The opinion of the court was delivered by: MUNSON
MEMORANDUM-DECISION AND ORDER
On October 14, 1984, plaintiff Norstar Bank of Upstate New York ("Norstar") commenced this action pursuant to 28 U.S.C. § 1346(a)(1)(1982) to recover estate taxes claimed to have been illegally assessed and collected.
Subsequent to the commencement of this action, the parties agreed there were no genuine issues of material fact relating to the question of liability and entered into a stipulation to that effect. On the basis of the facts contained in that stipulation, both parties now move for summary judgment on the question of liability.
It is the opinion of this Court that the United States properly assessed and collected the taxes the plaintiff seeks to recover. Accordingly, the motion of the United States for summary judgment is granted.
internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority or any sum alleged to have been excessive or in any manner wrongfully collected under the internal-revenue laws; . . .
Norstar is a New York bank which by an agreement dated March 28, 1979, became the trustee of certain assets of Mildred J. Ricoy located in Troy, New York. These assets were in the form of cash and securities. The trust agreement covering the assets provided, inter alia, that upon Ms. Ricoy's death, Norstar was to continue to hold the assets in further trust pursuant to the terms of the agreement. This agreement was in full force and effect on April 6, 1979, the date Ms. Ricoy died.
At the time of her death, Ms. Ricoy was a United States citizen domiciled in Paris, France. Pursuant to the Code Civile of France, she bequeathed her entire estate, which consisted of approximately $200,000 in real and personal property located in France, to her daughter, Renee Ricoy. Testamentary dispositions. of realty and personalty situated in France by an individual residing in France at the time of death are subject to tax under the French "Droit de Succession". This tax on Ms. Ricoy's French assets was paid by Michael Bouvet and Associates, the French administrator of Ms. Ricoy's estate.
On or about June 13, 1980, Norstar filed a federal estate tax return on behalf of the estate of Ms. Ricoy.
Based on its interpretation of a tax treaty between the United States and France, which had been entered into on October 17, 1949, (the "Convention") Norstar did not include Ms. Ricoy's French realty and personalty in her gross estate. Thus, on or about August 12, 1980, Norstar paid an estate tax of $68,215.48. Norstar arrived at this amount by utilizing the provisions of the Internal Revenue Code and tax rates in effect on the date the Convention went into effect.
The Internal Revenue Service ("IRS") subsequently recalculated the estate tax due and owing from Norstar on the basis of the law and tax rates in effect in April, 1979, the time of Ms. Ricoy's death, and determined that Norstar was entitled to a refund. However, IRS subsequently audited the estate tax return, discovered that Norstar had not included Ms. Ricoy's French assets in her gross estate, and recalculated the estate tax including Ms, Ricoy's French assets in her gross estate. On this basis, IRS determined there was due and owing from Norstar an additional $51,515.67 in estate tax. By May 20, 1983, Norstar paid this amount.
On or about February 6, 1984, Norstar filed a claim with IRS for a refund of estate taxes claimed to have been illegally assessed and collected. Six months later, when IRS had failed to act on Norstar's claim, this action was commenced seeking a refund on the same grounds asserted in the claim to IRS.
In 1949, the United States and France entered into "a Convention for the avoidance of double taxation and the prevention of evasion in the case of taxes on estates and inheritances . . . ." Convention for the Avoidance of Double Taxation and the Prevention of Evasion of Estate and Inheritance Taxes, October 18, 1946, United States-France, 64 Stat. B-5, B-6, T.I.A.S. No. 1982. The Convention provided two primary mechanisms for avoiding double taxation, a credit system and an exemption system.
Under Article 5 of the Convention, the United States and France agreed that under certain circumstances, the taxing nation would allow the taxpayer a credit for taxes paid in the other nation. Thus, the Convention provided:
The Contracting State imposing tax in the case of a deceased person who, at the time of his death, was domiciled in such State (or was a citizen thereof if such State is the United States), shall allow against its tax . . . a credit for the amount of the tax imposed by the other Contracting State with respect to property situated in the territory of such other Contracting State and included for tax purposes by both States, but the amount of credit ...