Appeal from the United States District Court for the Northern District of Indiana - Civil No. 4237 George N. Beamer, Judge.
Cummings, Pell and Tone, Circuit Judges. Tone, Circuit Judge, dissenting.
Lurline Smith died on July 14, 1958. A federal estate tax return was filed but the tax was not paid. In 1964, the state probate court entered a judgment against the estate for the taxes which had been assessed. On August 25, 1965, the Government filed suit in the district court to foreclose federal tax liens. The only property involved in that suit which is also involved in the present appeal was real estate in which the decedent was a joint owner. No transferee assessment was made against the surviving joint tenant in whom title had vested. Eventually judgment was entered dismissing the foreclosure action as to the jointly owned property. The court held that the special lien for estate taxes imposed by Section 6324(a)(1) of the Internal Revenue Code of 1954, 26 U.S.C. § 6324(a)(1),*fn1 expired ten years after the death of the decedent notwithstanding that the Government had instituted an action to foreclose that lien within the ten-year period.*fn2 This appeal by the Government followed. The sole issue, easy of statement but not equally easy of resolution, is whether the filing of the action extended the special estate tax lien.
There are generally two types of tax liens available to the United States to enforce the estate tax liability of a decedent's estate. The first, commonly referred to as the "general tax lien" or the "assessment lien," is created by the provisions of 26 U.S.C. § 6321:
"If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person."
Under Section 6322 of the Internal Revenue Code of 1954, the general tax lien imposed by Section 6321 arises at the time the assessment is made and continues "until the liability for the amount so assessed (or a judgment against the taxpayer arising out of such liability) is satisfied or becomes unenforceable by reason of lapse of time."
The second type of lien available to the United States is the "special estate tax lien" provided for in Section 6324(a)(1).
The special estate tax lien is an immediate lien upon the gross estate of the decedent. Unlike the general tax lien, the special lien arises at the date of the death of the decedent without any necessity of making an assessment or of recording or filing. This lien is a lien not only on property which the decedent owned outright but also upon all property which is properly includable in his gross estate for the purpose of computing the federal estate tax. Detroit Bank v. United States, 317 U.S. 329, 332-333, 87 L. Ed. 304, 63 S. Ct. 297 (1943). In the present case, the property in question concededly constituted part of the decedent's gross estate for purposes of the federal estate tax under Section 2040 of the Code (26 U.S.C.), even though it passed automatically to the surviving tenant upon death of the decedent. See United States v. Jacobs, 306 U.S. 363, 83 L. Ed. 763, 59 S. Ct. 551 (1939).
We also note as a background matter the sections of the Code pertinent hereto which are categorized as Limitations. Under 26 U.S.C. § 6501, the time for assessment expires three years after the estate tax return is filed. 26 U.S.C. § 6502 provides in part as follows:
"(a) Length of period.--Where the assessment of any tax imposed by this title has been made within the period of limitation properly applicable thereto, such tax may be collected by levy or by a proceeding in court, but only if the levy is made or the proceeding begun --
(1) within 6 years after the assessment of the tax, or
(2) prior to the expiration of any period for collection agreed upon in writing by the Secretary or his delegate and the taxpayer before the expiration of such 6-year period (or, if there is a release of levy under section 6343 after such 6-year period, then before such release).
The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon. The period provided by this subsection during which a tax may be collected by levy shall not be ...