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BOHNEN v. HARRISON

January 12, 1955

EDWIN J. BOHNEN, EXECUTOR OF THE ESTATE OF MARY A. BOHNEN, AND INDIVIDUALLY; THEODORE G. BOHNEN AND VIRGINIA E. BOHNEN, PLAINTIFFS,
v.
CARTER H. HARRISON, INDIVIDUALLY AND AS COLLECTOR OF INTERNAL REVENUE, DEFENDANT.



The opinion of the court was delivered by: Campbell, District Judge.

Accordingly, the plaintiffs have filed a petition for supplemental judgment asking for an additional refund of estate tax due them as a result of their having incurred said additional attorneys' fees and expenses in successfully defending the appeals of the judgment of this Court to the Court of Appeals for the Seventh Circuit, 199 F.2d 492, and to the United States Supreme Court, 345 U.S. 946, 73 S.Ct. 863, 97 L.Ed. 1371.

The defendant has answered the petition for supplemental judgment, alleging that this Court is without jurisdiction to entertain this petition since no claim for refund was filed with the Commissioner based on the grounds that the decedent's estate is entitled to a refund resulting from a deduction for additional attorneys' fees or expenses incurred in connection with the appeal or any other litigation.

After filing the answer to the petition for supplemental judgment, the defendant also filed a motion for relief from judgment under Rule 60 of the Rules of Civil Procedure, as amended, 28 U.S.C.A. This motion seeks to attack so much of the original judgment of this Court as resulted from the deduction of attorneys' fees and expenses from decedent's gross estate. The defendant contends that attorneys' fees and litigation expenses were not included in the refund claim filed by the decedent's estate and therefore this court is without jurisdiction in this respect. He argues that the court's jurisdiction was, and is, limited to the grounds for refund expressed in the claim for refund, said claim being based solely on the contention that the proceeds of the life insurance policies were erroneously included by the Commissioner in the decedent's taxable estate.

It is interesting to observe that the defendant, on appeal, did not object either to the allowance of attorneys' fees and expenses as a deduction from the decedent's gross estate or to the reservation by this Court of jurisdiction to make such further refund for additional attorneys' fees and expenses as would be incurred in defending the appeals from the original judgment.

Since both the defendant's answer to the petition for supplemental judgment and the defendant's motion for relief from judgment are based upon the same issues, my opinions hereinafter expressed will relate to both the petition for supplemental judgment and to the motion for relief from judgment.

The statutory basis for the defendant's position is former Section 3772(a)(1) of the Internal Revenue Code, 26 U.S.C.A. § 3772(a)(1), which provides as follows:

    "No suit or proceeding shall be maintained in any
  court for the recovery of any internal revenue tax
  alleged to have been erroneously or illegally
  assessed or collected, or of any penalty claimed to
  have been collected without authority, or of any sum
  alleged to have been excessive or in any manner
  wrongfully collected until a claim for refund or
  credit has been duly filed with the Commissioner,
  according to the provisions of law in that regard,
  and the regulations of the Secretary established in
  pursuance thereof."

A careful reading of the above section discloses no statutory provision relating to the question of the inclusion of attorneys' fees and expenses in a claim for refund. The dictates of this section are that before a suit is maintained in any court, a claim for refund or credit must be filed in accordance with "the provisions of law in that regard, and the regulations of the Secretary established in pursuance thereof."

Since the decedent died on June 29, 1942, the applicable Federal Estate Tax regulations are Regulations 105.

The governing sections of these regulations are Sections 81.96 and 81.34.

The pertinent part of Section 81.96 provides as follows:

    "A claim for refund of estate tax, or for refund of
  interest or penalties, erroneously or illegally
  collected, should be made on the form prescribed by
  the Treasury Department (Form 843), and should be
  filed with the collector of internal revenue,
  although a claim will not be considered defective
  solely by reason of the fact that it is not made on
  the form or that it is filed with the Commissioner of
  Internal Revenue. The claim must set forth in detail
  and under oath each ground upon which a refund is
  claimed, and facts sufficient to apprise the
  Commissioner of the exact basis thereof. Any claim
  which does not comply with the requirements of the
  preceding sentence will not be considered for any
  purpose as a claim for refund. For deduction of
  attorneys' fees incurred in prosecuting a claim for
  refund, see section 81.34."

Obviously, the last sentence of the above-quoted provision specifically excludes attorneys' fees incurred in prosecuting a refund ...


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