The opinion of the court was delivered by: RYAN
The Government by this suit seeks to enforce collection of unpaid taxes due on the 1931 income of defendant's deceased wife, Helen Orr Prince. It asks judgment against the defendant personally under the 'trust fund' doctrine, as transferee of the assets of the estate of the deceased.
The following facts appear undisputed:
1. Helen Orr Prince (Mrs. Frank J. Prince) died on June 16, 1932 leaving a last will in which she named her husband, the defendant, sole residuary legatee and executor.
2. Prior to her death and on February 25, 1932 Mrs. Prince had filed a tax return on her income for the calendar year 1931. The address given on the face of the return was 'Apt. 104, Hotel English, Indianapolis, Indiana.'
3. On February 23, 1934 the Commissioner of Internal Revenue in accordance with Section 272 of the Revenue Act of 1928, mailed to 'Mr. Frank J. Prince, Executor, Estate of Mrs. Frank J. Prince, deceased, Suite 1102, 4 West 37th Street, New York, New York,' a notice that the determination of the income tax liability of Mrs. Frank J. Prince, Deceased, for the year 1931, disclosed a deficiency of $ 6,096.26. This notice although improperly addressed and returned by the Post Office Department was later received by the defendant.
4. On April 14, 1934, the defendant, as 'Executor of the Estate of Mrs. Frank J. Prince, deceased,' filed a petition for redetermination of the deficiency with the United States Board of Tax Appeals. In this petition the defendant alleged that 'The notice of deficiency * * * was mailed to the petitioner on February 23, 1934,' and the defendant, as executor, raised no objection to the manner or timeliness of the service of the notice. This petition recited that the petitioner was 'Frank J. Prince, Executor of the Estate of Mrs. Frank J. Prince, deceased, 4 West 577th Street, No. 1102, New York, New York.'
5. On May 31, 1935, the Board of Tax Appeals entered its order, which recited that the 'proceedings came on for hearing on the merits,' that 'there was no appearance on behalf of the petitioner, counsel for the respondent (i.e. the Government) moved to dismiss and to find a deficiency in the amount of $ 4,056.96 for 1931, such amount being less than that shown in the deficiency letter,' and it dismissed the proceedings 'for lack of prosecution' and stated that there was 'a deficiency for 1931 in the amount of $ 4,056.96.'
6. On June 20, 1934, pursuant to a decree of the Probate Court of Marion County, Indiana, the defendant as executor of the will of his deceased wife turned over to himself as residuary legatee the undistributed assets of her estate amounting to $ 22,818.09.
7. On September 13, 1935 the Commissioner of Internal Revenue entered and determined an assessment against 'Est. of Mrs. Frank J. Prince, Dec'd, Frank J. Prince, Exec., Suite 1102, 4 W.37th Street, New York, N.Y.' in the amount of $ 4,056.96 and interest to September 13, 1935 of $ 851.02, totaling $ 4,907.98.
8. No part of this assessment has been paid, although payment was demanded of the estate and of the defendant as distributee of the estate.
9. This suit was commenced by the filing of the complaint herein on September 11, 1941 and was not brought on for trial until the March 1954 Term.
It was contended on trial by the Government that the order of the Board of Tax Appeals of May 31, 1935, was entered under an oral agreement or stipulation made by the attorneys for the Government and for the defendant, as executor of the estate of his deceased wife. This was put in issue by the defendant; on this factual question the Government has sustained its burden of proof and has established by a preponderance of credible evidence that such an oral agreement and stipulation was made.
Since the Government has not elected to pursue the remedy afforded by Section 311(b)(1) and (2) of the Internal Revenue Act of 1934, 26 U.S.C.A. Int.Rev.Acts, p. 753, but seeks to enforce collection through a common law 'trust fund' liability, the conditions precedent to suit under this section need not have been performed. Specifically, the formal assessment of tax deficiency against a transferee of assets required by Section 311 is not a prerequisite to suit against him under the 'trust fund' theory. United States v. Fisher, D.C., 57 F.Supp. 410; Leighton v. United States, 289 U.S. 506, 53 S. Ct. 719, 77 L. Ed. 1350; Rosenberg v. McLaughlin, 9 Cir., 66 F.2d 271, certiorari denied sub. nom. Rosenberg v. Lewis, 290 U.S. 696, 54 S. Ct. 132, 78 L. Ed. 599. It is immaterial that defendant came into possession of the assets of the estate by reason of an order of the Probate Court of Marion County which had jurisdiction of the administration of the decedent's estate. The assets of a deceased taxpayer are primarily liable for payment of federal income taxes; and this priority cannot be impaired by a state court proceeding to which the government has chosen not to submit as a creditor. United States v. Fisher, supra; 31 U.S.C.A. § 191.
Defendant has pleaded the statute of limitations and alleges that suit was not commenced within six years of assessment as required by Section 276(c)(1), 1928 Internal Revenue Act, 26 U.S.C.A. Int.Rev.Acts, p. 430, and that assessment of the alleged deficiency was not made within the time and in the manner provided by Sections 272(a) and 275(a), 1928 Int.Rev.Acts. The questions of law presented by this ...