Roe v. United States

LittletoN, Judge,

delivered the opinion of the court:

Emma B. Johnson died December 29,1937, leaving a Will dated December 17, 1936, and the plaintiff Norman W. Roe is the duly appointed, qualified and acting executor of the decedent’s estate. The estate is still in process of administration.

Upon the petition of Norman W. Roe which, among other things, alleged that decedent was domiciled in Suffolk County, New York, decedent’s will was originally offered for probate on January 8, 1938, in the Surrogate’s Court of Suffolk County.

Objections were filed alleging that decedent was domiciled at the time of her death in New York County. These objections were ultimately sustained by the Court of Appeals of New York on December 4, 1940, that court holding that decedent was domiciled in New York County at the time of her death, and ordering that the New York County Surrogate’s Court had jurisdiction to take proof of any paper propounded as the last will and testament of decedent and to grant letters testamentary or of administration thereof.

Thereafter, on December 18, 1940, a proceeding was instituted in the Surrogate’s Court for New York County for probate of decedent’s will. Objections were filed to the probate of the will upon the ground, among others, that decedent had executed a subsequent will dated September 8, 1937, which revoked the will offered for probate; that the *2351937 will bad been destroyed and revoked by tbe decedent with the result that she died intestate. This objection was dismissed by order of the New York County Surrogate’s Court, which was affirmed by the Appellate Division of the New York Supreme Court and, later, by the Court of Appeals on January 13,1944.

Decedent’s will dated December 17,1936, was admitted to probate by the Surrogate’s Court of New York County on March 30, 1944, and on April 25, 1944, letters testamentary were issued to Norman W. Noe as executor.

March 15,1939, Norman W. Noe and George H. Payne, as temporary administrators of decedent’s estate, filed an income tax return for the estate for the year 1938 showing a total tax due of $56,010.36, which was paid in quarterly installments during the year 1939. The net income of the estate was overstated in this return and the tax due was overpaid.

The overpayment resulted from the failure of the estate to deduct $62,764.40 representing the portion of the income of the estate which was, pursuant to the terms of the will of decedent, permanently set aside during 1938 for the exclusive use of certain charitable institutions within the meaning of Section 162 (a) of the Revenue Act of 1938.

An amended return of income of the estate and a timely claim for refund of $39,648.94 were filed September 23,1941, while the validity of the decedent’s will, dated December 17, 1936, was being contested in the Surrogate’s Court of New York County, and before the will was finally held to be valid and formally admitted to probate on March 30, 1944. The overpayment of the tax due is admitted.

Defendant says that the refund claim was completely and finally disallowed and rejected on January 27, 1942, and insists, therefore, that recovery of the admitted overpayment, due to failure of the estate to deduct $62,764.40 under Section 162 (a), is barred since this suit was not instituted within two years thereafter.

Plaintiff contends that the form letter dated January 27, 1942, signed by the Acting Deputy Commissioner of Internal Nevenue and sent to the National City Bank of New York, as the temporary administrator of the estate, pending final decision as to the validity of decedent’s will, amounted *236to and was intended, under tbe circumstances, only as a tentative disallowance, due to inability of the Commissioner at that time to decide whether the deduction should be allowed or disallowed, pending the outcome of the litigation affecting the probate of the will dated December IT, 1936, offered for probate as the last will and testament of the deceased. None of the facts was in dispute. It is insisted, therefore, that the claim for refund actually subsisted as a valid claim subsequent to January 27, 1942, and was still open and subject to legal allowance pursuant to written application of the estate on April 20, 1945, in which it requested of the Commissioner of Internal Eevenue that the letter of January 27, 1942, be withdrawn in view of the allowance of the probate, on March 30,1944, of the will of December 17, 1936, and that the refund claim filed September 23, 1941, be allowed. No action was taken on this application. In these circumstances plaintiff contends that the refund claim has never in fact or in law been decided or finally disposed of or disallowed on its merits and that this suit is, therefore, not barred by the two-year statute of limitation, relied upon by counsel for defendant.

We are of the opinion that the facts and circumstances established by the stipulation of facts and the exhibits made a part thereof support the plaintiff’s position, and we have so found (finding 16).

The notice of disallowance, quoted in finding 16, was mailed by the Deputy Commissioner, not because the claim was considered invalid or insufficient, but due to the fact that the Commissioner was not able at that time to make a decision on the law and the facts on the merits of the claim under the terms of the will and Section 162 (a) of the Revenue Act of 1938. This notice was based solely on the statement in the agent’s report of January 5,1942, that “No evidence has been presented to show that any distribution of the income of the Estate has been made or can be made until the decision of the Court, as to the distribution of the assets, has been rendered. The distribution indicated in the amended return and used as a basis for the claim accompanying same is accordingly reversed.”

*237The statement of the revenue agent was based, as the report and the refund claim disclosed, and as the Commissioner knew, upon the then existing status of the probate proceeding with respect to the will of December 17, 1936, under the provisions of which the charitable deductions were claimed and by which the deductibility of the amounts permanently set aside and credited to the charitable institutions was primarily governed.

The notice of January 27,1942, was prepared on a mimeographed form letter, and we think it was not intended, in the circumstances of this case, as a final disallowance and disposition of the estate’s claim for refund, but was intended only as a notice that under the circumstances a decision could not be made at that time on the merits of the claim, and that it was, therefore, being tentatively disallowed for the time being pending the outcome of the litigation concerning the probate of the decedent’s will of December 17, 1936. Arthur K. Bourne et al. v. United States, 76 C. Cls. 680, 682-687; Mutual Chemical Co. v. United States, 78 C. Cls. 664; Henry Stanley Wood v. United States, 84 C. Cls. 367, 377, 378; Lawrence B. Conner et al. v. United States, 82 C. Cls. 476, 497, 498. The facts set forth in the findings with reference to the Commissioner’s action and admissions concerning the tentative nature of his disallowance of charitable bequests in the audit of the estate tax return, show that the letter of January 27,1942, was intended only as a tentative disallowance and not a final disposition and rejection of the claim. Cf. American Hide & Leather Co. v. United States, 284 U. S. 343, 347, 348.

The controversy involving the question whether this Will, which had been offered for probate, was the last will and testament of the decedent and whether it should be admitted to probate was not finally determined and settled until March 30, 1944, almost five years after the income tax for 1938 had been paid. Long before that date the time within which an original refund claim could be filed had expired under the statute of limitations of three years from the due date of the return and two years from the date of payment of the tax. Cf. B. Altman & Co. v. United States. 69 C. Cls. 721.

*238Soon after the will bad been admitted to probate and plaintiff Roe had been appointed executor, the estate made written application to the Commissioner asking that the refund claim of September 23, 1941, be allowed for the amount of tax overpaid for 1938, pursuant to the terms of the will and the provisions of Section 162 (a) of the Revenue Act of 1938. In the circumstances this application was proper and action in accordance therewith should have been taken. No action was taken thereon and this suit followed.

In view of the facts set forth in the findings and for the reasons stated, it is our decision that the suit by Norman W. Roe, as executor of the estate, was not barred at the time the petition was filed. The executor is, therefore, entitled on behalf of the estate to recover the overpayment in respect of the tax due for 1938, with interest as provided by law.

It is not necessary, in view of our decision that the suit by the executor is not barred, to discuss the alternative question whether Norman W. Roe, individually, the Industrial Home for the Blind, St. Faith’s House, and the Long Island College Hospital, are entitled, as beneficiaries under the will of the decedent, to recover as for money had and received by defendant, under Section 250, U. S. Code, Title 28. The petition as to Norman W. Roe, individually, and as to the other plaintiffs above-mentioned is, therefore, dismissed.

Judgment will be entered in favor of the executor of the estate upon the filing by the parties of a stipulation showing the amount due. It is so ordered.

Howell, Judge] Madden, Judge] and Jones, Chief Justice, concur.