The opinion of the court was delivered by: MARSH
This case came on for trial before the court without a jury, upon the pleadings and the written stipulation of the facts. Briefs have been filed and considered, and the court makes the following.
1. The plaintiff brings this action against the United States pursuant to the provisions of Section 24 of the Judicial Code, as amended, 28 U.S.C.A. § 1346(a) (1), the action arising under the Internal Revenue Laws of the United States.
2. On or about March 11, 1942, the plaintiff filed her income tax return for the calendar year 1941 wherein she reported a tax of $ 2,711.78, which was subsequently increased to $ 2,843.78. The amount of $ 2,843.78 was paid, $ 2,711.78 on March 11, 1942, and $ 132 on November 19, 1942.
3. On March 30, 1943, the plaintiff filed a claim for the refund of the amount of $ 2,843.78, plus interest, which is based upon a claimed deduction of $ 21,804.90.
4. On May 2, 1944, the Commissioner of Internal Revenue disallowed the claim.
5. One, J. W. Cree, prior to his death on November 24, 1941, was the manager of several trust estates and also a business agent and adviser for a large number of persons. Among his clients was the plaintiff in this case whose maiden name was Martha Liggett. When the plaintiff was a minor Mr. Cree was her guardian and after she became of age, Mr. Cree continued as her business agent and adviser. The plaintiff's chief source of income was from real estate and securities and Mr. Cree had complete control and possession of the funds and property of the plaintiff. There was no written agreement between the plaintiff and Mr. Cree respecting the funds and securities and no accounting was ever requested or given by Mr. Cree. The account of the plaintiff, as well as other trust accounts, was carried in a separate set of books called the 'J. W. Cree, Jr., Trust Account,' the funds of which were commingled with his own personal funds. The securities were likewise carried in the name of J. W. Cree, Jr.
7. The net loss was established on November 18, 1942.
8. 'The Net Amount Embezzled' for each year from 1931 to 1940, both inclusive, was determined from Cree's books.
9. No money was taken by Cree during the year 1941.
10. Plaintiff had no reason to suspect that any of her funds were being embezzled by Cree and had no knowledge of such embezzlement until after his death on November 24, 1941.
11. Throughout the period above mentioned, Cree was a director in several banks and prominent in real estate and business circles in the City of Pittsburgh. He enjoyed substantial credit and had a ...