Opinion
John A. Sweeney, of Washing, D.C. (Fred A. Woodis, of Washington, D.C., on the brief), for plaintiff.
George H. Foster and Elizabeth B. Davis, both of Washington, D.C., and Frank J. Wideman, Asst. Atty. Gen., for the United States.
This is a suit for recovery of income taxes for the year 1926 amounting to $632.87, with interest thereon, in lieu of the rejection by the Commissioner of Internal Revenue of plaintiff's claim for refund of taxes paid on the sum of $12,000 received as an annuity from the estate of plaintiff's husband.
The court, upon the report of a Commissioner and the evidence, makes the following
Special Findings of Fact.
1. Plaintiff is an individual and is, and at all times material to this suit was, a citizen of the United States and a resident of the District of Columbia.
2. On or about March 15, 1927, plaintiff filed her income tax return for 1926, which showed a tax liability of $1,686.33. The foregoing tax was paid in four equal installments, March 15, June 14, September 14, and December 13, 1927. The return showed a net income of $28,343.53, and included in the gross income from which certain deductions were taken in arriving at such net income, was an amount of $12,000 which was described as 'Annuity, Estate of C. W. Semmes.'
3. After an audit of the aforementioned return, the Commissioner of Internal Revenue determined an overassessment of $624.30 in favor of plaintiff for 1926. Such overassessment was found to be an overpayment and was duly paid to her, thus reducing her tax liability for 1926 to $1,062.03. In making such adjustment the payment from the estate of C. W. Semmes of $12,000, referred to in finding 2 as included in her gross income, was reduced to $6,750.70.
4. In auditing the income tax return of the estate of C. W. Semmes for 1926, the Commissioner made the following adjustment:
1926
Net loss reported on return....................
$11,529.84
Deduct:
Deduction for annuities paid to Mrs. Semmes, eliminated....................................
12,000.00
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Net Income.....................................
$ 470.16
The following explanation was given of the above adjustment:
'In accordance with the United States v. Bolster ((C.C.A.) 26 F.2d 760, 59 A.L.R. 491), Warner v. Walsh ((D.C.) 27 F.2d 952), and United States v. Brandeis ((C.C.A.) 29 F.2d 363), decisions, income of $12,000.00 paid to the widow as her distributive income is not taxable to her until she has received an amount in excess of her dower right.
'Information from the internal-revenue agent in charge at Baltimore, Maryland, indicates that the value of Mrs. Semmes' dower interest has not been returned to her prior to December 31, 1927. Therefore, the total amount has been included as taxable to the estate.'
5. Subsequent to the allowance and payment of the refund referred to in finding 3 the following agreement, designated 'Agreement as to Final Determination of Tax Liability,' was entered into:
'This agreement, made in duplicate under and in pursuance of section 606 of the Revenue Act of 1928 (26 USCA § 2606) by and between M. Gertrude Semmes, a taxpayer residing at, or having its principal office or place of business at 1500 Delafield Place, N. W., Washington, D.C., and the Commissioner of Internal Revenue; 'Whereas there has been a determination of the tax liability of said taxpayer in respect of income tax for the calendar year 1926 in the principal sum of ten hundred sixty-two dollars and three cents ($1,062.03); and 'Whereas said taxpayer hereby agrees to this determination and consents to the assessment and collection of any deficiency in tax included in the amount of the principal tax liability so determined, together with any penalty or interest applicable thereto as provided by law, and/or to accept any abatement, credit, or refund made in accordance with such determination, together with any interest due thereon as provided by law; 'Now, this agreement witnesseth, that said taxpayer and said Commissioner of Internal Revenue hereby mutually agree that the principal amount of such liability so determined shall be final and conclusive if and when this agreement is approved by the Secretary of the Treasury or the Under Secretary. 'In witness whereof, the above parties have subscribed their names to these presents in duplicate. 'Signed this 5th day of October 1928. 'M. Gertrude Semmes, Taxpayer. 'Signed Dec. 21, 1928. 'H. F. Mires, Acting Commissioner of Internal Revenue. 'The above agreement has been approved by the Secretary of the Treasury in accordance with the provisions of section 606 of the Revenue Act of 1928, the approval being specifically enumerated on-- 'Schedule no. 710, dated December 21, 1928.' H. F. Mires, whose name appears above, was Acting Commissioner of Internal Revenue on December 21, 1928, and, while he did not sign the agreement himself, it was signed on his behalf by C. E. Bittinger, an administrative assistant in the office of the Commissioner of Internal Revenue, who had been given the following authorization which had not been revoked when the agreement in question was signed: 'March 22, 1928. 'Mr. C. E. Bittinger, Office of the Commissioner of Internal Revenue. 'Sir: You are hereby authorized to sign my name and/or my initials when I am Acting Commissioner of Internal Revenue, and to exercise appropriate administrative supervision under the same conditions and in the same manner in which you are authorized to act for the Commissioner of Internal Revenue. '(Signed) H. F. Mires, 'Assistant to the Commissioner.' H. F. Mire's position in the Bureau of Internal Revenue at the time the above authorization was issued was 'Assistant to the Commissioner' and among the duties of such position was that of acting as Commissioner of Internal Revenue in the absence of the Commissioner.
6. Schedule No. 710, referred to in the agreement set out in finding 5, bears the following approval:
'Treasury Department, 'Office of the Secretary, 'Dec. 22, 1928. 'Approved: 'Henry Herrick Bond, Acting Secretary of the Treasury.'
At the time the foregoing agreement was approved, Henry Herrick Bond was Assistant Secretary of the Treasury. In the office of the Secretary of the Treasury at that time were an Undersecretary and two Assistant Secretaries of the Treasury in addition to Mr. Bond. The two Assistant Secretaries were seniors to Mr. Bond as to date of appointment and in the absence of the Secretary, the Undersecretary, and the two Assistant Secretaries who were senior to him, Mr. Bond was authorized to act as Secretary of the Treasury. At the time the said schedule 710 was approved, Mr. Bond was Acting
Secretary of the Treasury and duly authorized to sign such schedule in such capacity.
7. When the closing agreement set out in finding 5 was executed, another form was in use in the Treasury Department for cases where only a partial closing was affected, that is, a closing with respect to certain items; but such a form was not used in this case, since it was handled as a final closing agreement on all questions involving plaintiff's tax liability for 1926.
8. July 22, 1929, plaintiff filed a claim for the refund of $632.87 on account of income tax paid for 1926 and set out the basis therefor as follows:
'That during the year 1926 claimant received from the estate of Charles W. Semmes the sum of $12,000.00 as an annuity provided to be paid her under the will of the late Charles W. Semmes, recorded and probated in the Probate Court of the District of Columbia, No. 32290, which sum she included as income in her income-tax return for said year through error; that no other provision was made for her in the said will; that prior to the making and execution of the said will an understanding and agreement was made by her and her husband, said decedent, that she would accept an annuity in said sum instead of a devise or bequest, and of her dower rights, to be provided for in his said will, as will appear therein so provided; that under the laws of the District of Columbia (D.C. Code 1924, Sec. 1173 (D.C. Code 1929 T. 14, Sec. 38)) claimant was authorized within six months after the administration of said estate had been granted to renounce her right to said annuity, and thereby would have been entitled to dower as his widow and share in the personal property of said estate, and that she was aware of her rights within said six-months' period, and did not so renounce them, for the reason that she accepted the said annuity in lieu of her said right of dower and her share in the personal property, and now asks refund of the above sum, with interest, or the sum which was erroneously paid by reason of including said $12,000 as income in said year; and in support of this claim the decision in the case of United States v. Bolster, Ex'r (C.C.A.) 26 F.2d 760, 59 A.L.R. 491, is cited. A hearing is requested.'
9. August 23, 1929, plaintiff was advised of the action on the foregoing claim as follows:
'Your claim filed for the refund of $632.87, income taxes paid for the year 1926, has been examined. 'The records of this office disclose that your tax liability for the above-named year was closed by agreement in accordance with the provisions of section 606 of the Revenue Act of 1928, and, therefore, no further action can be taken on the case. 'In view of the foregoing your claim will be rejected and listed on the next schedule to be officially approved.'
Request for further consideration of the claim was denied in a letter to plaintiff dated September 12, 1929.
Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
PER CURIAM.
Upon the foregoing special findings of fact, which are made part of the judgment herein, the court decides as a conclusion of law that the plaintiff is not entitled to recover and the petition is therefore dismissed. Judgment is rendered against the plaintiff in favor of the United States for the cost of printing the record herein, the amount thereof to be ascertained by the clerk and collected by him according to law.