rejection of this claim, suit was instituted in the District Court for the Western District of Pennsylvania to determine the issue involved. A final decision was rendered by the Supreme Court of the United States on November 21, 1927, in the case of Heiner v. Colonial Trust Co., 275 U.S. 232, 48 S. Ct. 65, 72 L. Ed. 256.
On or about April 29, 1929, the Colonial Trust Company, as executor of the estate of Glenn T. Braden, executed and filed with the collector of internal revenue for the Twenty-Third district of Pennsylvania, at Pittsburgh, a claim for refund of $20,574.05 of the income and profits tax paid for the calendar year 1918, and based its said claim upon the following grounds:
"The taxpayer believes that this amount was assessed after the period during which assessment could legally have been made had expired; that this amount was collected after the period during which collection could legally have been made had expired; that this amount was assessed and/or collected after the period during which assessment and/or collection could legally have been made had expired.
"This claim is filed to comply with T.D. 4265 and T.D. 4266, and to amend our formal and informal claims previously filed."
Thereafter and on July 13, 1929, the Deputy Commissioner of Internal Revenue addressed a letter to the plaintiff informing it that —
"The records of the bureau show no claim except the one now under consideration, based on the contention that the tax was paid after the expiration of the statutory period of limitation on collection applicable thereto.
"Inasmuch as no claim for refund based on the statute of limitations was filed within four years from the date of payment of the tax sought to have refunded, your claim will be rejected in full. The rejection will officially appear on the next schedule to be approved by the commissioner."
On July 25, 1929, the Deputy Commissioner of Internal Revenue addressed another letter to the plaintiff, informing it that its claim for refund of the amount of $20,574.05 for the year 1918 was disallowed by the Commissioner on a schedule dated July 25, 1929.
Howe P. Cochran, of Washington, D.C. (William N. Wood, of Washington, D.C., on the brief), for plaintiff.
Lisle A. Smith, of Washington, D.C., and Charles B. Rugg, Asst. Atty. Gen. (Lester L. Gibson, of Washington, D.C., on the brief), for the United States.
Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
This suit is begun to recover two payments of taxes, one of $162,658.17 upon taxes for the year 1917, and the other of $20,574.05 upon taxes for the year 1918, both sums being alleged to have been collected after the expiration of the period of limitations. In defense it is alleged on behalf of the government that any claims for refund on which the suit can properly be based were not filed within the time required by law, and that so far as the taxes for 1917 are concerned a waiver had been filed by the plaintiff, as executor of the estate of Glenn T. Braden, extending the period for assessment and collection of the tax of that year beyond the period prescribed by the statute of limitations, and also that the five-year period for assessment and collection of the additional tax for 1918 had not expired when the collection was made.
The defense last above stated will be first taken up. This defense depends on a mixed question of fact and law as to the time when payment was made for the 1918 taxes to the collector of internal revenue. It appears that the check which was given in payment for the taxes of 1918 was delivered to and received by the collector of internal revenue on May 17, 1924, but was not deposited in the bank and credited on the collector's list until the 19th of the same month. We have held that under the Treasury Regulations the time of the actual receipt of the check by the collector is the date of payment thereof within the meaning of the law applicable in such cases. See Second National Bank of Saginaw v. United States, 39 F.2d 759, 42 F.2d 44, 69 Ct. Cl. 552, and Altman Co. v. United States, 40 F.2d 781, 69 Ct. Cl. 721. The return of the taxpayer was filed on May 17, 1919. Under the holding in Burnet v. Willingham Loan Trust Co., 282 U.S. 437, 51 S. Ct. 185, 75 L. Ed. 448, the date of filing the return is excluded. When the computation of the period is made in accordance with the rules laid down in the cases above cited, it is found that the tax was not collected more than five years after the return had been filed, and consequently the collection thereof was not barred by the statute of limitations.
Considering next the taxes for 1917, we find that the plaintiff, as executor of the estate of Glenn T. Braden, on February 11, 1924, executed a waiver extending the period for assessment and collection of the tax to March 15, 1925. The plaintiff contends that this waiver is of no force and effect, for the reason that the executor derives its authority from the laws of the state of Pennsylvania, and under the laws of that state it had no authority to file a waiver of the statute of limitations. The case of In re Estate of James L. Claghorn, 181 Pa. 600, 37 A. 918, 59 Am. St. Rep. 680, is cited as supporting this rule.
That such is the general rule in Pennsylvania may be admitted, but we do not think the decision has any application to cases of the kind now under consideration. As was said in Aldridge, Executrix, v. United States, 64 Ct. Cl. 424, a case similar to the one at bar:
"This is not the ordinary case of waiver of a debt asserted against an estate. The act of Congress was intended for the accommodation of both the Government and the taxpayer. It was in the nature of an agreement to give time for further consideration of claims."
It is urged on behalf of plaintiff that the Aldridge Case, supra, is not controlling, and on behalf of defendant that the issue is merely one of construction of the federal statute for the collection of taxes, which is not affected by state laws. Without determining the question so raised by defendant, it may be said that in the case cited, as well as in the one at bar, the situation was not such that the executor merely gave up some right and privilege which the estate possessed. In fact, the rights of the plaintiff were prescribed by the statute of the United States, and it was availing itself of a privilege in some respects. In order to obtain this privilege, the law of the United States required that it should execute a waiver. The whole proceeding was in pursuance of a comprehensive scheme provided by Congress to avoid requiring the taxpayer to make payment until his return had been fully considered by the government officials. We think the main purpose of the statutory provisions with reference to waivers was to confer a benefit upon the taxpayer, who might otherwise be compelled upon demand to immediately pay a tax that subsequently might be found not to be due. In our opinion the waiver was valid, and the collection of this tax is not barred by the statute of limitations.
What has been said above makes it unnecessary to determine whether plaintiff had filed proper claims for refund.
The petition of plaintiff should be dismissed, and it is so ordered.