MaddeN, Judge,
delivered the opinion of the court:
The plaintiff sues for a refund of income taxes. She filed her income tax return for the calendar year 1947, showing a tax of $2,464.96, and paid the tax. The income on which the tax was computed had been received by the plaintiff as her share of the income of a purported partnership with her husband. As we shall see, the taxing authorities later raised a question as to the validity of the partnership, for income tax purposes.
The trial commissioner of this court, having heard the evidence, made findings that in the early 1940’s the plaintiff, who had formerly been employed as a legal secretary, and her husband entered into a partnership which engaged in the advertising business; that the plaintiff rendered service as the manager of the office; that at first only the plaintiff and her husband were in the partnership but that later a Mr. Verlin was taken in as a partner; that during the existence of the partnership the plaintiff and her husband maintained separate bank accounts; that her share of the partnership earnings went into her own bank account and was not subject to withdrawal by her husband; that during the existence of the partnership she filed separate income tax returns show[102]*102ing her income from the partnership earnings, except that in certain years when it was advantageous for her and her husband to file joint returns they did so; that when she entered into the partnership she intended to become a partner.
The plaintiff’s only exception to the findings just, recited is that they are irrelevant. Of course, they are highly relevant. They form a basis for the legal conclusion that the plaintiff’s tax return properly showed that the income which she returned was her own, and was taxable to her. It follows from these findings that she paid only the tax which she owed. It would be a rare situation indeed where a taxpayer who made a return showing a tax lawfully due, and paid that tax, could later lawfully claim a refund of it, unless Congress had, in the meantime, retroactively changed the tax law.
The plaintiff says that she is in that rare situation. At some time after the plaintiff and her husband had filed their individual income tax returns for 1941, and the plaintiff had paid the tax shown by her return, they, no doubt at the request of the Treasury Department, filed separate forms consenting to the extension of the time for the assessment of their income taxes for the year 1947 to June 30, 1954. On June 10, 1954, the District Director of Internal Revenue for the Upper Manhattan, New York, District where the plaintiff had paid her tax, wrote the plaintiff that it had been determined that she had overpaid her tax by the entire amount which she had paid, because all of the income which she reported was taxable to her husband. The District Director’s letter suggested that the plaintiff should make a claim for refund of the tax she had paid and enclosed a form for that purpose.
On the same day, June 10, 1954, the Commissioner of Internal Revenue sent a 90-day deficiency notice letter to the plaintiff’s husband, advising him that the Commissioner intended, at the expiration of the 90-days, to assess against him a tax on the income which his wife had reported on her return. Whether the tax was paid by the husband, and if so whether he filed a claim for refund, we do not know.
The plaintiff filed her claim for refund on June 24, 1954, which was in time. Her claim has never been acted upon. [103]*103More than six months having elapsed from the time of filing her claim for refund, she brought the instant suit.
We can think of no theory upon which the plaintiff’s claim might be based. There is no element of estoppel in the facts. She took no action except the filing of her claim for refund, and refrained from no action, because of the District Director’s letter. There was no novation. There was no tripartite agreement that if the husband would assume liability for the tax on the income in question, the wife’s liability would be released. There was nothing but a unilateral statement by the District Director that the plaintiff had paid a tax which she did not owe. As our findings show, the District Director’s statement was wrong. There is no showing that the District Director had authority to forgive and refund a tax which was owed and was paid. If in a private transaction a merchant writes a letter to his debtor advising him that he has overpaid his account, and that the overpayment will be refunded to him, and then discovers that there was no overpayment, the debtor cannot successfully sue on the mistaken advice.
The plaintiff urges that there was an account stated, or an “account settled” between her and the Government. To effect an account stated, there must be a pending account, and a mutual agreement that it shall be in the amount stated, whether that be more or less than one or the other of the parties had been claiming. In the instant case the plaintiff had no pending dispute with the Government. She had made her return and paid her tax. The District Director’s letter was, as we have seen, a unilateral erroneous statement that she had not owed the tax which she paid.
The Government’s dealing with the other taxpayer, the husband, was no concern of the plaintiff. On the facts which we have found, the assessment of the tax to the husband would have been as erroneous as the refund of the tax to the plaintiff. He could have defeated the proposed assessment in the Tax Court, or, if he paid the tax, could have recovered it by a suit in an appropriate court. But none of these events would have affected the plaintiff’s situation.
The Government points to section 1405 of the Internal Revenue Code of 1954, which provides that if a refund is [104]*104erroneously made, tbe Government may recover the refund by suit. It would seem that, under this statute, the plaintiff would have had no right to keep the refund if she had received it.
In a situation in which the decisions of courts were as unpredictable as they were in the cases of family partnerships, it would seem that ordinary prudence on the part of the Commissioner of Internal Eevenue would have required him to do what he did in this case. He refrained from issuing a certificate of overassessment to the plaintiff, because there was no assurance that his assessment of a deficiency against the husband would be sustained by the courts. It would not have been proper for him to subject the Treasury to the risk that the income in question would go completely untaxed. The District Director properly suggested to the plaintiff that she file a claim for refund, so that the period of limitation for the filing of such a claim would not run against her. She has had ample opportunity to sue for the refund of her tax on the merits of the question whether the income which she returned as her own was in fact her own. She has not chosen to submit that question to judgment. We think she has no other basis for recovery, and her petition will be dismissed.
It is so ordered.
Laramore, Judge; Whitaker, Judge; Littleton, Judge; and Jones, Chief Judge, concur.
FINDINGS OF FACT
The court, having considered the evidence, the report of Trial Commissioner Wilson Cowen, and the briefs and arguments of counsel, makes findings of fact as follows:
1. Plaintiff is a citizen of the United States and a resident of San Francisco, California.
2.
Free access — add to your briefcase to read the full text and ask questions with AI
MaddeN, Judge,
delivered the opinion of the court:
The plaintiff sues for a refund of income taxes. She filed her income tax return for the calendar year 1947, showing a tax of $2,464.96, and paid the tax. The income on which the tax was computed had been received by the plaintiff as her share of the income of a purported partnership with her husband. As we shall see, the taxing authorities later raised a question as to the validity of the partnership, for income tax purposes.
The trial commissioner of this court, having heard the evidence, made findings that in the early 1940’s the plaintiff, who had formerly been employed as a legal secretary, and her husband entered into a partnership which engaged in the advertising business; that the plaintiff rendered service as the manager of the office; that at first only the plaintiff and her husband were in the partnership but that later a Mr. Verlin was taken in as a partner; that during the existence of the partnership the plaintiff and her husband maintained separate bank accounts; that her share of the partnership earnings went into her own bank account and was not subject to withdrawal by her husband; that during the existence of the partnership she filed separate income tax returns show[102]*102ing her income from the partnership earnings, except that in certain years when it was advantageous for her and her husband to file joint returns they did so; that when she entered into the partnership she intended to become a partner.
The plaintiff’s only exception to the findings just, recited is that they are irrelevant. Of course, they are highly relevant. They form a basis for the legal conclusion that the plaintiff’s tax return properly showed that the income which she returned was her own, and was taxable to her. It follows from these findings that she paid only the tax which she owed. It would be a rare situation indeed where a taxpayer who made a return showing a tax lawfully due, and paid that tax, could later lawfully claim a refund of it, unless Congress had, in the meantime, retroactively changed the tax law.
The plaintiff says that she is in that rare situation. At some time after the plaintiff and her husband had filed their individual income tax returns for 1941, and the plaintiff had paid the tax shown by her return, they, no doubt at the request of the Treasury Department, filed separate forms consenting to the extension of the time for the assessment of their income taxes for the year 1947 to June 30, 1954. On June 10, 1954, the District Director of Internal Revenue for the Upper Manhattan, New York, District where the plaintiff had paid her tax, wrote the plaintiff that it had been determined that she had overpaid her tax by the entire amount which she had paid, because all of the income which she reported was taxable to her husband. The District Director’s letter suggested that the plaintiff should make a claim for refund of the tax she had paid and enclosed a form for that purpose.
On the same day, June 10, 1954, the Commissioner of Internal Revenue sent a 90-day deficiency notice letter to the plaintiff’s husband, advising him that the Commissioner intended, at the expiration of the 90-days, to assess against him a tax on the income which his wife had reported on her return. Whether the tax was paid by the husband, and if so whether he filed a claim for refund, we do not know.
The plaintiff filed her claim for refund on June 24, 1954, which was in time. Her claim has never been acted upon. [103]*103More than six months having elapsed from the time of filing her claim for refund, she brought the instant suit.
We can think of no theory upon which the plaintiff’s claim might be based. There is no element of estoppel in the facts. She took no action except the filing of her claim for refund, and refrained from no action, because of the District Director’s letter. There was no novation. There was no tripartite agreement that if the husband would assume liability for the tax on the income in question, the wife’s liability would be released. There was nothing but a unilateral statement by the District Director that the plaintiff had paid a tax which she did not owe. As our findings show, the District Director’s statement was wrong. There is no showing that the District Director had authority to forgive and refund a tax which was owed and was paid. If in a private transaction a merchant writes a letter to his debtor advising him that he has overpaid his account, and that the overpayment will be refunded to him, and then discovers that there was no overpayment, the debtor cannot successfully sue on the mistaken advice.
The plaintiff urges that there was an account stated, or an “account settled” between her and the Government. To effect an account stated, there must be a pending account, and a mutual agreement that it shall be in the amount stated, whether that be more or less than one or the other of the parties had been claiming. In the instant case the plaintiff had no pending dispute with the Government. She had made her return and paid her tax. The District Director’s letter was, as we have seen, a unilateral erroneous statement that she had not owed the tax which she paid.
The Government’s dealing with the other taxpayer, the husband, was no concern of the plaintiff. On the facts which we have found, the assessment of the tax to the husband would have been as erroneous as the refund of the tax to the plaintiff. He could have defeated the proposed assessment in the Tax Court, or, if he paid the tax, could have recovered it by a suit in an appropriate court. But none of these events would have affected the plaintiff’s situation.
The Government points to section 1405 of the Internal Revenue Code of 1954, which provides that if a refund is [104]*104erroneously made, tbe Government may recover the refund by suit. It would seem that, under this statute, the plaintiff would have had no right to keep the refund if she had received it.
In a situation in which the decisions of courts were as unpredictable as they were in the cases of family partnerships, it would seem that ordinary prudence on the part of the Commissioner of Internal Eevenue would have required him to do what he did in this case. He refrained from issuing a certificate of overassessment to the plaintiff, because there was no assurance that his assessment of a deficiency against the husband would be sustained by the courts. It would not have been proper for him to subject the Treasury to the risk that the income in question would go completely untaxed. The District Director properly suggested to the plaintiff that she file a claim for refund, so that the period of limitation for the filing of such a claim would not run against her. She has had ample opportunity to sue for the refund of her tax on the merits of the question whether the income which she returned as her own was in fact her own. She has not chosen to submit that question to judgment. We think she has no other basis for recovery, and her petition will be dismissed.
It is so ordered.
Laramore, Judge; Whitaker, Judge; Littleton, Judge; and Jones, Chief Judge, concur.
FINDINGS OF FACT
The court, having considered the evidence, the report of Trial Commissioner Wilson Cowen, and the briefs and arguments of counsel, makes findings of fact as follows:
1. Plaintiff is a citizen of the United States and a resident of San Francisco, California.
2. Prior to 1948, plaintiff lived with her husband, Marcel Schulhoff, at 110 West 55th Street, New York City, New York. She had been employed for a number of years as a legal secretary, but sometime during the early 1940’s, she and her husband entered into a partnership, which engaged [105]*105in tlie advertising business under the name of Marcel Schul-hoff & Co. The office of the partnership was located at 10 East 44th Street, New York, New York.
3. Plaintiff performed duties as an office manager for the partnership until the early part of 1948. At that time she took an extended trip and decided to move permanently to San Francisco, California, where she has since resided.
In the beginning, the partnership consisted of herself and her husband only, but at a later date a Mr. Yerlin was taken in as a partner.
4. During the time the partnership was in existence, plaintiff and her husband maintained separate bank accounts. Money distributed to her from the partnership earnings was placed in her individual bank account and was not subject to withdrawal by her husband.
5. While the partnership was in operation, plaintiff reported her earnings from the partnership in her individual tax returns, except in some years when it was more advantageous for her husband and her to file joint returns.
6. When plaintiff entered into the partnership with her husband, she intended to become a partner, contributed services as stated above, and received a share of the income from the firm until 1948.
7. About March 15, 1948, plaintiff filed with Collector of Internal Eevenue, Upper Manhattan District of New York, her individual tax return for the calendar year 1947. In the return she reported a total gross income of $10,876.27 — all as income received from the partnership of Marcel Schulhoff & Co. The return showed that the tax due for 1947 was $2,464.96, which plaintiff paid to the Collector prior to March 15,1948.
8. About March 15,1948, plaintiff’s husband, Marcel Schul-hoff, also filed his individual income tax return for the calendar year 1947 with the Collector of Internal Eevenue, Upper Manhattan District of New York. In the return, he reported a total gross income of $14,776.28 as income received from the partnership of Marcel Schulhoff & Co.
9. After their individual income tax returns for 1947 had been filed, plaintiff and her husband separately filed Treas[106]*106ury Department forms by which they agreed that the period of limitation for the assessment of their income taxes would be extended to June 30,1954.
10. On June 10, 1954, the District Director of Internal Revenue, Upper Manhattan District, wrote plaintiff in part as follows:
The determination of your income tax liability for the taxable year ended December 31, 1947 (Account number 3032367/48L) indicates an overassessment in the amount of $2,464.96 the basis of which is as follows:
The distributable income from the partnership, Marcel Schulhoff & Co., for the taxable year ended March 31,1947, reported as taxable by you has been determined to be taxable to Marcel Schulhoff.
A suggestion was contained in the letter to the effect that plaintiff should prepare and file a claim for refund upon a form which was enclosed with the notice.
11. On May 28,1954, an Internal Revenue agent made an examination of the books and records of Marcel Schulhoff & Co. As a result, the agent recommended that the $10,876.27 which plaintiff had reported in her individual income tax return for the year 1947 should all be taxed to Marcel Schul-hoff. On June 10, 1954, a notice, signed in the name of the Commissioner of Internal Revenue by the District Director of Internal Revenue for the Upper Manhattan District, was mailed to Marcel Schulhoff. The notice stated that a determination of his income tax liability for the calendar year 1947 had disclosed a deficiency of $5,203.76, and that Marcel Schulhoff had 90 days from the date of the mailing of the letter in which to file a petition with the Tax Court for a redetermination of the deficiency. A. statement attached to the notice of deficiency explained that it had been determined from an examination of the books of Marcel Schulhoff & Co. that the income from the partnership that had been distributed to Miriam Schulhoff for the year 1947 was taxable to Marcel Schulhoff.
12. There is no evidence that Marcel Schulhoff filed a petition in the Tax Court for a redetermination of the deficiency. Likewise, there is no evidence that Marcel Schulhoff paid the additional income tax assessed against him and filed a [107]*107claim for the refund thereof within the time prescribed by law.
13. Pursuant to the suggestion contained in the notice of overassessment (finding 10), plaintiff filed a claim for refund with the District Director of Internal Revenue, Upper Manhattan District, on June 24,1954. The claim was in the amount of $2,464.86, the stated amount of the overassessment for 1947, and was based on the following:
The distributable income from the partnership, Marcel Schulhoff & Co., for the taxable year ended March 31, 1947 was reported on the income tax return Form 1040 for the calendar year 1947 filed by the undersigned taxpayer. This income has been determined by the Bureau of Internal Revenue to be taxable to Marcel Schulhoff, and not to the undersigned taxpayer. (See attached copy of letter from District Director of Internal Revenue — Upper Manhattan). Accordingly, the undersigned now requests refund of the overpayment of income taxes for the year 1947 in the amount of $2,464.96 together with interest thereon at 6% per annum as provided by law.
14. Plaintiff’s claim for refund has never been acted on by the Internal Revenue Service. On October 10, 1956, more than six months after the claim for refund had been filed, plaintiff instituted this suit.
15. On February 24, 1950, Marcel Schulhoff signed and acknowledged a general release by which he released Miriam C. Schulhoff, her heirs and assigns, from all claims, causes of action, contracts and agreements of every kind. The record does not show the circumstances under or the purposes for which the release was executed.
16. On May 14, 1957, Marcel Schulhoff died in Philadelphia, Pennsylvania.
CONCLUSION OF LAW
Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that the plaintiff is not entitled to recover, and the petition is therefore dismissed.