147 F.2d 619 | 5th Cir. | 1945
Lead Opinion
These are income tax cases. The question in each is whether the taxpayer was entitled to a deduction under Section 23(b) of the Revenue Act of 1938 for interest paid on a deficiency in estate taxes assessed against the succession of Ellen H. Henderson.
The issue developed from these facts: Hunt Henderson was executor and residuary legatee of Ellen H. Henderson, who died in 1935. Succession proceedings were instituted in Louisiana, where all parties resided; the administration was completed
Section 23(b), supra, provides that in computing net income there shall be allowed as deductions all interest paid or accrued on indebtedness.
Section 316(a) (1) of the Revenue Act of 1926 provides that' the liability, at law. or in equity, of a transferee of property of a decedent for estate taxes and interest shall be assessed, collected, and paid, in the same manner as a deficiency.
There are statutes fixing personal liability upon the executor if he pays other debts before he satisfies those owing to the United States,
For these reasons we conclude that the interest was not paid upon an indebtedness of the taxpayers within the terms of Section 23(b). The decisions of the Tax Court are reversed, and the cause remanded for further proceedings not inconsistent with this opinion.
26 U.S.C.A. Int.Rev.Oode, § 23(b).
Scripps v. Commissioner, 6 Cir., 96 F.2d 492, certiorari denied 305 U.S. 625, 59 S.Ot. 86, 87, 83 L.Ed. 400.
Koch v. United States, 10 Cir., 138 F.2d 850.
26 U.S.C.A. Int.Rev.Code § 900 (a) (1).
its decision was expressly based on the opinion in Green v. Commissioner, 3 T. C. 74.
United States v. Updike, 281 U.S. 489, 50 S.Ct. 367, 74 L.Ed. 984; Phillips v. Commissioner, 283 U.S. 589, 51 S.Ct. 608, 75 L.Ed. 1289; Hatch v. Morosco Holding Co., 2 Cir., 50 F.2d 138; Baumgartner v. Commissioner, 9 Cir., 51 F. 2d 472; Paul, Federal Estate and Gift Taxation, Vol. 1, p. 764.
Revised Statutes, § 3467, 48 Stat. 760, 81 U.S.G.A. § 192.
26 U.S.O.A. Int.Rev.Code, § 827(b).
Oswego Falls Corp. v. Commissioner, 26 B.T.A. 60; Id., 2 Cir., 71 F.2d 673; Coffee Pot Holding Corp. v. Commissioner, 5 Cir., 113 F.2d 415; Alex Harjo v. Commissioner, 34 B.T.A. 467; Paul, Federal Estate and Gift Taxation, Vol. 1, p. 766.
Hatch v. Morosco Holding Co., 2 Cir., 50 F.2d 138; Baumgartner v. Commissioner, 9 Cir., 51 F.2d 472; Koch v. United States, 10 Cir., 138 F.2d 850; Commercial National Bank v. Commissioner, 36 B.T.A. 239; Paul, Federal Estate and Gift Taxation, Vol. 1, p. 768.
Some authorities consider that the procedure brings into play the doctrine of fraudulent conveyances, see 22 Ill. Law Rev. 233, 257, 258; but the trust-fund doctrine seems better to fit the Congressional intent. Cf. Baumgartner v. Commissioner, supra, Koch v. Commissioner, supra, and House Conference Reports, No. 356, 69th Cong., 1st Sess., pp. 42-45, 49-50.
Concurrence Opinion
(concurring specially).
If the property taken by the transferee had not been sufficient to pay the interest assessment, and the taxpayer had had to pay it out of his own funds, I should agree with the Tax Court that the taxpayer was personally liable for the interest and that in paying it he paid a debt entitling him to the deduction he claimed. A transferee of property, of a value sufficient only to pay a tax charged on it, cannot take it and by withholding payment of the tax get the use of the property free of liability for interest by the simple expedient of claiming that the interest was not a debt of his but of the succession, and the succession being insufficient to pay it, the interest is not collectible. No such facts exist here, however. The property the transferee took was ample in value to pay both the original tax and the interest assessed upon it. The assessment was made against the succession. To get it, the Commissioner pursued not the transferee personally but tihe property of the succession in his hands. In.these circumstances, the payment of the interest was not the payment by the transferee of a debt due by him, and he was not entitled to a deduction on account thereof. I, therefore, concur in the judgment of reversal.