Opinion
In this suit plaintiff seeks to recover $4,112.38 with interest from December 19, 1938, alleged overpayment of additional estate tax and interest.
It is admitted that the additional tax and interest in the total amount mentioned were not due under a Supreme Court decision rendered prior to assessment.
The question presented is whether under the facts and circumstances disclosed by the record this court has jurisdiction to enter judgment in favor of plaintiff for any amount, in view of the fact that after the Commissioner of Internal Revenue made a final determination of a deficiency of $2,132.62 plaintiff took the case to the United States Board of Tax Appeals and the determination of the Commissioner was affirmed by a decision of the Board which became final before the deficiency, plus interest, was assessed and collected.
Special Findings of Fact
1. Plaintiff, a resident of the State of Missouri, is the widow of Charles F. McMullin and the duly appointed and qualified executrix of his estate. C.F. McMullin died January 5, 1926. The decedent was also a resident and citizen of the State of Missouri.
Plaintiff and the decedent were married June 28, 1905. No children were born of the marriage and the decedent, at the time of his death, left surviving him no children or other descendants being capable of inheriting. The decedent named the plaintiff, his widow, as the principal beneficiary under his will, the provisions of which were accepted by her. The property which he devised and bequeathed to plaintiff was in excess of one-half of the net value of his estate. Two pertinent paragraphs of the will of the decedent are as follows:
"I devise, bequeath, and give to by beloved wife, Mattie McMullen, all my property, real, personal or mixed of which I am seized or possessed or to which I may be entitled at the time of my decease, wheresoever situated, of all kinds and descriptions, to her absolutely and forever to do as she sees fit, during her lifetime, but at her death to go as hereinafter set out; but during her lifetime to enjoy the use and income thereof. * * * * * "All provisions herein made for my wife are in lieu of dower or other statutory provisions made and given to her by the statutes of Missouri."
2. January 4, 1927, plaintiff, as executrix of the estate of her husband, filed a Federal estate tax return showing an estate tax due of $506.44 which was paid on the same date. In this return the executrix claimed that only one-half of the value of the net estate, namely, $108,762.68, constituted assets of the estate for purposes of taxation inasmuch as one-half of the decedent's estate belonged to the widow by operation of law under the statutes of Missouri. May 9, 1928, the executrix paid an additional tax of $123.25, together with interest of $9.85, making a total of $133.10.
3. The return so made for the estate was examined and audited by the Commissioner of Internal Revenue and he finally determined that the value of the gross estate of the decedent was $395,857.91, consisting of real estate in Missouri of the value of $318,421.50 and personal property of the value of $77,436.41; that the allowable deductions therefrom amounted to $211.899.15, consisting of funeral expenses of $3,519.50, executor's commissions of $11,166.74, attorney's fees of $6,600, miscellaneous administration expenses of $9,648.63, debts of decedent of $66,521.38, unpaid mortgages of $64,442.91, and the $50,000 exemption, leaving a net estate for the purpose of the estate tax of $183,958.75. The Commissioner also determined that all of the net estate was subject to the estate tax at the rate specified by the applicable estate tax act and that the wife's one-half should not be excluded from the net estate as claimed by her in the return filed. This determination resulted in a deficiency of estate tax in the amount of $2,843.51, which after a statutory credit for state inheritance tax paid resulted in a net deficiency of $2,132.62. April 24, 1928, the Commissioner prepared and mailed to plaintiff, as executrix, a statutory 60-day deficiency notice under the provisions of section 308 of the Revenue Act of 1926, 26 U.S.C.A. Int.Rev. Acts, page 244, advising her of his final determination of a deficiency.
4. Under the applicable provisions of the Revenue Act of 1926, plaintiff had the right to elect whether she would institute a proceeding before the United States Board of Tax Appeals for the redetermination of the deficiency determined by the Commissioner or whether she would pay the additional tax so determined, file a claim for refund and, in the event of rejection of such claim in whole or in part, bring suit in court to recover the amount for which the claim was rejected. Plaintiff elected to take the case to the Board of Tax Appeals and, on May 28, 1928, filed a petition with the Board for a redetermination of the deficiency disclosed by the Commissioner's decision. The appeal to the Board was based on the contention that the marital interest of the widow should not be included in the gross estate of the decedent for the purpose of determining the net estate subject to the estate tax. At the time of the Commissioner's determination and the filing of the petition with the Board of Tax Appeals, and the date on which the Board rendered its opinion in the case, the decisions of the Treasury Department, of this court, and of the Board of Tax Appeals had all held that the value of real estate situated in the State of Missouri was properly to be included under the estate tax provisions of the revenue statute for the purpose of determining the net estate subject to tax, and the Supreme Court had prior to the Commissioner's determination of the deficiency denied a petition for writ of certiorari to review this court's decision in Carrie Howard Steedman and Eugenia Howard Edmunds v. United States, 63 Ct.Cl. 226, to that effect.
In an opinion promulgated by the Board of Tax Appeals August 11, 1930, McMullin v. Commissioner of Internal Revenue, reported in 20 B.T.A. 527, the Board sustained the decision of the Commissioner and on August 14, 1930, judgment was entered by the Board of Tax Appeals finding a deficiency of $2,844.53, as had been determined by the Commissioner, which, as stated in finding 3, was subject to a credit for state inheritance tax paid by the estate. The facts before the Board of Tax Appeals in the proceeding there instituted by plaintiff were sufficient to show that the decedent was a resident of Missouri and that the items of real estate had been included in the gross estate for the purpose of determining the net estate upon which the Commissioner determined the deficiency in question. However, the question of the correctness or legality of the inclusion of the value of the real estate situated in Missouri in the decedent's gross estate under section 302(a) of the Revenue Act of 1924, 26 U.S.C.A.Int.Rev. Acts, page 67, was not raised or contested by plaintiff and was not involved, considered, or discussed by the Board in the proceeding before it. Plaintiff did not appeal to the Circuit Court of Appeals for the Eighth Circuit or to the Court of Appeals of the District of Columbia from the decision of the Board of Tax Appeals. The decision of the Board entered August 14, 1930, became final February 14, 1931, under the provisions of section 1005 of the Revenue Act of 1926, 26 U.S.C.A.Int.Rev. Acts, page 314.
November 24, 1930, the Supreme Court handed down its opinion in Crooks v. Harrelson, 282 U.S. 55, 51 S.Ct. 49, 75 L.Ed. 156, in which it was decided that the value of real estate situated in the State of Missouri was not includable in the gross estate for the purpose of determining the net estate subject to Federal estate tax.
5. On February 26, 1931, the Commissioner of Internal Revenue assessed an additional tax against plaintiff in the amount of $2,132.63, which was the amount of the deficiency of $2,843.51 theretofore determined by him and approved by the Board, less the statutory credit for state inheritance tax paid, together with interest of $530.07, or $2,662.07. Notice was issued by the Collector of Internal Revenue and demand for payment of this additional tax and interest was made upon plaintiff. Thereafter, and before payment, plaintiff sought to compromise the additional tax and made various offers of compromise to the Commissioner, all of which were finally rejected by him August 20, 1935. Thereafter, on October 24, 1935, plaintiff brought suit in equity in the District Court for the Eastern District of Missouri against Thomas J. Sheehan, the then Collector of Internal Revenue for the First District of Missouri, wherein she sought to enjoin the collection of the deficiency and interest, for which demand had been made pursuant to assessment, on the ground that exaction of the tax was illegal in view of the decision of the Supreme Court in Crooks v. Harrelson, supra, and that if the additional tax were paid she would be unable to file a claim for refund because of statutory prohibition on account of having taken an appeal from the final decision of the Commissioner of Internal Revenue to the United States Board of Tax Appeals. At that time, whatever right the estate had to take an appeal from the final decision of the Board of Tax Appeals had expired for the reason that the Board's decision had theretofore become final. The defendant filed a motion to dismiss the bill of complaint, which motion was sustained by the District Court--thereupon plaintiff appealed to the Circuit Court of Appeals for the Eighth Circuit, which, on March 7, 1938, affirmed the order of the District Court in McMullin v. Sheehan, 95 F.2d 128, and thereafter the Supreme Court denied a petition for writ of certiorari. 305 U.S. 607, 59 S.Ct. 67, 83 L.Ed. 386. Thereafter, on December 19, 1938, plaintiff, having previously filed with the Commissioner of Internal Revenue a waiver extending the period for collection of the additional tax to December 31, 1938, paid under protest to the Collector of Internal Revenue at St. Louis, Mo., the sum of $4,112.38. This amount represented the additional tax of $2,132.63 and interest of $396.97, being the interest of $530.07 assessed February 26, 1931, less an abatement of such interest of $133.10, which amount had previously been paid by plaintiff to the collector on May 9, 1928, together with further interest of $1,582.78 from date of assessment of the deficiency in February, 1931, to the date of payment on December 19, 1938. The total interest paid by plaintiff on the deficiency of $2,132.63 collected pursuant to the Commissioner's original determination and decision of the Board of Tax Appeals affirming such decision was $1,979.75.
6. February 23, 1939, plaintiff filed with the Collector of Internal Revenue at St. Louis a claim for refund of the additional tax of $2,132.63 and interest of $1,979.75 theretofore paid on December 19, 1938, as above stated, which claim is in evidence as Exhibit B and is made a part hereof by reference. The claim was rejected in full by the Commissioner of Internal Revenue on July 7, 1939, and this suit was instituted on November 20 following. [Copyrighted Material Omitted] Chase Morsey, of St. Louis, Mo. (William R. Rodenberg, of Washington, D.C., on the brief), for plaintiff.
Elizabeth B. Davis, of Washington, D.C., and Samuel O. Clark, Jr., Asst. Atty. Gen. (Robert N. Anderson and Fred K. Dyar, both of Washington, D.C., on the brief), for defendant.
Before WHALEY, Chief Justice, and LITTLETON, WHITAKER, and GREEN, Judges.
LITTLETON, Judge.
Under the facts set forth in the findings and the provisions of sections 308(h) and 319 of the Revenue Act of 1926, 26 U.S.C.A.Int.Rev. Acts pages 246, 259, we are of opinion that this court is without jurisdiction of the claim presented by plaintiff. When the Commissioner of Internal Revenue on April 24, 1928, made a final determination of a deficiency in respect of the tax of the estate of decedent and mailed to the estate a deficiency notice under the provisions of section 308(a), Revenue Act of 1926, 26 U.S.C.A.Int.Rev. Acts, page 244, the estate had the right to pay the additional tax and any interest thereon, file a claim for refund, and bring suit in court to recover the whole or any portion thereof, or, to file a petition with the United States Board of Tax Appeals for the redetermination of the deficiency and to raise the Board and all issues or questions relating to the correct estate tax liability. The Board had jurisdiction to determine not only whether the deficiency had been correctly and legally determined but whether the estate had made an overpayment of tax on the return filed. Peerless Woolen Mills v. Commissioner of Internal Revenue, 13 B.T.A. 1119, 1125. In this case plaintiff filed a petition with the U.S. Board of Tax Appeals May 28, 1928, and the only question then raised and presented by plaintiff was that the marital interest of the widow should not have been included in the gross estate of the decedent for estate tax purposes. The facts upon which this issue was raised before the Board and the facts set forth in the deficiency notice, upon the basis of which the petition was filed with the Board, disclosed that real estate situated in Missouri had been included in the decedent's gross estate for the purpose of determining the net estate subject to tax, but no question with reference to the inclusion of the value of such real estate was raised by plaintiff before the Board. But the failure of a taxpayer who appeals to the Board of Tax Appeals to raise a certain question before the Board does not, in a case instituted before the Board after February 26, 1926, give the taxpayer a right thereafter to bring an original suit in respect of any portion of the tax for the taxable year before the Board. Nor does the failure of a taxpayer to raise and present to the Board a certain question with reference to the tax liability for such taxable year limit in any way the finality and conclusiveness of the decision of the Board as to the entire tax liability for the year involved. Section 308(a) provides for the mailing of a deficiency notice and gives the taxpayer the right to take the Commissioner's determination before the Board. Subdivision (b) provides that if the executor files a petition with the Board, the entire amount redetermined as the deficiency by the decision of the Board, which has become final, shall be assessed and shall be paid upon notice and demand from the collector. Subdivision (g) of section 308 and sections 1001(a) and 1005(a) (1), 26 U.S.C.A.Int.Rev. Acts, pages 246, 311, 314, provide that the decision of the Board in a case where no petition for review is filed shall become final six months after the decision is entered and subdivision (h) of section 308 provides that "Interest upon the amount determined as a deficiency shall be assessed at the same time as the deficiency, shall be paid upon notice and demand from the collector, and shall be collected as a part of the tax, at the rate of 6 per centum per annum from the due date of the tax to the date the deficiency is assessed, * * *." Other provisions of the statutes making certain exceptions with reference to the period in which interest is collectible are not material here. Section 309(b), 26 U.S.C.A.Int.Rev. Acts, page 248, provides that "Where a deficiency, or any interest assessed in connection therewith under subdivision (h) of section 308, * * * is not paid in full within 30 days from the date of notice and demand from the collector, there shall be collected as part of the tax, interest upon the unpaid amount at the rate of 1 per centum a month from the date of such notice and demand until it is paid."
Section 319(c), 26 U.S.C.A.Int.Rev. Acts, page 259, provides that "If the Board finds that there is no deficiency and further finds that the executor has made an overpayment of tax, the Board shall have jurisdiction to determine the amount of such overpayment, and such amount shall, when the decision of the Board has become final, be credited or refunded to the executor as provided in section 3220 of the Revised Statutes, as amended." And it also provides that such refund shall be made either (1) if claim therefor was filed with the period of limitation provided for by law, or (2) if the petition was filed with the Board within four years after the tax was paid; or, in the case of a tax imposed by the estate tax title of the 1926 act, within three years after the tax was paid. Section 319(a)(2), which are the only other provisions of section 319 pertinent to the question presented by the case at bar, provide as follows:
"(a) If the Commissioner has mailed to the executor a notice of deficiency under subdivision (a) of section 308 and if the executor after the enactment of this Act files a petition with the Board of Tax Appeals within the time prescribed in such subdivision, no refund in respect of the tax shall be allowed or made and no suit for the recovery of any part of such tax shall be instituted in any court, except-- * * "(2) As to any amount collected in excess of an amount computed in accordance with the decision of the Board which has become final; * * *."
The facts show that the decision of the Board, that there was a deficiency, was entered August 14, 1930, and became final and conclusive under the statute on February 14, 1931, and that the deficiency of $2,132.63, being the amount of $2,843.51 determined by the Board after the allowance of a statutory credit of $710.88 for state inheritance tax, was duly assessed February 26, 1931, in accordance with the provisions of section 308(b), together with interest of $530.07 from the due date of the tax to the date of assessment in accordance with subdivision (h) of that section. Upon receipt of the assessment, the collector gave notice and made demand for payment of the deficiency and interest so assessed, but, for the reasons set forth in the findings, plaintiff did not make any payment under the assessment until December 19, 1938. On that date plaintiff paid a total sum of $4,112.38 which it seeks to recover in this proceeding. This amount represented the deficiency of $2,132.63 plus interest of $1,979.75. The interest of $1,582.78 collected on the deficiency in excess of the net interest of $396.07 assessed by the Commissioner thereon under the provisions of section 308(h) represented interest imposed by and collected under section 309(b) for failure of plaintiff to pay the deficiency and interest theretofore assessed within 30 days after the date of notice and demand by the collector for payment of the amount of the assessment.
Within three years after the additional tax and interest was paid plaintiff filed a claim for refund thereof, which claim was rejected on the ground that the decision of the Board was final and that allowance of any refund was prohibited by section 319(a). Plaintiff insists that it is entitled to maintain this suit and to recover the additional tax deficiency and interest collected for the reason that assessment and collection thereof were illegal because of the inclusion in the gross estate of the value of the real estate situated in the state of Missouri in direct disregard of the decision in Crooks v. Harrelson, 282 U.S. 55, 51 S.Ct. 49, 75 L.Ed. 156, which had been decided before the deficiency and interest was assessed and collected. The case of Crooks v. Harrelson, supra, was decided by November 24, 1930, and it is conceded by defendant that if the rule announced in the decision in that case had been applied and followed by the Commissioner no deficiency or interest would have been due by the estate. But, in view of the provisions of the Revenue Act of 1926 hereinbefore referred to, that fact does not give this court jurisdiction to entertain this suit. Bankers' Reserve Life Co. v. United States, 71 Ct.Cl. 279, 44 F.2d 1000; Bindley v. Heiner, D.C., 38 F.2d 489. Plaintiff elected to take the case to the United States Board of Tax Appeals and permitted the decision of the Board to become final, and under the clear provision of the statute this court is without authority to inquire into the correctness or legality of the deficiency determined by the Board and assessed by the Commissioner, or to entertain a suit with respect to any interest collected on such deficiency in strict accordance with the provisions of the statute. Moreover, the decision of the Board did not become final until nearly three months after the Supreme Court had decided the case of Crooks v. Harrelson, supra, during which time the plaintiff could have applied to the Board for a rehearing and the correction of its decision to accord with the decision of the Supreme Court, or it could have raised this question of law by an appeal to the proper court of appeals after the decision in Crooks v. Harrelson case and before the decision of the Board became final. Legg's Estate et al. v. Commissioner of Internal Revenue, 4 Cir., 114 F.2d 760.
The petition must be dismissed. It is so ordered.