The opinion of the court was delivered by: LEVET
Both plaintiffs and defendant have moved for summary judgment. The action is brought to recover alleged overpayments of income taxes which plaintiffs contend were erroneously and illegally assessed and collected for the calendar years 1946 to 1951 inclusive. The issues involve the receipt of money by plaintiff Doris B. Harte. Income tax returns were made on payments received by Doris B. Harte for the years in question, separate returns having been made by her for the years 1946 and 1947 and joint returns having been filed for the years 1948, 1949, 1950 and 1951. The facts, many of which have been stipulated, are as follows:
1. Samuel M. Braunstein, a resident of Atlantic City, New Jersey, died on November 14, 1928, leaving an estate then valued at $ 3,000,000.
2. Decedent's only living descendant was his grandchild Doris Adele Braunstein, now the plaintiff Doris B. Harte. At the time of decedent's death, Doris B. Harte was about 13 years of age. She and decedent's wife were his only surviving heirs and next of kin.
3. Had Samuel M. Braunstein died intestate, Doris B. Harte would have inherited all of his real property, subject to his widow's dower rights therein, and she would also have inherited two-thirds of his personal property.
4. Under the will of the said decedent, plaintiff, Doris B. Harte, was the beneficiary only to the extent of a trust fund of $ 5,000, from which she was to receive income until the age of 40, when she was to acquire one-half of the fund, and thereafter she was to receive income until the age of 50, when the balance of the fund was to be paid to her.
5. Objections to the will were filed by Doris B. Harte through her mother, Rose Richman, acting as her guardian. The New Jersey Orphans Court ruled that Doris B. Harte had reasonable cause to contest the probate and the order of that court was eventually affirmed by the highest court of the State of New Jersey.
6. Thereafter, Doris B. Harte's objections to the probate of the will were settled by an agreement dated November 26, 1934, between Doris B. Harte, acting through her mother, Rose Richman, the Guarantee Trust Company as an executor and sole trustee under the will, and those persons who took the entire income and corpus of a trust created under Paragraph Seventh of Samuel M. Braunstein's will, as well as almost all of the residuary estate.
7. The settlement agreement provided, among other things, that the '390 shares of the capital stock of the Boardwalk Realty Co. * * * and the dividends received thereon to October 1, 1934, shall be held by the Executors or the Trustee for the benefit of the Contestant (Doris B. Harte) * * *.'
8. It is further specified in the agreement that in such event, at the sole discretion of the benficiaries, the said 390 shares of stock of the Boardwalk Realty Company shall revert back to the beneficiaries free of the obligation of the contestant (Doris B. Harte) and be dealt with in accordance with the direction of Paragraph Seventh of the will (the trust provision).
9. The dividends mentioned above, amounting to $ 92,690, had been commingled with miscellaneous receipts of the estate. By the settlement agreement it was understood that they were to be repaid to the trust fund described in Paragraph Seventh of the will of Samuel M. Braunstein. The aforementioned sum was subsequently paid into the trust fund -- $ 60,000 in cash and $ 32,690 in securities. The cash was subsequently invested. At the present time the trust fund, exclusive of the shares of Boardwalk Realty Company, has a value of $ 83,971.09.
10. The settlement agreement also provided for monthly payments of $ 208.33 to Doris B. Harte for the period of her natural life. Since the making of the settlement agreement, these monthly payments have in fact been made to her.
11. Doris B. Harte filed individual income tax returns for the years 1946 and 1947 with the Collector of Internal Revenue for the First District, Brooklyn, New York. The plaintiffs Doris B. Harte and her husband, Stanley J. Harte, filed joint income tax returns with the same Collector for the year 1948, and for the years 1949, 1950 and 1951 with the Collector of Internal Revenue for the Third District, New York, N.Y.
12. The income tax returns referred to above were thereafter audited by the said Collectors who asserted deficiencies against plaintiff Doris B. Harte as follows:
Year Tax Interest Total
1946 $ 1,541.71 $587.88 $2,129.59
1947 287.71 92.44 380.15
$1,829.42 $680.32 $2,509.74
And against both the plaintiffs as follows:
Year Tax Interest Total
1948 $ 810.54 $211.81 $1,022.35
1949 748.00 158.18 906.18
1950 850.00 128.75 978.75
1951 1,275.00 116.66 1,391.66
Total $3,683.54 $615.40 $4,298.94
Totals $5,512.96 $1,295.72 $6,808.68
13. Following payment of the taxes aforementioned, plaintiffs filed timely claims for refund of said taxes and interest paid thereon. Each of the claims for refund has been disallowed and two years have not elapsed since the disallowance of any of the refund claims.
14. The agreement provides that the executors and/or trustee and the beneficiaries shall have and do have the right to sell said stock as in the will authorized, provided that the executors and/or trustee retain in their or its possession a sum in cash, which, if invested in United States Government securities, will provide an income, after the trustee's fees and expenses have been paid, of $ 2,500 per annum, sufficient to pay the annuity payable ...