The opinion of the court was delivered by: RYAN
This suit filed to recover Federal Estate Tax erroneously assessed and wrongfully collected comes to us for trial upon stipulated facts. Jurisdiction is predicated under Section 1346(a)(1), Title 28 U.S.C.
Plaintiff, as Executor of the Last Will and Testament of Clara J. Pineyro, deceased, duly filed a federal estate tax return and paid $ 5,734.25, the amount of tax shown to be due by the return. Thereafter, upon audit, the Commissioner of Internal Revenue determined the tax due to be $ 8,807.23, and assessed a deficiency of $ 3,072.98 with interest of $ 299.62, totaling $ 3,372.60. This additional sum plaintiff paid and thereafter duly filed a claim for refund in the amount of $ 2,811.14; upon disallowance of the refund claim, this suit was filed.
The additional assessment was reached by the Commissioners including in the taxable estate undistributed income cash of $ 13,722.61 and making several miscellaneous adjustments which are not now in controversy. We are concerned only with the tax computed on the undistributed income cash.
The decedent Clara J. Pineyro died on April 14, 1946, a resident and citizen of France. She had not been engaged in business in the United States.
An agreement had been entered into on February 10, 1909, by Enrique Pineyro and Clara Poey de Pineyro, the parents of decedent, as settlors and the plaintiff, as trustee thereunder. Since December 26, 1927, the date of the death of the decedent's mother, the entire income from the trust fund was payable to the decedent as the sole income beneficiary. It was a New York trust and the laws of that state determine the validity and interpretation of the instrument and of its provisions.
There is but one question presented, namely, whether section 863(b) of the Internal Revenue Code, 26 U.S.C.A. § 863(b), applied at the time of the death of the decedent to the moneys on deposit in the income account of this trust. This section then read:
' § 863. Property without the United States.
'The following items shall not, for the purpose of this subchapter, be deemed property within the United States:
'(b) Bank deposits. -- Any moneys deposited with any person carrying on the banking business, by or for a nonresident not a citizen of the United States who was not engaged in business in the United States at the time of his death.'
More specifically, the question presented is whether the moneys were deposited with the plaintiff, a person carrying on the banking business, for the decedent.
The Banking Law of New York in Section 100-b, subd. 1. grants to plaintiff Trust Company the following power:
'* * * Any moneys of any such estate or fund awaiting investment or distribution may be held on deposit by such trust company in its own name, * * *; provided that appropriate entries showing the share or interest of each such estate or fund in the moneys so held on deposit shall, at all times, appear upon the records of such trust company.'
By Executive Order 8389, 12 U.S.C.A. § 95a note, issued under the Trading with the Enemy Act, 50 U.S.C.A.Appendix, § 1 et seq., subsequent to June 17, 1940, further remittances of income to the decedent were restricted. During a part of this period, no remittances of income could be made to the decedent and during the remainder of the period only limited remittances of income for necessary living expenses were permissible. This resulted in the accumulation of income which totaled $ 13,772.61 on the date of her death. This balance was otherwise distributable to the decedent as income.
All income received by the plaintiff as trustee during this period was held uninvested and appropriate entries showing the deposits of such income, the remittances and the balance on hand appear on records maintained by the plaintiff ...