The opinion of the court was delivered by: GOURLEY
This is a suit for the refund of federal estate taxes in the sum of $ 4,577.73 with interest, the refund of which taxpayer alleges has been erroneously denied.
Thomas K. Reeves died on December 28, 1947. Leonard D. Reeves was duly appointed the administrator of said estate. An estate tax return was filed with the Internal Revenue Service on February 20, 1950, reporting a net estate tax due in the sum of $ 16,826.31.
Prior to February 20, 1950, the date the estate tax return was filed, Internal Revenue Service had examined the income tax returns of the decedent, for the calendar years 1943 through 1946 inclusive. On the basis of said examination, Internal Revenue Service determined that deceased taxpayer had overpaid his income tax for 1943 and 1946, which overpayments were reported as assets of the decedent's estate and inter alia, upon the basis of which the estate tax was paid. In view of this action on the part of Internal Revenue Service, and with no knowledge existing on the part of the representative of the estate of deceased taxpayer that any claim was being made for additional income tax liability for any of the years 1943 through 1946 inclusive, no deduction was claimed on the estate tax return for any income tax liability of the decedent for any of the years 1943 through 1946 inclusive. Said estate tax was paid to the then Collector of Internal Revenue at the time the return was filed. An examination of the estate tax return was made by the Internal Revenue Service, and an additional assessment of $ 3,009.63 was proposed by letter dated April 18, 1952. Of this additional estate tax, $ 2312.12 was paid by the estate on July 7, 1952.
On May 29, 1952, Internal Revenue Service advised the representative of the estate in writing that a review of the income tax return of deceased, inter alia, for the years 1943 through 1946 inclusive disclosed certain adjustments or conclusions. This letter was probably the notice of deficiency assessment however; said letter specifically stated it was not a statutory notice of deficiency, and was not the assessment itself, which was not made until November 6, 1952.
Subsequent to July 7, 1952, more particularly on November 6, 1952, additional income tax assessments were made in the amount of $ 16,203.23 for the years 1943 through 1946 inclusive. These assessments were paid as follows: $ 14,398.38 on October 17, 1952, and $ 12,597.93 on April 10, 1953, which amounts included penalties and interest to date of payment.
Internal Revenue Service advised the Court by letter of July 25, 1957, directed to the United States Attorney, which I have incorporated as part of the record of this proceeding that it is not unusual and perfectly possible for a payment on a deficiency assessment of taxes to be made before the actual assessment of the deficiency. After a notice of deficiency has been sent and where a taxpayer decides not to file a petition in the Tax Court within the ninety-day period allowed, then, since taxpayer knows the assessment will be made in the immediate future, it is not unheard of for a taxpayer to make a payment before the assessment is actually made.
On July 6, 1955, the estate of taxpayer filed a claim for refund of estate taxes with the Internal Revenue Service, claiming that the assessments of income taxes for the years 1943 to 1946 inclusive, were properly deductible as a debt for estate tax purposes and had not been so deducted on the estate tax return, theretofore for the reason the taxpayer had no knowledge or information that additional income taxes were being claimed for any of the years 1943 to 1946 inclusive. The Internal Revenue Service determined that the estate tax had been overpaid in the sum of $ 6,329.85 because of the additional income tax assessments, but refused to refund more than $ 2,312.12, the amount of tax paid within three years preceding the filing of the claim for refund on July 6, 1955.
There is no dispute that more than three years elapsed from the date of payment of the estate tax on February 20, 1950, and the filing of the claim for refund of estate taxes on July 6, 1955, based on the delinquency assessment and payment of additional income tax liability for the years 1943 through 1946, inclusive, which was paid subsequent to July 7, 1952. The date of the payment of said additional income tax liability for the years 1943 through 1946 inclusive being October 17, 1952 and April 10, 1953.
When a fiduciary files an estate tax return for a taxpayer and correctly pays the estate tax due under provisions of Internal Revenue Code based on all facts and circumstances known to him, and subsequent thereto a deficiency assessment is made by Internal Revenue Service for income tax liability of deceased taxpayer for years prior to his death which would have entitled taxpayer to credits in a refund on his estate tax return, when does the three year statute of limitations commence to run for the filing of a claim for refund for overpayment of the estate tax which is alleged was erroneously or illegally assessed under provisions of Section 910, Section 3772, Section 3774 and Section 7422 of 26 U.S.C.A., and Treasury Regulation 105, Section 81.96?
Chronologically, the events which concern us occurred in the following sequence:
December 28, 1947 - Date of decedent's death
February 20, 1950 - Date of estate tax paid
July 7, 1952 - Date additional estate tax paid
November 6, 1952 - Additional income tax liability assessed against
deceased taxpayer for years 1943 through 1946
inclusive. This assessment, penalty and inter-
est paid October 17, 1952 and April 10, 1953.
July 6, 1955 - Claim for estate tax refund based on payment of
additional income taxes 1943 through 1946 in-
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