*1189 Held, that petitioners are liable as transferees.
*1115 These proceedings, duly consolidated, are for the determination of the petitioners' liability as transferees of the assets of the estate of Jeremiah Roberts Downing, for an alleged deficiency of $10,432.80 (plus accrued penalty and interest) in the income tax of the transferor for 1920. The petitions set forth the following allegations of error:
(a) The deficiency is proposed under Section 280 of the Revenue Act of 1926 which section violates the Constitution.
(b) The deficiency letter was mailed to the petitioner after the expiration of the statutory period of limitations.
(c) The petitioner is not the transferee of the assets of the Estate of Jeremiah R. Downing.
(d) The Estate of Jeremiah R. Downing did not at any time owe any taxes to the Government for the year 1920.
FINDINGS OF FACT.
The petitioners are residents of Kennebunk, Maine.
Under the provisions of the decedent's will certain individuals were designated as executors and trustees, who, after the payment of certain*1190 bequests, were to hold the remainder of the decedent's property in trust for a period of 10 years after the probation of the will, pay the net income to the decedent's widow and son, and upon the termination of the trust divide the trust estate equally between the widow and son - these petitioners. The will was probated March 13, 1912, at which time Everett Morse, Frank G. Newhall, and another, who shortly thereafter resigned, were appointed executors by the probate court of Suffolk County, Massachusetts. Jere R. Downing was appointed an executor by the court on May 28, 1912, in the place of the resigned executor.
On March 9, 1914, the above named executors were appointed trustees under the will of Jeremiah Roberts Downing.
*1116 On February 28, 1921, an income-tax return for the calendar year 1920 was filed by:
Everett Morse
Frank G. Newhall
Jere R. Downing Trustees u/w J. R. Downing
This return was signed:
Estate Jeremiah R. Downing
Everett Morse, Trustee.
On June 26, 1922, the trustees under the will of Jeremiah Roberts Downing filed their "first and final account" for the period March 31, 1916, to March 13, 1922, inclusive, which was "allowed" by the*1191 probate court. This account shows distributions of the principal of the trust estate to each of these petitioners on March 12, 1922, in the amount of $83,948.54.
On January 20, 1926, the Commissioner sent a deficiency notice to "Mr. Everett Morse, et al, Trustees under the Will of J. R. Downing," advising that:
The determination of the income tax liability of the above-mentioned estate for the taxable years 1920 to 1922, inclusive, * * * [discloses] a deficiency in tax of $10,432.80 for the year 1920 and an aggregate overassessment of $1,774.36 for the years 1921 and 1922 * * *.
A petition based upon that notice and captioned, "Appeal of Everett Morse, Frank G. Newhall, Jere R. Downing, Trustees under the will of Jeremiah Roberts Downing, late of Boston, Mass., and of Elvina P. Downing and Jere R. Downing, beneficiaries under said will," was duly filed with this Board and assigned Docket No. 13492. That petition was signed by "Arthur T. Johnson, Attorney for taxpayers" and verified by:
Everett Morse
Frank G. Newhall
Jere R. Downing Trustees
As trustee, and for himself and Elvina P. Downing, beneficiaries u/w Jeremiah R. Downing.
The pleadings in Docket No. 13492*1192 raise only questions as to the merits of the Commissioner's determination of a gain upon the sale of certain stock in 1920. The Board's opinion, promulgated July 6, 1928, and decision, entered July 9, 1928, sustaining the Commissioner's determination, were captioned "Estate of Jeremiah Roberts Downing, Everett Morse, Frank G. Newhall and Jere R. Downing, Trustees."
The deficiency sustained by the Board in Docket No. 13492, plus accrued interest, was assessed February 2, 1929, and warrant for distraint issued and returned unsatisfied. The record in the office *1117 of the collector of internal revenue for the District of Massachusetts indicates that this assessment is still unpaid.
On January 18, 1930, notices of the asserted transferee liability were sent to these petitioners, who within the time allowed instituted these proceedings. The following statement accompanied these notices:
Under authority of Section 280 of the Revenue Act of 1926, there is proposed for assessment against you the amount of $10,432.80 constituting your liability as one of the transferees of the assets of the Estate of Jeremiah R. Downing, formerly of Brighton, Massachusetts, for unpaid income*1193 tax in the above amount due from the said estate (plus any accrued penalty and interest) for the year 1920.
This deficiency, originally determined by the Bureau on the basis of a revenue agent's report dated August 4, 1924, has been approved by the United States Board of Tax Appeals. The Board's findings of fact and its decision, promulgated July 6, 1928, are published on page 1180, Vol. 12, of the Board's reports. As no petition for review of the decision was filed with a proper court within the time allowed by Section 1001 of the Revenue Act of 1926 the decision has become final (Section 1005(1)(a) of that Act) and the deficiency has been assessed against the taxpayer in accordance with the provisions of Section 274(b) of said Act.
OPINION.
SMITH: The constitutionality of section 280 has been definitely established by the decision of the Supreme Court in .
The petitioners contend that they are not transferees of the estate@ of Jeremiah Roberts Downing, that the said estate was distributed to the trustees, and that the "trust" and "estate" were distinct legal entities, citing *1194 . Technically, there is a distinction and it was so held in the cited case, but here the respondent has asserted liability against these petitioners as transferees of the assets of the trust estate established by the decedent's will, and explained that the amount proposed for assessment was the amount of the deficiency, plus interest, determined in the proceedings in Docket No. 13492. The petitioners have not been misled as to the liability asserted. The facts show that each petitioner received assets in excess of the deficiencies which had been determined against the trust estate in a proceeding to which Jere R. Downing, acting for himself as trustee and for himself and Elvina P. Downing as beneficiaries, was a party. The respondent has sustained the burden of proving that the petitioners are transferees of the assets of the entity primarily liable for the tax in question.
*1118 The petitioners further contend that the Board had no jurisdiction of the proceeding in Docket No. 13492, that our determination there was a nullity, and that their liability is barred by the statute of limitations. *1195 The respondent concedes that if our determination in Docket No. 13492 was a nullity, the statute has run. The petitioners argue that the trustees of the decedent's estate had been discharged and were without authority to institute the prior proceedings. The facts of record merely establish the allowance of their first and final account; the petitioners have not shown that the trustees were legally discharged, although such is to be inferred from the provisions of section 22 of chapter 206 of the Revised Laws of Massachusetts, which provide for the final accounting and discharge of trustees and other fiduciaries, but which make no provision for subsequent action by such fiduciaries in any respect. Assuming, but not deciding, that the trustees had been discharged, no notice of their discharge had been given to the Commissioner as is required by section 281 of the Revenue Act of 1926 (see ), and under section 3467 of the Revised Statutes they continued personally liable for the tax (see *1196 ), and, in any event, neither the tax nor the petitioners' (in Docket No. 13492) liability therefor was extinguished prior to the running of the statute of limitations. The Board had jurisdiction of the proceeding at Docket No. 13492, instituted by the persons receiving the deficiency notice and responsible for the settlement of the tax obligations of the trust estate. Cf. ; ; (reversed on other grounds, ). The jurisdiction of the Board being thus invoked without contest by the proper parties, one of whom is now at bar, we conceive of no reason for now denying that we had jurisdiction, and these petitioners can not now deny that jurisdiction which was invoked in their behalf. See United Statesv. Wolf Run Coal Co. (U.S. Dist. Ct., N. Dist. Ohio, E. Div.), 313 C.C.H. 8258, 8261. Cf. *1197 ; ; ;
The notices to these petitioners were timely and their liability as transferees for the asserted tax is not barred by the statute of limitations.
Judgment will be entered for the respondent.