Opinion
Docket No. 6566.
1947-07-24
ESTATE OF ALBERT A. HANSEN, DECEASED, ALICE CARMODY HANSEN, EXECUTRIX, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
Robert H. Walker, Esq., for the petitioner. T. M. Mather, Esq., for the respondent.
Held, no claim for refund having been filed, petitioner is not entitled to a refund of taxes paid in excess of liability. Robert H. Walker, Esq., for the petitioner. T. M. Mather, Esq., for the respondent.
The respondent determined a deficiency of $32,193.52 in the estate tax liability of the estate of Albert A. Hansen.
Several issues were raised, but all have been settled by stipulation except the petitioner's right to a refund of an overpayment of $483.33. This right is contested on the ground that a claim for refund, sufficient under the statute, was not filed within three years after payment of the estate tax.
FINDINGS OF FACT.
The facts were stipulated. Those material to the issue are as follows:
Albert A. Hansen died on March 25, 1940, a resident of San Francisco, California. On April 18, 1940, the Superior Court in and for the City and County of San Francisco admitted the decedent's will to probate. On the same day letters testamentary were issued to the decedent's wife, the petitioner, Alice Carmody Hansen, as executrix of his will and she duly qualified as such.
No deficiency in estate tax is payable by the petitioner (the estate). The petitioner has made an overpayment of estate taxes in the amount of $483.33, the sum shown to be due on the estate tax return filed by the petitioner on September 23, 1941, with the collector of internal revenue for the first district of California. At the time of filing, the petitioner paid such amount, with $7.25 interest thereon.
Attached to the estate tax return of the petitioner, and incorporated therein by reference, was the following statement:
Albert A. Hansen died March 25, 1940. On August 5, 1940, a claim was filed against the Estate by one Virginia Hansen, a niece of the decedent, whereby among other things she claimed to be the owner of all the stock, both common and preferred, of Bear Film Co., and she demanded that the Estate turn over to her all the stock standing in the name of the decedent or controlled by him, and demanded also an accounting by the Estate of all dividends or profits received by the decedent during his lifetime from Bear Film Co.; she claimed that all such stock, dividends and profits had been held by the decedent in trust for her.
The claim being rejected by the Executrix, Virginia Hansen, on August 15, 1940, filed suit in the Superior Court of the State of California in and for the City and County of San Francisco against numerous defendants including Bear Film Co. and the Executrix of the decedent. This suit, known as ‘Virginia Hansen, Plaintiff, vs. Bear Film Co., Inc., et al., Defendants ‘, No. 296,867 in the files of said court, came to trial upon an amended complaint on February 14, 1941, and was submitted to the court for decision on June 5, 1941. No decision has yet been rendered, but a decision is expected in the near future. If an appeal should be taken from the judgment of the Superior Court a final decision will not be had for many months. In view of the pendency of said action, it is obvious that it can not be determined definitely at this time whether any Federal Estate Tax is payable, or if payable, the amount of tax.
Several claims have been made by Virginia Hansen in the suit referred to above. Prior to his death in April, 1929, Virginia Hansen's father, Oscar C. Hansen, was the Manager and President of Bear Film Company. Prior to November 2, 1926, Oscar C. Hansen had owned all the preferred stock of Bear Film Co. On that date he transferred all the stock to his mother, Josephine T. Hansen. The common stock of the company was owned in entirety by a third part, one Quinn, from whom it was transferred in February, 1927, to Josephine T. Hansen. After Oscar C. Hansen's death, Josephine T. Hansen transferred all the stock of Bear Film Co., both preferred and common, to her son, the decedent, Albert A. Hansen, pursuant to certain contractual arrangements. The gist of the claims made by Virginia Hansen in the suit referred to above is as follows:
1. That Oscar C. Hansen had become the owner of the common stock, obtaining it from Quinn; that he had never transferred either the preferred or common stock to his mother, but had died possessed of the same, and that Josephine T. Hansen and her son, Albert A. Hansen, had conspired to cheat the estate of Oscar C. Hansen of the stock, and that as the heir of Oscar C. Hansen, the plaintiff, Virginia Hansen, has been the owner of all the stock, both preferred and common, of Bear Film Co., since April, 1929.
2. That Oscar C. Hansen transferred the preferred stock to his mother in November, 1926, but did so on an express trust to deliver the stock to his daughter on his death.
3. That Oscar C. Hansen was the owner of all the common stock of Bear Film Co. in February, 1927, and then transferred it to his mother, but did so on an express trust to deliver to his daughter on his death.
4. That the common stock was purchased from Quinn in February, 1927, and taken in the name of Josephine T. Hansen, but that the purchase price was paid by Oscar C. Hansen, and that the stock was held by Josephine T. Hansen on a resulting trust for Oscar C. Hansen and his heirs.
5. That on one or the other of the several theories notice (sic) above all the preferred stock of Bear Film Co and all or part of the common stock of the company has been, ever since Oscar C. Hansen's death, the property of Virginia Hansen; that it was never the property of the decedent Albert A. Hansen, and that she, Virginia Hansen, is entitled to a decree establishing her title adversely to the estate.
6. That during the lifetime of Albert A. Hansen, the decedent, there was declared and paid to him $66,500.00 of dividends on the preferred stock of Bear Film Co., and $28,500.00 of dividends on the common stock of that company; that those dividends belonged to her, Virginia Hansen, and that she is entitled to judgment against the estate for $95,000.00 plus accrued interest.
7. In addition, Virginia Hansen claims that upon her father's death in 1929 Bear Film Co. and the decedent Albert A. Hansen conspired to cheat and defraud her father's estate of sums of money due from Bear Film Co. aggregating, according to the claim as finally submitted to the court, $46,205.47. Virginia Hansen, therefore, seeks, in addition to a decree establishing title to the stock and dividends, judgment against the Bear Film Co. and the Estate of Albert A. Hansen for $46,245.47 (sic) plus interest at the legal rate of 7% per annum since Oscar C. Hansen's death.
If a judgment is rendered in favor of Virginia Hansen establishing that all or part of the preferred and common stock and the dividends thereon belongs to her, the result would be that the estate of Ablert A. Hansen would be materially less than it is believed to be. If title to the stock is quieted in the Estate of Albert A. Hansen, but some judgment is rendered in favor of the plaintiff on her claim for $46,205.47 either against the Estate or against the Bear Film Co., the estate of Albert A. Hansen would likewise be less than believed to be. If such judgment is rendered against Bear Film Co., the result would be that the stock of that company would be of less value than otherwise.
No inventory has been filed in the proceedings to administer the Estate of Albert A. Hansen.
At the time of decedent's death, 2,000 shares of the preferred stock and 2,000 shares of the common stock of Bear Film Co., a California corporation, stood of record in his name, and 500 shares of the preferred stock and 500 shares of the common stock of Bear Film Co. stood of record in the name of Bear Film Co., as trustee for Robert Fulton Hansen, having been formerly transferred to such trustee by the decedent.
Prior to the date of the decedent's death dividends had been declared on the preferred and common stock of Bear Film Co. standing in his name, and consequent thereon there were carried to the credit of the decedent on the books of Bear Film Co. at the time of his death certain sums of money, consisting of an account payable to him entitled ‘Note Account,‘ in the amount of $54,616.76, with interest accrued thereon to March 25, 1940, in the amount of $814.64, and an account payable entitled ‘Special Account,‘ in the amount of $3,766.76.
On August 16, 1940, Virginia J. Hansen filed an action in the Superior Court of the State of California in and for the City and County of San Francisco, entitled ‘Virginia J. Hansen, Plaintiff, vs. Bear Film Co., Inc., et al., Defendants,‘ and numbered 296,867 in the files of that court. Bear Film Co. and petitioner Alice Carmody Hansen, individually and as executrix of the will of the decedent, among others, were named as defendants. In that action the plaintiff, Virginia J. Hansen, claimed to be the owner of all of the 2,500 shares of the preferred stock and 2,500 shares of the common stock of Bear Film Co. She further claimed that neither decedent nor petitioner nor decedent's estate had at any time any right, title, or interest in or to any of the said shares, and that neither the decedent nor the petitioner nor decedent's estate is, or has been at any time, entitled to receive all or any part of the said $58,383.52 or interest thereon.
The action was contested by Bear Film Co. and petitioner Alice Carmody Hansen, who denied the claims of Virginia J. Hansen.
On June 22, 1943, the Superior Court rendered its judgment in that action, determining and decreeing that the decedent had never been the beneficial owner of any of the 2,500 shares of preferred stock and 2,500 shares of the common stock of Bear Film Co.; that Virginia J. Hansen had at all times since before acquisition of record title by decedent been the equitable owner of all of the shares; that the decedent at all times had held all such shares standing in his name as trustee for Virginia J. Hansen; that Bear Film Co. now holds 500 shares of the preferred stock and 500 shares of the common stock as trustee for Virginia J. Hansen; and that the petitioner now holds 2,000 shares of the preferred stock and 2,00 shares of the common stock as trustee for Virginia J. Hansen; and by its decree the court ordered the immediate transfer of the legal title to Virginia J. Hansen. The judgment also canceled the whole of the accounts payable in the amount of $58,383.52, and the interest accrued thereon, and determined that no part of such sums or interest accrued thereon is or ever was payable to the decedent or the petitioner or the decedent's estate.
The judgment was thereafter appealed by Bear Film Co. and by the petitioner. The record on appeal was docketed in the Supreme Court of the State of California on January 20, 1944. On January 26, 1944, the case was transferred by the Supreme Court of Appeal of the State of California, First Appellate District, for decision and was pending therein. Until a final decision should be rendered in the litigation it could not be determined whether the decedent ever had any right, title, or interest in or to any of the 2,500 shares of the preferred stock and 2,500 shares of the common stock of Bear Film Co., or whether all or any part of the $48,383.52 was payable to decedent.
The following correspondence passed between the petitioner, acting through her attorneys, Brobeck, Phlager & Harrison, and the respondent, acting through the internal revenue agent in charge at San Francisco, all of which correspondence was duly mailed by the petitioner's agents on the respective dates of the several letters comprising it and all within three years after September 23, 1941:
On May 19, 1942, the petitioner's attorneys wrote a letter to the respondent's agent referring to the rider attached to the estate tax return and containing the following excerpts:
Shortly after the return was filed, and in early October, 1941, the court announced its decision that all the stock of Bear Film Co. does belong to Virginia Hansen and was not the property of the estate, and the decedent had no interest therein at the time of his death. No findings of fact have been settled, and no judgment has yet been entered. Only recently the case was reopened for new evidence. If, however, a judgment is finally entered in accord with the previously announced decision of the trial judge, the estate intends to move for a new trial and, if necessary, to appeal. It may therefore be several years before the title of the estate to the stock of the Bear Film Co. and the estate's obligation with respect to dividends received can be finally determined.
In the circumstances, and in view of the possibility that the decedent may have had no interest in the stock, it seems futile to attempt to fix the estate tax liability at this time. If this stock or any part thereof is part of the estate, the executrix will and does protest against the proposed deficiency assessment on the following grounds, among others:
It would be idle to engage in proceedings to determine the value of the stock of the Bear Film Co., if the decision of the court upholding the claim of Virginia Hansen that the estate does not own the stock is entered as a judgment and the judgment affirmed. It would be equally idle to engage in a determination of the question of community property or the other questions which would be raised by the protest, for, if the estate does not own the stock of the Bear Film Co., no estate tax at all will be due.
We therefore request that the time within which to file a protest should be extended for two years without prejudice, with the right to apply for a further extension in the event a judgment in the said action of Virginia Hansen v. Bear Film Co., Inc., et al. has not become final within that time.
On May 21, 1942, F. M. Harless, internal revenue agent in charge at San Francisco, replied that ‘the matter is being held in suspense pending determination of the ownership of the property included in the gross estate.‘
On May 29, 1942, the petitioner's attorneys acknowledged the receipt of the letter from Harless, and stated:
Incidentally, we prepared our letter of May 19, 1942, in the form of a protest so that it could be considered as such and as a request for a hearing in the event that it was necessary to do so in order to accomplish the objectives sought by both of us.
On September 16, 1942, the petitioner's attorneys wrote again to the internal revenue agent, stating that the case of Virginia Hansen v. Bear Film Co., Inc., et al., had been reopened for new evidence, and requested a definite extension of time in which to file protest against the deficiency tax. On September 18, 1942, the acting internal revenue agent in charge granted the requested extension to January 6, 1943.
On December 29, 1942, the petitioner's attorneys wrote to the internal revenue agent in charge, stating that the court had ordered further proceedings in Hansen v. Bear Film Co., and asked for a further extension, which, on January 1, 1943, was granted, to expire on April 6, 1943.
On March 27, 1943, the Petitioner's attorneys wrote a letter of like tenor and the time for filing a protest was extended to May 15, 1943. On similar grounds a further extension was granted to July 15, 1943.
On July 6, 1943, the petitioner's attorneys informed the internal revenue agent in charge that a judgment was finally rendered in the case, decreeing that the petitioner did not own any of the stock of Bear Film Co. and canceling all credits on that company's books in favor of the decedent (and his estate). They stated also that the estate intended to appeal, and requested a further extension, which was granted to January 31, 1944. After the appeal was taken a similar request was made and granted to June 30, 1944, but any subsequent extension was denied, on the ground that the ‘statute of limitations will expire September 23, 1944, with respect to the assessment and collection of any deficiency.‘
On June 22, 1944, the petitioner's attorneys wrote to the internal revenue agent in charge, in part, as follows:
* * * As has heretofore been explained, in the event the judgment in the case of Virginia Hansen v. Bear Film Co., Inc. et al. were to be affirmed, the estate would be so stripped of assets that no estate tax whatever would be due. Consequently, until that case is concluded, it would seem to be futile to discuss other objections to the proposed assessment.
As we have also advised, we have done our best to press the appeal. The record on appeal was finally docketed in the Supreme Court of the State of California on January 20, 1944. The case was transferred to the District Court of Appeal, First Appellate District on January 26th and we promptly filed the briefs on behalf of the appellant on or about January 28th. The respondent however, has not yet filed her own brief or briefs but has obtained extensions of time within which to do so, which now expire on June 30th, the very date on which the extension of time to file protest in the matter of the above estate expires. After the respondent's brief has been filed, it will be necessary for us to file our reply briefs, and some period of time will necessarily elapse before the case can be heard and determined by the court.
You have advised us that you can grant no further extensions of time to us in which to file a protest, beyond June 30th, because the Statute of Limitations will shortly expire with respect to the assessment and collection of any deficiency.
In view of the pendency of our appeal in the case of Virginia Hansen v. Bear Film Co., Inc., et al., we are in no better position to file a protest now than we have heretofore been, and it would seem futile to do so. However, we call your attention to the objections we have heretofore noted to the proposed deficiency assessment and will hereafter take such other steps as may be necessary to protect the interests of the estate.
On May 7, 1946, the judgment of the Superior Court of the State of California in and for the City and County of San Francisco in the case of ‘Virginia J. Hansen, Plaintiff, vs. Bear Film Co., Inc., et al., Defendants,‘ was affirmed by the Supreme Court of the State of California, this case having theretofore been retransferred from the District Court of Appeal to the Supreme Court upon the granting of a petition for a hearing by the Supreme Court. The decision is reported in 28 A.C.R., p. 173. The judgment of the Superior Court thereupon became final.
The overpayment of tax results from the elimination from the gross estate of the stock and accounts receivable, as above set forth.
The parties stipulated that the petition herein shall be deemed to have been amended to add at the end of paragraph V (22) thereof the following allegation, which shall be deemed to have been denied by the respondent:
Prior to the expiration of three (3) years from September 23, 1941, petitioner filed a claim for refund of said estate taxes in the amount of $483.33, and interest thereon in the amount of $7.25, with the Commissioner of Internal Revenue.
No part of the said taxes or interest has been repaid to the petitioner.
OPINION.
VAN FOSSAN, Judge:
By stipulation the asserted deficiency was wiped out and it was agreed that the petitioner had made an overpayment of its estate tax in the sum of $483.33, plus $7.25 interest thereon. The single issue remaining is whether or not the petitioner filed a claim for refund sufficient in tenor and terms to warrant the return of the overpayment.
The applicable statutes are sections 910
SEC. 910. PERIOD OF LIMITATION FOR FILING CLAIMS.All claims for the refunding of the tax imposed by this subchapter alleged to have been erroneously or illegally assessed or collected must be presented to the Commissioner within three years next after the payment of such tax. The amount of the refund shall not exceed the portion of the tax paid during the three years immediately preceding the filing of the claim, or if no claim was filed, then during the three years immediately preceding the allowance of the refund.
(before its amendment by section 415 of the Revenue Act of 1942, which was not made retroactive) of the Internal Revenue Code. Albeit section 81.96, Regulations 105
SEC. 912. OVERPAYMENT FOUND BY BOARD.If the Board finds that there is no deficiency and further finds that the executor has made an overpayment of tax, the Board shall have jurisdiction to determine the amount of such overpayment, and such amount shall, when the decision of the Board has become final, be credited or refunded to the executor as provided in section 3770(a). No such refund shall be made of any portion of the tax unless the Board determines as part of its decision that such portion was paid within three years before the filing of the claim or the filing of the petition, whichever is earlier, or that such portion was paid after the mailing of the notice of deficiency.
does not require the claim for refund of estate taxes to be made on Form 843 to be effective, from a reading of the statute and regulations it is clear that a claim in some form must be filed. It must be sufficient to advise the Commissioner (or the collector) of the fact that it is intended as a claim and must apprise him of the nature and basis thereof. In Julia A. Forhan, 45 B.T.A. 799, in considering the identical question now before us and on similar facts, we said:
SEC. 81.96. Claim for Refund.— A claim for refund of estate tax, or for refund of interest or penalties, erroneously or illegally collected, should be made on the form prescribed by the Treasury Department (Form 843), and should be filed with the collector of internal revenue, although a claim will not be considered defective solely by reason of the fact that it is not made on the form or that it is filed with the Commissioner of Internal Revenue. * * *
The present protest and memorandum were not intended as a claim for refund and were not treated as a claim for refund. They were intended and treated merely as a protest against the assertion of any additional tax. Even if they could be regarded as an imperfect claim for refund, susceptible of amendment, nevertheless, no amendment was ever filed and the issuance of the notice of deficiency was a complete rejection of any pending claim. Thereafter, it was too late to amend. Furthermore, the petition to the Board may not be regarded as an amendment of an imperfect claim theretofore filed.
The above may properly be said of the instant case. The matter at issue between the parties was the threatened finding of the deficiency in taxes. All of the correspondence relates to filing of the protest against such additional taxes, not to the recovery of taxes paid. Although it might fairly be assumed that anyone who has overpaid his taxes would wish to recover the excess, the law requires certain procedure and the taxpayer must initiate such procedure by filing a claim. Neither an implied nor an expressed intention to file a claim in the future is enough. The intention must be so evidenced as to spell out a claim. Here, there is not even an informal claim which can be recognized under the liberal construction accorded such situations by the courts. The protest against additional taxes was not intended as a claim for refund and was not recognized or treated as such. The amendment of the petition at the hearing comes too late to constitute a statutory claim.
Fully recognizing the fact that the Government should not in good conscience retain taxes in excess of those due, nonetheless the statute requires certain formalities, and, absent those requisites, the petitioner is in no position to complain. On this issue we sustain the respondent. See United States v. Frauenthal, 138 Fed.(2d) 188.
Decision will be entered under Rule 50.