WISDOM, Circuit Judge:
This case is before the Court on the issue of the liability of the defendant, Carolyn Lazarowitz Brafman, as an alleged transferee of the Estate of Abraham Lazarowitz, for unpaid estate taxes.
The executors of the Estate of Lazarowitz failed to file a timely estate tax return. On July 29, 1952, the executors filed a return with a check for the tax due as shown on the return. June 29, 1955, the Director of Internal Revenue notified the executors that there was a gross deficiency in taxes paid of $19,241.49, together with a penalty of twenty percent. The executors challenged the deficiency in a proceeding in the Tax Court, and the matter was settled by a written stipulation executed on June 11, 1956.
The United States filed this suit for collection against Carolyn Brafman, as transferee, July 23, 1962. The Government contends that her contingent interest passed to Carolyn at the time of her father's death, and that the value of the interest as of that moment is ascertainable by recognized actuarial principles based upon the joint life expectancy of Carolyn and her mother. The Government seeks to collect its assessment against Carolyn Brafman on the theory that she holds the proceeds of the policies in trust. The Government concedes that a suit against her based on her personal liability would be barred by the statute limitations. Mrs. Brafman contends that the value of her contingent interest at the date of the decedent's death was too speculative to be ascertainable. She denies that the payments she receives are subject to a trust for the payment of the estate tax. The district court entered judgment for the Government for $6,136.23 Mrs. Brafman had already received plus $3,933.70 withheld by the insurance company. The Court held that future amounts receivable by Mrs. Brafman must be turned over to the United States until the entire tax deficiency is extinguished.
We do not reach the complex and tantalizing issue of a trust-fund theory of transferee liability for the transfer of a contingent insurance interest. The threshold issue of the validity of the assessment is crucial. We reverse on the ground that a valid assessment against the transferor's estate was not made, because of an assessment officer's failure
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For a tax to be collected upon any deficiency, an assessment must be made against the taxpayer within three years after his return is filed. Int.Rev.Code of 1939, § 874 (§ 6501 of the 1954 Code). The mailing of a ninety-day letter of deficiency or the filing of any court action will suspend the running of the statute of limitations, and the time will not begin to run again until sixty days from the entry of final judgment of that court or until ninety days following the mailing of the letter of deficiency if no proceedings are begun. See Int.Rev.Code of 1954, § 6213. In the case of a transferee, a separate section provides that the assessment must be filed against the transferee within one year after the expiration of the period of limitation for assessment against the original transferor. Int.Rev.Code of 1939, § 900(b) (1) (§ 6901(c) (1) of the 1954 Code)
If the estate is not assessed within the statutory period there can be no transferee liability. United States v. Updike, 1930, 281 U.S. 489, 50 S.Ct. 367, 74 L.Ed. 984. For the Government to collect any tax from the transferee, Mrs. Brafman, a valid assessment must have been made against the estate of the transferor, Abraham Lazarowitz, by September 28, 1957.
There is no disagreement that if the assessment against the estate was made on July 23, 1956, as the Government argues and the documents apparently indicate, the assessment of the transferor was timely. Mrs. Brafman contends, however, that no valid assessment was made on July 23, 1956, because the assessment certificate was not signed.
Section 6203 of the Internal Revenue Code of 1954 specifies that an assessment
The Treasury Regulations set forth the procedures governing the assessment process as follows:
The assessment certificate involved in this case, a photostated copy of which is in the record, is not signed by an assessment officer or by any other official. The certificate refers to July 23, 1956, but shows that it was "prepared" August 1, 1956. Apparently this is the
We are not moved by the Government's argument that the assessment was valid and effective on July 23rd because it is certified for authenticity under the seal of the United States Treasury. There is no question as to the authenticity of the document or its admissibility into evidence.
We find section 301.6203-1 of the Treasury Regulations reasonably adapted to carry out the intent of Congress as reflected in § 6203 of the Code.
The Treasury Regulations are binding on the Government as well as on the taxpayer: "Tax officials and taxpayers alike are under the law, not above it." Pacific National Bank of Seattle v. Commissioner, 9 Cir. 1937, 91 F.2d 103, 105.
Case after case has quoted Treasury Regulation § 301.6203-1 and cited it approvingly, and the treatises on taxation take its literal application for granted.
The taxpayer in Filippini v. United States, N.D.Cal.1961, 200 F.Supp. 286, argued that the assessment was not effective until notice was sent to him, and notice was not sent until three days after the running of the statute of limitations. The Court found that the assessment was "made and complete" when the procedure outlined in the Code and Regulations — including the signing of the summary record by the assessment officer — was followed. In accord with Filippini and Miller are Graper v. United States, E.D.Wis.1962, 206 F.Supp. 173; In re Milwaukee Crate & Lumber Co., E.D.Wis. 1961, 206 F.Supp. 115. See also Commissioner of Internal Revenue v. Welch, 5 Cir. 1965, 345 F.2d 939, 948 n. 33.
When § 6203 of the Internal Revenue Code of 1954 was before Congress, the detailed discussions of the proposed section in both the House and Senate was substantially the same:
It appears to us that the requirement of the applicable Treasury Regulation — that an assessment officer sign the assessment certificate — is consistent with the literally mechanical procedures for recording of liability. The recordation is to be accomplished through "machine operations", but the actual and final assessment step, that step which establishes a prima facie case of taxpayer liability,
We recognize that in sustaining Mrs. Brafman's contention regarding lack of proper assessment within the limitations period we are disposing of this case on what could be termed a "technical defense". As the district court said in
Certainly the courts have not hesitated to enforce strictly the Code requirement that a taxpayer's returns must be signed to be effective. Thus, unsigned returns, even with remittances, have been viewed as nullities from the standpoint of imposition of penalties
Finally, where state taxation is involved compliance with a statutory provision requiring an assessment list to be signed by the assessors is usually considered essential to the validity of further proceedings. 84 C.J.S. Taxation § 473 (1954).
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Since the assessment certificate in this case was not signed by the proper official, as prescribed by the applicable Treasury Regulation, within the statutory period after the filing of the estate tax return, this suit for collection of any deficiency is barred by the statute of limitations. The judgment of the district court is therefore reversed and the cause remanded for dismissal.