Vath v. Commissioner

HERMANN S. VATH, EXECUTOR OF LAST WILL AND TESTAMENT OF CHARLES J. VATH, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Vath v. Commissioner Docket No. 95888. United States Board of Tax Appeals 41 B.T.A. 487; 1940 BTA LEXIS 1177; February 29, 1940, Promulgated *1177 Where property is included in the estate tax return for the wife who died six days before her husband's death and the tax thereon is paid simultaneously with the filing of the return, but the Commissioner on audit determined that her estate was not liable for the tax and tendered a refund check, which was refused by the executor of her extate, held, that such property is not "prior taxed property" deductible from the estate of the husband under section 303(a), Revenue Act of 1926, as amended by section 806, Revenue Act of 1932. Emmet W. Gottenberg, Esq., for the petitioner. T. M. Mather, Esq., for the respondent. VAN FOSSAN *487 This proceeding was brought to redetermine a deficiency in the estate tax of the estate of Charles J. Vath, deceased, in the sum of $2,633.54. The petitioner alleges that the respondent erred in disallowing a deduction from the decedent's gross estate of $43,567.96 representing property previously taxed to the estate of the decedent's wife. FINDINGS OF FACT. Charles J. Vath and Frances L. Vath were husband and wife, residing in San Jose, California, at the time of their respective deaths. Frances L. Vath*1178 died November 29, 1936, and Charles J. Vath, on December 5, 1936. The decedent's son, Hermann S. Vath, was named and qualified as executor of his father's will, which was probated in the Superior Court of Santa Clara County, California. As such executor, on July 3, 1937, he filed an estate tax return showing a gross estate of $92,023.30, deductions of $8,106.21, and an exclusion of $43,567.96, claimed as a "net deduction for property previously taxed." Frances L. Vath died testate. On June 24, 1937, her executor filed an estate tax return showing gross estate of $48,165.32, with deductions of $4,597.36, or a net estate of $43,567.96. A check for $71.35, appearing to be the tax due, accompanied the return. The collector of internal revenue acknowledged the receipt of the check on the usual form. The tax was duly assessed and listed on the records of the first collection district of California. Charles J. Vath was the sole beneficiary of his wife's will. After auditing, the Commissioner determined that the estate of Frances L. Vath was not liable for an estate tax and issued a certificate *488 of overassessment. A refund Treasury check for the amount of the tax, *1179 plus interest, was tendered to the executor, who refused to accept it on the ground that the estate was properly taxable. The check was then forwarded to the General Accounting Office in Washington, D.C., for safekeeping and proper disposition. OPINION. VAN FOSSAN: The statute under which the petitioner claims a deduction for "property previously taxed" is section 303(a)(2) of the Revenue Act of 1926, as amended by section 806 of the Revenue Act of 1932. 1 *1180 Counsel for the petitioner argues on brief that there has been no "final determination" that the estate of Frances L. Vath is or is not subject to the estate tax. He submits that only after a taxpayer has pursued his remedy to its ultimate disposition by the Board and the courts can the determination be final. He contends, however, that, since there has been no final determination that Mrs. Vath's estate is not subject to the estate tax and no one has been given an opportunity to have that question decided on its merits, the respondent is precluded from asserting that there is no tax due from that estate. There are several reasons why petitioner can not prevail. The statute allows a deduction for prior taxed property where such property can be identified as having been transferred to the decedent by the prior decedent by gift, bequest, devise, or inheritance. The record in this case fails to establish such identification. There was testimony as to certain properties that "they belonged to them both." But there was no proper identification of the property. Moreover, there was no evidence as to source or quality of title or time of transfers, if any; as to disposition*1181 of rents received; as to payment of property taxes. In short, there is neither direct nor collateral evidence sufficient to establish the identity and ownership of the property alleged to have been previously taxed. *489 The statute further provides that the deduction shall be allowed only where an estate tax "was finally determined and paid" by or on behalf of the estate of the prior decedent. Here the Commissioner "finally determined" that there was no tax due from the estate of Frances L. Vath. No tax has been "finally determined and paid", as provided by the statute. The check for $71.35 was not tendered to nor received by the collector as a result of a final determination. The accepting of the check was an administrative act in nowise conclusive of the rights of the Government to audit the return, to demand additional taxes, or to declare a refund due. The fact that the estate of Frances L. Vath has declined to accept the refund check gives petitioner no rights. Thus petitioner can not qualify under this provision of the statute for the sufficient reason that no tax has been "finally determined and paid" as to the estate of Frances L. Vath. On the other*1182 hand, if we accept petitioner's contention advanced on brief that there has been no final determination in the estate of Frances L. Vath because there has been no appeal from the ruling that no tax is due, we arrive at the same conclusion. If there has been no final determination petitioner can not qualify under the statute. It matters not that a proceeding before the Board may not be predicated on an overassessment. There is no way by which the Board can, as requested by counsel, take jurisdiction of the estate of Frances L. Vath and reverse the ruling of the Commissioner. Decision will be entered for the respondent. Footnotes 1. SEC. 303. For the purpose of the tax the value of the net estate shall be determined - (a) In the case of a resident, by deducting from the value of the gross estate - * * * (2) An amount equal to the value of any property (A) forming a part of the gross estate situated in the United States of any person who died within five years prior to the death of the decedent, or (B) transferred to the decedent by gift within five years prior to his death, where such property can be identified as having been received by the decedent from the donor by gift, or from such prior decedent by gift, bequest, devise, or inheritance, or which can be identified as having been acquired in exchange for property so received. This deduction shall be allowed only where a gift tax imposed under the Revenue Act of 1932, or an estate tax imposed under this or any prior Act of Congress, was finally determined and paid by or on behalf of such donor, or the estate of such prior decedent, as the case may be, and only in the amount finally determined as the value of such property in determining the value of the gift, or the gross estate of such prior decedent, and only to the extent that the value of such property is included in the decedent's gross estate. * * * ↩