B. Altman Co.v.United States

Court of ClaimsApr 30, 1930
40 F.2d 781 (Fed. Cir. 1930)

No. K-298.

April 30, 1930.

Suit by B. Altman Co. against the United States.

Petition dismissed.

This case is for the recovery of an additional assessment of income taxes collected from the plaintiff by including within the taxable income of the corporation for 1913 the value of the devise of real property received by the corporation the same year, that is, 1913, in which the testator died.

This case having been heard by the Court of Claims, the court, upon the report of a commissioner, makes the following special findings of fact:

1. Plaintiff is a corporation duly organized and existing under the laws of the state of New York, having its principal place of business in the city of New York in said state.

2. Plaintiff has at all times borne true allegiance to the government of the United States. It has not in any way aided or given encouragement to rebellion against such government. It is and always has been the sole and absolute owner of the claim herein presented, and has made no transfer or assignment of said claim, or any part thereof, or of any interest therein. No other action than as stated hereafter has been had on this claim in Congress or by any of the departments.

3. Plaintiff received by devise under the will of Benjamin Altman, a resident of the state of New York, who died October 7, 1913, certain real property having a value at the time received in the sum of $5,381,500.

4. On February 27, 1914, the plaintiff filed with the collector of internal revenue for the second district of New York an income tax return for the calendar year 1913, showing a taxable net income of $1,163,429.40, and an income tax due thereon in the sum of $11,634.29, and on or about June 25, 1914, the plaintiff filed with the said collector an amended income tax return for the said year showing a net income of $1,073,429.40, and an income tax due thereon in the sum of $10,734.29. The returns filed by the plaintiff for the year 1913 as aforesaid did not include as a part of the taxable income reported in such returns the sum of $5,381,500 referred to in finding 3. The sum of $11,634.29 income tax shown due on the original return filed by the plaintiff for the year 1913 was assessed against the plaintiff, and on or about June 26, 1914, the said sum of $11,634.29 was paid by the plaintiff to the collector of internal revenue for the second district of New York.

5. Thereafter an additional income tax in the sum of $1,000 was assessed against the plaintiff for the year 1913, and on or about November 11, 1914, the said sum of $1,000 was paid by the plaintiff to the collector of internal revenue for the second district of New York.

6. Thereafter a further additional income tax in the sum of $1,223.95 was assessed against the plaintiff for the year 1913, and on or about March 29, 1918, the said sum of $1,223.95 was paid by the plaintiff to the collector of internal revenue for the third district of New York.

7. During the year 1923 the Commissioner of Internal Revenue caused an examination to be made of the books and records of the plaintiff, and upon the basis of such examination audited the income tax returns filed by the plaintiff for the year 1913. The said Commissioner computed the taxable income of the plaintiff for the year 1913 in the sum of $6,583,023.72, including therein the sum of $5,381,500, being the value of the property received by the plaintiff by devise, as stated in finding 3. Upon the basis of his computation of the taxable income of the plaintiff in the said sum of $6,583,023.72, the said Commissioner determined the total income tax liability of the plaintiff for the year 1913 to be the sum of $65,830.24.

8. On or about January 5, 1923, the Commissioner of Internal Revenue duly notified the plaintiff of the final determination against it of an additional income tax for the year 1913, in the sum of $53,195.95, which said sum was assessed against the plaintiff by the said Commissioner.

9. Upon demand of the collector of internal revenue for the second district of New York, the plaintiff, on July 2, 1923, delivered to said collector its check in the sum of $63,532.63, dated June 30, 1923, payable to the order of said collector, drawn on Bankers' Trust Company, New York City. A portion of said check, to wit, the sum of $51,972, was in payment of additional income tax for the year 1913, assessed as set forth in finding 8 hereof. The said check received by the collector on July 2, 1923, was deposited by him in the Federal Reserve Bank either on July 16 or July 17, 1923. This payment was posted by the collector to the plaintiff's account under date of July 17, 1923.

10. On July 2, 1923, the plaintiff executed a claim for the refund of $53,815, income tax paid by the plaintiff upon the amount of $5,381,500, which sum of $5,381,500 was included by the Commissioner of Internal Revenue in his computation of the taxable income of the plaintiff for the year 1913, as stated in finding 7 hereof. The records of the collector of internal revenue for the second district of New York disclose that the said claim was received by said collector on July 7, 1923. This is the only date appearing in the records of the said collector as the date of the receipt by him of said claim. The collector has no correspondence or other evidence to contradict the said date of receipt. The claim, however, bears two receipt stamps by the collector of internal revenue, one showing the date July 7, 1923, and the other showing the date July 20, 1923. A true copy of said claim, without notation of said receipt stamps thereon, is annexed to plaintiff's petition, marked Exhibit A, and is, by reference, hereby made a part hereof. The said claim was wholly rejected and denied by the said Commissioner, and the plaintiff was duly notified of such rejection and denial by a letter received from the said Commissioner dated January 17, 1924. A true copy of the said letter of rejection is annexed to plaintiff's petition, marked Exhibit B, and is, by reference, hereby made a part hereof. The plaintiff filed a protest to the rejection of the said claim as set forth in said letter of January 17, 1924, and after due reconsideration of the claim by the Commissioner the previous rejection was affirmed. The official rejection of the claim appeared on a schedule approved by the Commissioner on December 9, 1924.

11. On or about October 5, 1923, the plaintiff duly received from the Commissioner of Internal Revenue, through the office of the collector of internal revenue for the second district of New York, a certificate of overassessment of income tax for the year 1913 in the sum of $1,223.95.

12. On June 27, 1927, the plaintiff duly appealed to the Commissioner of Internal Revenue by filing with the collector of internal revenue for the second district of New York a claim for the refund of $53,815, income tax paid by the plaintiff upon the amount of $5,381,500, which sum of $5,381,500 was included by the Commissioner of Internal Revenue in his computation of the taxable income of the plaintiff for the year 1913 as stated in finding 7. A true copy of said claim is annexed to the plaintiff's petition, marked Exhibit D, and is, by reference, hereby made a part hereof. The said claim was wholly rejected and denied by the said Commissioner, and the plaintiff was duly notified of such rejection and denial by a letter received from the said Commissioner, dated November 30, 1927. A true copy of the said letter of rejection is annexed to the plaintiff's petition, marked Exhibit E, and is, by reference, hereby made a part hereof.

13. If the value of the property received by the plaintiff by devise, as stated in finding 3 hereof, does not constitute taxable income to the plaintiff for the year 1913, and the plaintiff is not barred from bringing this suit by the provisions of section 3226 of the Revised Statutes as amended, judgment should be for the plaintiff in the amount of $51,972, together with interest from date of payment thereof.

14. If the value of the property received by the plaintiff by devise, as stated in finding 3 herein, does constitute taxable income to the plaintiff for the year 1913, or the plaintiff is barred from bringing this suit by the provisions of section 3226 of the Revised Statutes as amended, judgment should be for the defendant.

A.C. Newlin and Henry Mannix, both of New York City (White Case, of New York City, on the brief), for plaintiff.

Fred K. Dyar, of Washington, D.C., and Charles B. Rugg, Asst. Atty. Gen. (Ottamar Hamele, of Washington, D.C., on the brief), for the United States.

Before BOOTH, Chief Justice, and WILLIAMS, LITTLETON, GREEN, and GRAHAM, Judges.


Benjamin Altman devised to the plaintiff corporation real property located in the city of New York, having at the time it was received an agreed value of $5,381,500. The plaintiff corporation in its income tax return for the calendar year 1913, the year in which it received the above devise, did not report the value of the same as taxable income. On January 5, 1923, the Commissioner of Internal Revenue assessed an additional income tax predicated upon the inclusion of the value of the devise received by the corporation from Benjamin Altman as aforesaid.

On July 2, 1923, the plaintiff delivered to the collector a check in payment of the additional tax assessed on January 5, 1923, and five days later — i.e., on July 7, 1923 — filed a refund claim in which a refund of the additional tax was asked for the following reasons: "Such assessment is based in part upon the value of devise under the will of Benjamin Altman who died on the 7th of October, 1913, to the undersigned taxpayer. The devise for the purposes of income tax for 1913 was valued at $5,381,500, with the resultant tax thereon of $53,815. The undersigned claims that under the law under which said assessment is purported to have been made a devise under a will or a gift to a corporation is not income and is not taxable under said law, and the undersigned claims that the said sum should be refunded for the causes above stated."

The plaintiff's check of July 2, 1923, was deposited for collection July 17, 1923, and its refund claim of July 7, 1923, was denied by the collector January 17, 1924, and its denial affirmed on November 6, 1924. Almost three and one-half years later — i.e., on June 27, 1927 — the plaintiff corporation filed a second refund claim, in which a refund of the additional tax assessed on January 5, 1923, was asked for the following reasons: "Income as determined by T.D. letter of Jan. 5, 1923 (IT:CA:PU-2300) includes $5,381,500.00, being value of devise acquired by the corporation October 7, 1913, at the decease of B. Altman. It is contended that the receipt of this devise does not represent income and that the tax paid thereon was in error and should be refunded. A hearing is requested before proper officials of the Treasury Department in the event that there is any question regarding the allowance of this claim."

The petition in this case, asserting a claim for $51,972, with interest, was filed on June 26, 1929, plaintiff corporation seeking to recover the amount of additional income taxes assessed against it on January 5, 1923, because the Commissioner illegally included the value of the Altman devise of 1913 as income.

The plaintiff concedes that under section 3226, Revised Statutes, as amended by section 1014(a) of the Revenue Act of June 2, 1924 ( 43 Stat. 253 [26 USCA § 156]), the cause of action is barred by limitation, unless its second refund claim filed June 27, 1927, and rejected by the Commissioner November 30, 1927, saves its rights.

The essential precedent steps to the jurisdiction of this court are of course not in issue. The filing and subsequent rejection of a refund claim, or failure of the Commissioner to act thereon for six months, and suit thereafter within two years must be disclosed by the facts, for, as conceded by the parties, the statute of limitations in this court is jurisdictional. The plaintiff in its analysis of section 3226, Revised Statutes, supra, emphasizes the terminology of the act and stresses the provision "until a claim for refund or credit has been duly filed with the Commissioner," insisting that the second refund claim meets the requirements of the act in this respect and was duly filed as therein required. With this contention we are unable to agree. The first refund claim met all the requirements of the statute and was regular in form and substance. We have set forth the claim in order to disclose that it was for an alleged illegal tax exaction predicated exclusively upon the inclusion of the Altman devise as income, and embraces precisely the same and identical facts upon which the present suit is rested.

The second refund claim, filed almost four years after the first, raises no new issue, involves no additional assessment made subsequent to the filing and denial of the first, and could not by any possibility occasion a reopening of plaintiff's tax liability; and while the Commissioner may not be in a position to forestall the filing of duplicate claims for refund, section 3226, Revised Statutes, manifestly does not contemplate the repetition of contentions for refund in such a way and at such times as to toll the running of the limitation period. The purpose of limiting suits to recover alleged illegal tax exactions is evident, and if plaintiff by repeating its contentions in two refund claims may establish jurisdiction to sue, despite the limitation prescribed in the law, litigation would be prolonged indefinitely. The act of the Commissioner in rejecting the second refund claim is without legal significance, for when it was filed and afterwards rejected plaintiff's right to sue had lapsed by limitation.

The question of payment of taxes by check and the date of payment when so paid was fully discussed by the court in the case of Second National Bank of Saginaw, Trustee, v. United States, 39 F.2d 759, and therein it was held that "the day on which the collector receives the check will be considered the date of payment so far as the taxpayer is concerned, unless the check is returned dishonored." There can be no doubt that a suit instituted under the first refund claim within the statutory period of limitation would have properly invoked the jurisdiction of this court, and being so, the second refund claim, in the absence of additional assessments or controversy arising thereafter, was insufficient to revive a cause of action, which must be brought under the statute within the two-year period.

Other issues are raised and discussed in plaintiff's brief. In view of the foregoing, it is unnecessary to discuss them. The petition will have to be dismissed. It is so ordered.