Stone v. WhiteStone v. White
- Reporters:
- , , ,
- Before:
- McLellan
This аction at law for the recovery of $24,870.66 and interest thereon was heard on September 20, 1934, and at the request of one of the parties the trial was continued until to-day in order to afford opportunity for counsel to present а brief and save their rights as to such rulings as might then be made.
The defendant’s motion for judgment, which was presented seasonably, wаs denied, subject to his exception duly taken during the trial.
The facts are as stated in the agreed statement of faсts, which is made a part of this memorandum. It discloses, among other things, the following:
The plaintiffs at all times material to this cоntroversy were and still are the trustees under the will of Galen L. Stone, deceased. • The plaintiff Robert G. Stone, as trusteе, filed income tax returns on March 15, 1929, one on Form 1041 showing income received and amounts paid by the plaintiffs as trustees to Carrie M. Stone, sole beneficiary under the trust created by the will of Galen L. Stone, and on Form 1040 showing taxable prоfits received by the plaintiffs as trustees during the calendar year 1928, which sum was not payable to the beneficiary and which return did not include amounts of income reported on Form 1041. On these returns there was assessed to the plaintiffs as trusteеs and paid by them the sum of $3,012.70 in the following installments:
March 15, 1929, $749.90-.
April 26, 1929, $13.12.
June 15, 1929, $749.90.
September 15, 1929, $749.89.
December 15, 1929, $749.89.
As a result of a review and audit, the Commissioner of Internal Revenue determined a deficiency of $21,982.80, against the plaintiffs as trustees, and said amount together with interest amounting to $2,809.-28, or $24,792.08, was assessed аnd paid under protest on May 18, 1931. With the letter of February 12-, 1931, determining such deficiency, was a statement that income from рroperty held by the trust under the will of Galen L. Stone to satisfy annual payments to the widow in lieu of her dower or statutory interest is not an allowable deduction in the return of the trust prior to such time as such payments equal the value of her dowеr or statutory interest in her deceased husband’s estate.
Of the total tax and interest paid, the amount for which recоvery is sought, $24,-870.66, plus interest from the dates of payment, is due to the denial of the Commissioner of Internal Revenue of a dеduction on account of the amount of income paid to Carrie M. Stone, under section 162 (b) of the Revenue Aсt of 1928 (
On May 28, 1931, the plaintiffs filed a claim for refund of said inсome tax alleged to have been illegally collected on income received by them as such trustees during thе year from January 1, 1928, to December 31, 1928, a copy of which is made a part of the agreed statement of facts. This claim for refund was denied by the Commissioner of Internal Revenue by a letter dated September 25, 1931.
Other facts, the relеvancy whereof is denied by the plaintiffs, are that the said Carrie M. Stone, the sole beneficiary under the trust creatеd by the will of Galen L. Stone, filed an individual income tax return for the year 1928 on March 19, 1929, disclosing a tax due of $37,441.35, which was duly paid. Mrs. Stone did not return for taxation any portion of the $153,545.30 received by her from the plaintiffs as trustees under the will of Galen L. Stone, as set forth in Form 1041, filed by the plaintiff Robert G. Stone. Mrs. Stone’s return contains the following statement: “Income from trust Galen L. Stone u/w of is not included in accordance with Bolster Decision -(D8286).” No tax has been paid by said Carrie M. Stone on a,ny portion of said income. If said income is added to the income reported by Mrs. Stone, the additional tax thereon would be in excess of the amount sought to be recovered in this action. The statute of limitations on the assessment and/оr collection of any income tax against said Carrie M. Stone has expired.
The defendant’s answer, after a general denial, sets forth substantially the foregoing facts, which are taken by me from the agreed statement, and conсludes by saying that in equity and good conscience the plaintiffs should not recover any portion of the amount sought to be recovered in this action.
These facts raise the question whether the Department was right in assessing and collеcting that portion of the tax paid by the plaintiffs which was due to including in the plaintiffs’ income the amount of income currently payable to Mrs. Stone, the sole beneficiary under the trust created by the will of her husband. The defendant, in the light of thе Butterworth Case, 290 U. S. 365, 54 S. Ct. 221, 78 L. Ed. 365, virtually concedes, and I conclude, that the tax was illegally assessed, and should be recoverеd in this action, unless the facts heretofore found with reference to Mrs. Stone’s not having been assessed for and not having paid any tax upon the income received by her, in connection with the fact that any claim therefor against her is barred by the statute of limitations, create a situation such as to prevent the plaintiffs’ maintaining their action.
Notwithstanding Lewis v. Reynolds, 284 U. S. 281, 52 S. Ct. 145, 76 L. Ed. 293, and the statute permitting equitable defenses (
The same сonclusion is reached if the trust is not regarded as an entity. The trustees jointly own a legal chose in action, and a bаrred claim at law against one of them cannot be used as a defense to an action by them both. No real authority for the position taken by the defendant has been supplied, and I have found none.
Let judgment be entered for the plaintiff in the sum of $24,870.66, and interest from the time of payment.