1928 BTA LEXIS 3363">*3363 1. TRANSFEREE - LIMITATION ON ASSESSMENT. - Petitioners, as distributees of an estate, were refunded by respondent the amount of a prior assessment of estate taxes paid by the executor. This refund respondent later determined to be erroneous and proposed assessment of same under section 316 of the Revenue Act of 1926 against petitioners as distributees. Held, that the periods of limitation, in respect to assessment, of four years as against the executor and of one year additional as against a transferee, having elapsed before the deficiency was determined, assessment is barred.
2. ASSESSMENT. - An assessment satisfied in full by payment of tax and later determined to be erroneous on claim for refund of the tax paid, which is allowed, held to be not revived by a later determination that refund made was improper and that the amount originally assessed was in fact due.
12 B.T.A. 1343">*1344 Petitioners appeal from a determination of deficiency in estate taxes of the estate of Stephen Townsend in the sum of $15,027.19, 1928 BTA LEXIS 3363">*3364 individual liability therefor as distributees of the estate having been asserted and proposed for assessment against them by respondent under section 316 of the Revenue Act of 1926, as evidenced by statutory deficiency letters mailed each by him under date of August 19, 1926. The deficiency in each case represents the amount of a refund formerly made by respondent to petitioners as an overassessment of tax exacted from the estate, which refund he now determines to have been made in error.
Petitioners assign the following errors:
(a) That section 316 of the Revenue Act of 1926 is unconstitutional.
(b) That assessment and collection of any liability from them as distributees of the estate of Stephen Townsend is barred by the limitations of the Revenue Act of 1926.
(c) That the estate of Stephen Townsend was not liable for the tax formerly exacted and subsequently refunded and the refund was proper and legal.
(d) That in securing the refund petitioners employed counsel to whom a portion of the amount refunded was paid as fees and it would be inequitable, even though the refund was illegal, to require repayment of the full amount by petitioners and thus cause them to lose, 1928 BTA LEXIS 3363">*3365 as a result of respondent's error, the amount of these counsel fees.
FINDINGS OF FACT.
The three petitioners herein are the widow, son and daughter of Stephen Townsend, deceased, who died a resident of the State of California on July 20, 1920. The petitioner V. Ray Townsend was duly qualified as executor of the estate of Stephen Townsend and on September 21, 1921, filed an estate-tax return and thereafter paid the tax computed thereon.
The testator, Stephen Townsend, and his wife, the petitioner, Anna M. Townsend, had during marriage, as residents of the State of California, accumulated a community estate, and in making the 12 B.T.A. 1343">*1345 estate-tax return mentioned, the executor excluded from the gross estate one-half of the community, as property of that petitioner not subject to the Federal estate tax. Thereafter, the respondent determined a deficiency against the estate in the sum of $15,027.19 by adjusting the gross taxable estate by inclusion of the one-half of the community excluded in the return and this deficiency was assessed and paid by the executor. Thereafter, on February 3, 1922, the administration of the estate was concluded and the administrator discharged. 1928 BTA LEXIS 3363">*3366 In October, 1923, petitioners filed with respondent a claim for refund of the deficiency assessed and paid in the sum of $15,027.19, and in May, 1925, this claim was allowed by respondent, and refunds made to the three petitioners of the sum of $15,320.01. These refunds were paid in accordance with the petitioners' distributive interests as follows:
| To | Refund |
| Anna M. Townsend | $7,660.01 |
| V. Ray Townsend | 3,830.00 |
| Esther Belle Covert | 3,830.00 |
| 15,320.01 |
Of this amount of $15,320.01 the sum of $15,027.19 represented the additional tax computed by inclusion in the estate of Stephen Townsend of the one-half of the community property passing to Anna M. Townsend on his death.
On August 19, 1926, respondent addressed and mailed to each of the three petitioners a similar letter, as follows:
AUGUST 19, 1926.
MT-ET-CI-836-CTK.
District of 6th California.
Estate of Stephen Townsend.
Date of death, July 20, 1920.
Tax liability, $15,027.19.
SIR: Reference is made to the estate tax return, on Form 706, filed September 20, 1921, by the administrator of the estate of Stephen Townsend.
Bureau letter of January 19, 1923, informed the administrator1928 BTA LEXIS 3363">*3367 that the total estate tax liability with respect to this estate had been determined to be $22,475.72 and that assessment of additional tax would be made in the amount of $17,026.45. Assessment having been made, the administrator filed a claim for abatement. Bureau letter of December 19, 1923, determined the total estate tax liability to be $21,040.78 and the assessment was abated to the extent of $1,434.94. Thereafter, distribution of the estate having been made, you joined with the other heirs at law of the decedent in filing a claim for refund of part of the tax paid. This claim is based upon the contention that, in determining the statutory gross estate of the decedent, allowance should be made on account of the widow's interest in the decedent's community property. Upon the basis of this claim, refund was made to you and to the other heirs of the decedent.
In view of the decision of the United States Supreme Court in the income tax case of United States vs. Robbins, and of the opinion of the Attorney General (Treasury Decision 3891) it now appears that the allowance on account of the 12 B.T.A. 1343">*1346 widow's interest in the decedent's community property and the consequent granting1928 BTA LEXIS 3363">*3368 of the refund was erroneous. Accordingly, it is determined that Bureau letter of December 19, 1923, correctly stated the gross estate to be $661,211.42; the deductions to be $85,531.78; the resultant net estate to be $575,679.64, the tax upon the transfer of which, computed in accordance with Title IV of the Revenue Act of 1918, is $21,040.78.
As stated above, the assets of the estate have been distributed. The amount of your liability is determined as follows:
| Correct amount of tax | $21,040.78 | |
| Payments in respect of the tax: | ||
| September 20, 1921 | $5,449.27 | |
| March 2, 1923 | 11,841.35 | |
| December 15, 1923 | 3,750.16 | |
| Interest on last payment | 292.82 | |
| 21,333.60 | ||
| Refund was made in the amount of | 15,320.01 | |
| Tax discharged | 6,013.59 | |
| Amount of your liability | 15,027.19 |
Your liability herein stated, or such part thereof as may be ultimately assessed, will bear interest at the rate of ten per centum per annum from and after thirty days after notice and demand by the Collector until paid, in accordance with section 407 of the Revenue Act of 1918.
Notice, under section 316 of the Revenue Act of 1926, of your liability, in the amount of $15,027.19, for estate1928 BTA LEXIS 3363">*3369 tax, under Title IV of the Revenue Act of 1918 with respect to the estate of Stephen Townsend, is hereby given.
In accordance with the provisions of Title III of the Revenue Act of 1926, you are allowed sixty days (not counting Sunday as the sixtieth day) from the mailing of this letter, within which to file a petition with the Board of Tax Appeals for a redetermination of your liability.
If you desire to file a petition for a redetermination of your liability, stated in this letter, such petition should be addressed to the United States Board of Tax Appeals, Earle Building, 13th and E Streets, Northwest, Washington, D.C.
Respectfully,
C. R. NASH, Acting Commissioner.
Enclosure.
aho
From these notices of deficiency petitioners filed these appeals on September 17, 1926.
For services rendered in securing the refund made in May, 1925, petitioners paid their attorney $4,282 of the sum refunded them.
OPINION.
TRUSSELL: This appeal may be disposed of upon the one issue that the liabilities in question are now, by lapse of time, barred from assessment.
The deficiency notices here involved were mailed after the enactment of the Revenue Act of 1926 and assessment1928 BTA LEXIS 3363">*3370 and collection are 12 B.T.A. 1343">*1347 controlled by the provisions of that Act as amended by the Revenue Act of 1928. Respondent has proposed assessment, under section 316 of the Revenue Act of 1926, of a deficiency in estate tax of the estate of Stephen Townsend, deceased, against petitioners as a liability of each as distributees of the estate.
The estate tax under the Revenue Act of 1918, in effect at the time of the death of Stephen Townsend, was due and payable one year after decedent's death, that is, on July 20, 1921.
Section 1109 of the Revenue Act of 1926 requires that all Revenue taxes be assessed within four years of the date when due, with certain exceptions. The record shows none of the conditions existing which would bring this case within the exceptions provided and accordingly the time for assessment of a deficiency against the executor of the estate expired on July 20, 1925. Fred S. Price,10 B.T.A. 1166">10 B.T.A. 1166.
Section 316 of the Revenue Act of 1926 provides a period of limitation for assessment of the liability of a distributee of one year after the expiration of the period for assessment against the executor, unless such an assessment has been made1928 BTA LEXIS 3363">*3371 within the period allowed therefor, in which case the liability may be assessed within six years from the date of such assessment against the executor. The Revenue Act of 1928 makes no change in the provisions of the Act of 1926 applicable to the case presented by this appeal.
In this case there is no assessment made within the period of four years from the date when the estate tax became due. The former assessment of the amount later refunded by respondent can not be considered, as such assessment was paid in full by the executor and was also later specifically determined by respondent, in making the refund, to have been erroneous. We had before us in Carney Coal Co.,10 B.T.A. 1397">10 B.T.A. 1397, the question of whether an assessment made and later abated as erroneous by the Commissioner was revived by a subsequent determination by him that the abatement was in error and the original assessment correct, and held that the assessment was not revived by such action. In the present case we have the original assessment fully satisfied by payment and then determined to have been erroneous by the allowance of a claim for refund of the payment made. We hold that the former assessment1928 BTA LEXIS 3363">*3372 is not now revived by the present action of the Commissioner in determining a deficiency based upon the conclusion that the claim for refund was erroneously made.
We accordingly conclude that there is no existing assessment against the executor and the period of limitation for assessment of any liabilities of petitioners as distributees of the estate of Stephen Townsend expired on July 20, 1926, one year after the expiration of 12 B.T.A. 1343">*1348 the four-year period beginning July 20, 1921. The deficiencies here involved, having been determined and advised of on August 19, 1926, are barred from assessment.
The question of whether the liabilities herein determined by respondent are subject to assessment under the Revenue Act of 1926, as amended by the Revenue Act of 1928, is the sole question here decided.
Judgment of no deficiency will be entered.