
    FOURTH & CENTRAL TRUST COMPANY, OF CINCINNATI, OHIO, SOLE SURVIVING EXECUTOR OF THE ESTATE OF JAMES E. MOONEY, v. THE UNITED STATES
    [No. F-92.
    Decided March 5, 1928]
    
      On the Proofs
    
    
      Income-tax return; omission to deduct accrued Federal estate-transfer tax; extension of time with interest; payment in subsequent taxable year.- — Where the executor of an estate did not charge, or credit the amount of a Federal estate-transfer tax on his books during the year in which it was due and payable, but entered it when it was finally paid in a subsequent year, he was not entitled, for the purpose of calculating the taxable income of the estate, to a deduction of the estate tax in the year in which it was originally due and payable, notwithstanding he was granted an extension of time for paying the estate tax on condition that it should bear interest until paid.
    
      The Reporter’s statement of the case:
    
      Messrs. Robert R. Miller and Samuel C. 'Williams for the plaintiff. Miller c% Winston were on the brief.
    
      
      Mr. Alexander H. McCormick, with whom was Mr. Assistant Attorney General Merman J. Galloway, for the defendant.
    The court made special findings of fact, as follows:
    I. James E. Mooney, a citizen of the United States, died on September 15, 1919, leaving a last will and testament. The Fourth & Central Trust Company of Cincinnati, Ohio (the corporate successor of and identical legal entity with the Central Trust Company, the name of the Central Trust Company having been changed to the Fourth & Central Trust Company), and Mr. Charles A. Gordon, of Cincinnati, Ohio, were appointed coexecutors under the will of said decedent. The executors qualified and letters testamentary were duly issued on September 27, 1919. Mr. Charles A. Gordon died before this suit was commenced, leaving plaintiff as sole executor of said estate.
    II. On March 14, 1921, the executors filed the estate’s income-tax return for the year 1920 on Form No. 1040. The net income returned amounted to $169,889.86, upon wh'ich a tax was assessed of $60,657.21, which tax was duly paid. An estate tax amounting to $341,371.47 was due and payable upon said estate on September 15, 1920. Said estate tax was not deducted from the return made by the executors on March 14, 1921, and was not charged on the books of the executors for that year. Prior to the date when payment of said estate tax was due the executors of said estate applied to the Commissioner of Internal Revenue for, and received an extension of, one year’s time in which to pay said tax, said extension being granted upon the condition that said tax should bear interest at the rate of six per cent per annum until paid. The sum of $123,800.26 was paid by the executors upon the estate tax on date of extension, and a further extension granted for the balance, $229,590.31. The total balance was paid in 1922, the total accumulated interest pa,id amounting to $12,019.10, the taxpayer finally paying a total tax of $353,390.57.
    III. The executors did not deduct the estate tax from the income of the estate for 1920 because the Commissioner of Internal Revenue had refused to allow deductions of this character and the rulings and regulations of the bureau forbade such deductions. On August 4, 1922, plaintiff filed a refund claim asking for the refund of the full amount of the income tax, viz, $60,657.21, pai.d in 1920, as per return for that year, basing the refund claim upon a claimed deduction of the amount of the estate tax due in 1920, citing section 214 of the revenue of 1918. . •
    IY. The Commissioner of Internal Revenue, through a special agent of the bureau, caused an audit of decedent’s estate to be made for the years 1919, 1920, 1921, and 1922. The special agent making the audit first examined the books of the plaintiff. Plaintiff’s books did not reflect all of the income of the estate received during this time, nor did they disclose all the disbursements made. Recourse was therefore had to the books of Mr. Charles A. Gordon, coexecutor and formerly private secretary to Mr. Mooney, the decedent. How and in what manner Mr. Gordon’s books were kept is not satisfactorily shown.. It was impossible to make up a correct and verified return by the special agent from an examination of the books of the plaintiff, and Mr. Gordon, the special agent, through correspondence conducted by the plaintiff, at his request, procured from superintendents of ranches in California certain inventories upon which in part his report was made, and in addition to this examined the books of the Oak Leather Company, a corporation in which both the decedent .and Mr. Gordon were interested, before he could make a final report. How the books of the Oak Leather Company and the superintendents of the California ranches were kept does not appear. The special agent making the examination and report had had a limited experience in auditing work and was not a certified public accountant. No one set of books reflected the true income of the taxpayer.
    Y. The special agent’s report of audit contained two errors, one allowing a deduction of the estate tax for the year 1921 and the other refusing to allow an item of $10,288.86 paid by plaintiff in discharge of certain delinquent taxes due in the years 1914 to 1919, inclusive, and paid by the executor in the year 1920.
    YI. The plaintiff’s books, as well as other records and accounts kept of the estate involved, did not disclose a charge or credit of the amount of the estate tax for the year 1920, and it was not entered upon its books until payments were made.
    VII. The deduction of $123,800.20 was allowed in the plaintiff’s return for the year 1921, and a further deduction from the balance of the estate tax is allowable for the year 1922.
    The court decided that plaintiff was not entitled to recover.
   Booth, Judge,

delivered the opinion of the court:

The plaintiff is the sole surviving executor of the estate of. James E. Mooney, deceased. Mr. Mooney died on September 15, 1919. His estate became liable for a Federal estate tax in the sum of $341,371.47. The plaintiff as executor of said estate filed the estate’s income-tax return for 1920 on March 14, 1921. In stating gross income and allowable deductions therefrom the plaintiff did not deduct the amount of the estate tax. The reported net income for the year 1919-20 was $169,889.86, upon which a tax was assessed and paid of $60,657.21. If the item of $341,371.47, the estate tax, is deductible, the estate was not liable for the income tax of $60,651.21 paid, and it is for the recovery of this amount that this suit is brought. The estate tax is a deductible item under section 214 (a) (3) of the revenue act of 1918 (40 Stat. 1067). United States v. Woodward, 256 U. S. 632. The commissioner refused a refund claim for the amount of the income tax stated above, on the ground of the system employed by the plaintiff in keeping the estate’s books of account, sustaining the right to do so on an alleged showing that the same had been kept on a cash and disbursements basis. This holding is supported by the decision of the Supreme Court in United States v. Mitchell, 271 U. S. 9. There is at least one pointed difference between the facts in the Mitchell case and the present one. The plaintiff in this case, prior to September 15, 1920, during the course of the administration of the estate, and before filing the estate’s income-tax return, applied to the commissioner for an extension of time in which to pay the estate tax. The commissioner granted the application upon the condition that interest must be paid upon the total amount of the tax due until it was paid. This was acceded to, the time of payment extended twice, and the accumulated interest duly paid. The commissioner declined to refund.

We think this case falls within the decision of the Supreme Court in the Mitchell case, supra, as the amount of the estate tax was not in fact charged against .the estate upon the books of the plaintiff until the dates when it was paid and the commissioner allowed the deduction for the 1921 payment. Under this decision the plaintiff is entitled to the deduction for the 1922 payment. The extension of time within which to pay was a privilege to plaintiff; and while it paid interest upon the deferred payments, this fact alone does not seem to except the case from the decision of the Supreme Court in the Mitchell case. We believe the plaintiff is not entitled to recover. The petition will be dismissed. And it is so ordered.

GRaham, Judge; Moss, Judge; and Campbell, Chief Justice, concur.  