
    HERBERT ROSENGARTEN v. THE UNITED STATES DAVID ROSENGARTEN v. THE UNITED STATES
    [No. 307-56]
    [No. 308-56]
    [Decided March 2, 1960.
    Plaintiffs’ motion for rehearing overruled May 4, 1960]
    
    
      
      Mr. Bernard Weiss for the plaintiffs.
    
      Mr. H. S. Fessenden, with whom was Mr. Assistant Attorney General Charles K. Bice, for the defendant. Messrs. James P. Garland and M. Carr Ferguson were on the brief.
    
      
      Plaintiffs’ petition for writ of certiorari denied by the Supreme Court, 364 G.S. 822.
    
   Jones, Chief Judge,

delivered the opinion of the court:

These actions for the recovery of income taxes for the year 1945, $34,837.90 plus interest as to plaintiff Herbert Rosengarten, and $16,164.38 plus interest as to plaintiff David Rosengarten, have been consolidated by stipulation because of the similarity of the questions presented.

During the years 1944 and 1945 plaintiffs were members of a family partnership, the Herbert Manufacturing Co. of New York City. Each filed a Federal income tax return for 1945 on March 13,1946, and subsequently paid the liabilities due thereon. In 1947, the Internal Revenue Service determined that the family partnership would be disallowed. Consequently, the profits of the partnership for a period including 1944 and 1945 were redistributed among the permitted partners of the Herbert Manufacturing Co., and deficiencies for those years were asserted against plaintiffs. The 1945 deficiencies were discharged by credits and cash payments during 1948, 1949, and 1951. Plaintiff Herbert Rosengarten made a final payment of $3,137.38 on July 16, 1951, and plaintiff David Rosengarten made a final payment of $2,177.86 on July 15,1951.

On February 7, 1950, each plaintiff filed a claim in duplicate for refund for the year 1944 with the Collector (now District Director) of Internal Revenue for the Third District of New York. The claims alleged that the disallowance of the family partnership was legally erroneous in the light of certain recent decisions and rulings. On March 3, 1950, refund claims for 1944 and 1945 were filed in behalf of Walter Rosengarten, brother and co-partner of plaintiffs, who had been deceased since February 1946, alleging the same grounds as those offered in plaintiffs’ 1944 claims.

In June 1953, plaintiffs’ returns for 1944 and 1945 were re-examined and, based on a favorable reconsideration of the family partnership question, overassessments were recommended for 1944 and 1945. The 1944 claims were allowed and the refunds were applied in part, by consent of the plaintiffs, to deficiencies owed by members of their respective families. Refund of the overassessments for 1945 was denied on the ground that neither plaintiff had timely filed a refund claim as required by section 322(b) (1), Internal Revenue Code of 1939.

On inquiry, plaintiffs were informed that the Collector for the Third District had no record of any claim for 1945' having been filed by either plaintiff. Thereafter, a claim and an amended claim for 1945 were filed on July 2, 1953, and December 27, 1954, respectively, by each plaintiff. These overassessments of $34,837.90, as to Herbert, and $16,164.38, as to David, have not been refunded by the defendant and they form the subject matter of these consolidated suits.

Plaintiffs’ claims for 1944 were prepared in pencil by an employee of an accounting firm who had them typewritten in duplicate after checking the pencil copy. Claims for 1945 were prepared in duplicate at the same time based on the same theory. The original and duplicate claims for both plaintiffs for both years were hand-carried by another employee of the accounting firm to the plaintiffs’ place of business where they signed the documents presented to them.

At about the same time the accounting firm prepared claims for Walter Rosengarten for 1944 and 1945 for execution by his administratrix. These claims were also prepared in pencil, then typed in duplicate. The Walter Ros-engarten claims were signed. at. a .different time and. were filed with the Collector.

It has not been shown whether plaintiffs’ 1944 claims which admittedly were properly filed arrived at the Collector’s office in one envelope or more than one.

It is plaintiffs’ contention that the evidence supports their position that the 1945 claims, as well as those for 1944, were filed within the statutory period. As an alternative theory, they assert that the claims filed in July 1958, and December 1954, were merely formalizing statements of the legally sufficient informal claims for refund for 1945 contained by implication in their own claims for 1944 and Walter’s claims for 1944 and 1945.

Section 322(b)(1) of the 1939 Code, on which the Collector based his denial, states that unless a claim for refund be filed within three years of the filing of the return for that year or within two years of the payment of the tax, no refund will be made or credit allowed. This section would seem to prohibit the Commissioner of Internal Revenue from making a refund in the absence of compliance with its provisions. Indeed, it has been held that a Government official has no power to waive the statute of limitations in this type of situation. United States v. Garbutt Oil Co., 302 U.S. 528 (1938). If then, as defendant maintains, the first claim for the 1945 tax year was not filed by either plaintiff until July 1953, at the earliest, there was no claim filed either within three years of the returns or within two years of the payments thereon (except as to the final deficiency installment payments of July 1951).

Plaintiffs direct our attention to a line of cases, the most recent of which is the case in the Ninth Circuit, Jones v. United States, 226 F. 2d 24 (1955), which are to the.effect that a strong presumption of receipt arises where there is evidence of proper preparation, addressing, and mailing of a claim for refund to the proper tax official. It has also been held that this presumption may be strong enough to overcome the presumption that a Government official has acted correctly or determined properly in respect to an official act.

All of the cases cited by plaintiffs, Detroit Automotive Products Corp. v. Commissioner, 203 F. 2d 785 (1953); Crude Oil Corp. v. Commissioner, 161 F. 2d 809 (1947) ; Haag v. Commissioner, 59 F. 2d 516 (1932); and Hudson v. United States, 92 F. Supp. 555 (1950), have in common the fact that the trial court was offered compelling evidence of correct preparation, signing, addressing, stamping, etc., of the claim while, at the same time, the Government was able only to offer evidence- of a purely negative character, i.e., that the tax collector had no record of such claim having been filed in his office. The instant case differs, however, in regard to the evidence concerning those vital facts.

We are satisfied that claims for both plaintiffs for 1944 and 1945 were prepared in duplicate by the accounting firm. As a matter of fact, those for the year 1944 were received by the Collector and were stamped, logged, numbered and attached to the returns to which they pertained. We think that the claims for both years were signed by the plaintiffs when presented to them by the employee of the accounting firm. Moreover, the evidence to that effect is -uncontroverted. The evidence as to what happened thereafter is less compelling.

Mr. Rossman, from the accounting firm, testifying some eight years and nine months after the fact, indicated that he knew in general terms that he was presenting original and duplicate claims for 1944 and 1945 to each plaintiff to be signed. He testified that they were signed and notarized and that two envelopes were prepared at his direction for mailing to the Collector of Internal Revenue. His recollection as to which of the documents were placed in which envelopes, the manner of affixing the stamps and where and when he mailed the envelopes is far less categorical. He could not definitely and explicitly describe his handling of these all-important documents; indeed, this is not unusual after a lapse of so many years. Moreover, we are aware of cases holding that there was a failure of filing notwithstanding evidence of timely filing where the evidence consisted of a personal recollection of events which were supposed to have transpired several years before. Worden & Co. v. United States, 86 C. Cls. 556 (1938). The character of this portion of the evidence, relating to the mechanics of the alleged filing by mail of the 1945 claims, is not such as would lead us to say that a presumption of due delivery and receipt by the defendant has arisen. The evidence tending to show delivery of a claim to the Commissioner or his agent must be strong enough to suggest that it is highly probable that the filing has taken place. Otherwise no presumption will be indulged.

In any event, a presumption based on such evidence would not prevail against the evidence offered by the Government as to the general and specific procedures of the-local Internal Revenue office. The defendant has not merely shown that it has no record of the claims at issue; it has shown that it is extremely doubtful that the claims ever, in fact, found their way to the office. We are not prepared to say that it is impossible for the claims to have been lost or mislaid in the office of the Collector after they had been received. But we do think, based on the evidence before us, that such eventuality was most unlikely.

Defendant has introduced evidence concerning the step-by-step treatment of incoming mail, particularly as to claims, in the Office of the Collector for the Third District of New York. Throughout the handling process of such documents various indexing and registry procedures are taken. It is virtually impossible for any in-coming document to be discarded with its envelope because of the practice of viewing every opened envelope over a glass scope. It will be noted that it is possible for both of Mr. Rossman’s envelopes to have reached the Collector’s office containing only the plaintiffs’ 1944 claims.

Applying the evidentiary facts to the law as we understand it, we must conclude that the plaintiffs’ evidence is not so compelling as to excuse the proof of actual filing in compliance with the statute on a theory of presumptive filing. It is with reluctance that we hold as we must in view of the admitted right of the plaintiffs, but for the failure of filing, to the claim before this court. This is all the more so since they themselves are not responsible for the forfeiture of the refund. They merely entrusted the purely mechanical end of their fiscal affairs to their accountants which is certainly a reasonable course for busy industrialists.

The alternative argument, that the 1953 and 1954 claims served to perfect informal claims previously presented through the media of plaintiffs’ 1944 claims and the 1944 and 1945 claims of Walter Eosengarten, also fails when the specific facts are tested by the law.

There are a number of reasons why it has been said that “[T]he filing of a claim or demand as a prerequisite to a suit to recover taxes paid is a familiar provision of the revenue laws, compliance with which may be insisted upon by the . . '. United States.” United States v. Felt & Tarrant Co., 283 U.S. 269 (1931) ; Aplington v. United States, 144 C. Cls. 683; cert. denied 361 U.S. 821. Perhaps the strongest justification for this rule is to insure that the Commissioner, as representative of the Government’s fiscal structure, will be put on notice of refund claims so that it can reasonably be predicted what revenues will be available to meet the estimated liabilities.

An informal claim timely filed which fairly gives notice of a taxpayer’s intention to press for a refund of taxes has been held to be sufficient to satisfy the statute, even if the formalizing of that claim is not accomplished until after the statute has run. This doctrine has been applied in this court and most of the other Federal courts. United States v. Kales, 314 U.S. 186 (1941); Crenshaw v. Hrcka, 237 F. 2d 372 (1956); Cumberland Portland Cement Co. v. United States, 122 C. Cls. 580 (1952).

Those and other cases acknowledge that a specific taxpayer may claim a refund for a specific year in a formal fashion even beyond the limitation period if the claim relates back to an informal claim filed by that taxpayer for that year within the limitation period. We are aware of no case, however, where a court has held that a request for refund for a particular year constituted a claim for another year, nor any case in which a claim for refund by a specific taxpayer constituted an informal claim for that year on behalf of a different taxpayer. Yet that is what plaintiffs would have us hold in this case.

The suggested bases for the plaintiffs’ alleged informal claims for 1945 are their own claims for 1944 and those of their brother for 1944 and 1945. These, they insist, formed an ample basis on which the Commissioner might have surmised that plaintiffs were also claiming for 1945 since a favorable determination of the family partnership question presented in the claims actually filed would have entitled them to a refund for 1945 as well as 1944. This, in effect, would admit of a theory of filing by inaction.

If we are to hold that a certain act constitutes an informal claim alerting the Commissioner to a potential demand for refund which will satisfy the requirements of section 322(b) of the Code, the act must be clear and explicit. An act which merely makes it possible for the Commissioner to discover the existence of a claim if he makes an independent investigation and sorts out the clues will not do. The cases supporting plaintiffs’ position all reveal that the device considered an informal claim was some definite instrument, a letter of transmittal, a waiver form, a qualification attached to a check, or the like, which indicated that the taxpayer questioned a tax payment which he had made for a particular year. Each device embodied a clarity which insured that the Commissioner would not be misled.

Before we can hold that there has been an informal claim filed within the statutory period, we must be satisfied that it contains the means by which the Commissioner will be apprised that a certain tax is being contested without resort to any extraneous factors. Notwithstanding the fact that the result of our holding is to deprive plaintiffs of the major part of a refund to which, on the merits of the claim, they are apparently entitled, we hold that the record does not establish in a satisfactory manner that a claim as to the refund of 1945 income taxes was filed by either plaintiff before July 2, 1953.

Plaintiffs’ final payments of $2,177.86 and $3,137.38 on the 1945 tax liabilities were made on July 15 and 16, 1951. Under section 322(b) which authorizes recovery of taxes paid within two years of the filing of a claim (not to exceed the amounts paid within the two years) plaintiffs are entitled to judgment for those sums. In its brief, the defendant, in effect, admits this but states that refunds as to those amounts were not made because of plaintiffs’ refusal to agree to offset against the deficiencies of the partnership members of their respective families. We find in the statutes no legal bar to plaintiffs’ recovery of the sums paid on July 15 and July 16,1951.

For the foregoing reasons judgments will be entered for the plaintiffs in the following amounts: plaintiff Herbert Eosengarten, $3,137.38; plaintiff David Eosengarten, $2,177.86, with interest on each as provided by law.

It is so ordered.

Eeed, Justice (Bet.), sitting by designation, and Lara-more, Judge, concur.

Whitaker, Judge, took no part in the consideration and decision of these cases.

MaddeN, Judge,

with whom LittletoN, Judge (Bet.), joins,

dissenting:

The court has felt obliged to decide that claims of these plaintiffs, concededly otherwise valid, must be rejected because, the court concludes, the plaintiffs did not file claims for refund within the period of time set by the statute for filing such claims.

We think the evidence points more strongly to the conclusion that the plaintiffs did file timely claims for refund. The court finds:

Plaintiffs’ claims for 1944 were prepared in pencil by an employee of an accounting firm who had them typewritten in duplicate after checking the pencil copy. Claims for 1945 were prepared in duplicate at the same time based on the same theory. The original and duplicate claims for both, plaintiffs for both years were hand-carried by another employee of the accounting firm to the plaintiffs’ place of business where they signed the documents presented to them.

The foregoing events occurred on February 7, 1950. In June 1953 the revenue office, having concluded that the plaintiffs were entitled to refunds for both 1944 and 1945, found the claim for refund for 1944 but was unable to find any such claim for 1945.

In this state of the evidence, the court concludes that the claim for 1945, though typed for and signed by the plaintiffs, was not sent to the revenue office, though the 1944 claim, signed at the same time, was sent.

To reach this conclusion, one must suppose that the plaintiffs were so careless of their claims for some $50,000 that they allowed the papers necessary to support those claims to be lost, although at the same instant of time they carefully mailed other papers of the same import relating to the preceding year. We think the foregoing supposition is quite violent.

To reach the opposite conclusion, one has to suppose only that the revenue office is not infallible in its handling of the tens of thousands of papers which it receives; that two papers out of those tens of thousands may have been misfiled and thereby lost. This supposition seems to us to contain no element of violence. On the contrary, it is consistent with the experience of every person who has had numerous dealing with large and impersonal organizations, public and private, handling myriads of documents.

We would not reject a just claim on the sole ground that the Internal Revenue Department could not find a paper relating to it three years after, according to trustworthy evidence, it was sent to that office. We would await the further development of automation before we would conclude that the Internal Revenue Department is immune from human error.

FINDINGS OF FACT

The court, having considered the evidence, the report of Trial Commissioner William E. Day, and the briefs and argument of counsel, makes findings of fact as follows:

Herbert Bosengarten

1. Plaintiff, Herbert Bosengarten, is an individual residing at 22 Gramercy Park South, New York, N.Y. During 1944 and 1945 plaintiff was a partner in the partnership, Herbert Manufacturing Co., whose place of business was located at 229 West 36th Street, New York, N.Y.

2. Plaintiff, on March 13, 1946, filed his Federal income tax return for the calendar year 1945 on a cash basis with the Collector of Internal Revenue for the Third New York District (now District Director of Internal Revenue, Upper Manhattan), reporting thereon net taxable income of $102,399.77, and a tax liability of $49,612.61, which was duly assessed and paid to the said Collector.

3. After an examination of plaintiff’s Federal income tax returns and records for the calendar years 1944 and 1945, the net income and tax liability for each year were revised in accordance with revenue agent’s report dated June 13, 1947, transmitted to plaintiff by letter of the Internal Revenue Agent in Charge, dated December 11, 1947. Pursuant to a waiver of restrictions on assessment and collection filed by plaintiff on June 13,1947, the income tax deficiencies for the years 1944 and 1945 of $33,618.37 and $38,780.40, respectively, shown in the revenue agent’s report, were duly assessed and paid together with interest thereon. The deficiency of $38,780.40, together with interest thereon of $4,166.99 for the year 1945, was paid by plaintiff as follows:

Date Amount Paid
3/24/48_ $25, 632. 76 In cash.
7/ 6/49_ 6, 531.91 By credit.
7/ 6/49_ 3, 611.45 By credit.
7/. 6/49_ 3,611.45 By credit.
11/ 3/49_ 422.44 By credit.
7/16/51_ 3,137.38 In cash.

4.Plaintiff filed a claim for refund in the amount of $23,807.47 for the year 1944, which was dated February 6, 1950 and stamped received by the Collector of Internal Revenue for the Third District of New York on February 7, 1950. The claim was grounded upon the assertion that the additional tax on 1944 income, resulting from the disallowance of certain members of a partnership, was assessed in error in the light of recent decisions and rulings. An unsigned duplicate copy of this claim for refund was also received by the said Collector on February 7,1950.

5. A re-examination of plaintiff’s Federal income tax returns for the calendar years 1944 and 1945 was made by a revenue agent, and in a supplemental report dated June 22, 1953, which was forwarded to plaintiff under date of October 23, 1953, he determined an overassessment of tax in the amount of $29,921.41 for the year 1944 and $34,837.90 for 1945. The latter amount was held to be barred from recovery on the ground that a claim for refund was not timely filed. Under date of June 19,1953 plaintiff filed a waiver of restrictions and acceptance of overassessment for the year 1944, and consent to application of part thereof against deficiencies in tax for such year of related taxpayers which resulted from the revision in plaintiff’s net taxable income. The balance of the overpayment of tax and interest for the year 1944 has been refunded to plaintiff with interest thereon, and for that reason is not included in this action.

6. On July 2,1953, plaintiff filed a claim for refund in the amount of $28,770.14 for the year 1945. On December 27, 1954 plaintiff filed another claim for refund in the amount of $34,837.90, for the year 1945.

7. By letter dated November 4,1955, plaintiff was advised of the proposal to reject the claims for refund filed July 2, 1953 and December 27, 1954, but he was given thirty days to file a protest. Under date of November 25,1955, plaintiff filed a protest of the proposed rejection of the refund claims and requested a conference with the Appellate Division of the Office of the Regional Commissioner. After a hearing, plaintiff was advised by letter dated February 28, 1956 that the two claims for refund for the year 1945 would be disallowed. Thereafter, by letter dated March 23, 1956, the statutory disallowance of the two refund claims was given to plaintiff by registered mail as provided in Section 3772(a) (2) of the Internal Revenue Code of 1939.

David Rosengarten

8. Plaintiff, David Rosengarten, is an individual residing at 6.0 Gramercy Park North, New York, N.Y. During 1944 and 1945, plaintiff was a partner in the partnership, Herbert Manufacturing Co., whose place of business was located at 229 West 36th Street, New York, N.Y.

9. Plaintiff, on March 13, 1946, filed his Federal income tax return for the calendar year 1945, on a cash basis with the Collector of Internal Revenue for the Third District of New York (now District Director of Internal Revenue, Upper Manhattan District, New York, N.Y.), reporting thereon net taxable income of $27,518.98 and a tax liability of $11,562.34, which was duly assessed and paid to the said Collector.

10. After an examination of plaintiff’s Federal income tax returns and records for the calendar years 1944 and 1945, the net income and tax liability for each year were revised in accordance with revenue agent’s report dated June 13,1947, transmitted to plaintiff by letter of the Internal Revenue Agent in Charge, dated December 11, 1947. Pursuant to a waiver of restrictions on assessment and collection filed by plaintiff on June 13,1947, the income tax deficiencies for the years 1944 and 1945 of $15,050 and $18,782.11, respectively, shown in the revenue agent’s report, were duly assessed and paid together with interest thereon. The deficiency of $18,782.11, together with interest thereon of $2,148.24, for the year 1945, was paid by plaintiff as follows:

Date Amount Paid
3/24/48_$10,741. 69 In cash.
7/20/48_ 3, 506. 51 By credit.
7/ 6/49_ 653. 00 By credit.
7/ 6/49_ 732.00 By credit.
7/ 6/49_ 888. 02 By credit.
7/ 6/49_ 989.13 By credit.
7/ 6/49_ 989.13 By credit.
11/ 3/49_ 115. 70 By credit.
11/ 3/49_ 137.31 By credit.
7/15/51_ 2,177.86 In cash.

11.Plaintiff filed a claim for refund in the amount of $8,376.75, for the year 1944, which was dated February 6, 1950, and stamped received by the Collector of Internal Revenue for the Third District of New York on February 7, 1950. The claim was grounded upon the assertion that the additional tax on 1944 income, resulting from the disallowance of certain members of a partnership, was assessed in error in light of recent decisions and rulings. An unsigned duplicate copy of this claim for refund was also received by the said Collector on February 7, 1950.

12. A re-examination of plaintiff’s Federal income tax returns for the calendar years 1944 and 1945 was made by a revenue agent, and in a supplemental report dated June 22, 1953, which was forwarded to plaintiff tmder date of October 23, 1953, he recommended an overassessment of tax in the amount of $12,943.28 for the year 1944, and $16,164.38 for 1945. The latter amount was held to be barred from recovery on the ground that a claim for refund was not timely filed. Under date of June 19, 1953, plaintiff filed a waiver of restrictions and acceptance of overassessment for the year 1944, and consent to application of part thereof against deficiencies in tax for such year of related taxpayers which resulted from the revision in plaintiff’s net taxable income. The balance of the overpayment of tax and interest for the year 1944 has been refunded to plaintiff with interest thereon, and for that reason is not included in this action.

13. On July 2, 1953, plaintiff filed a claim for refund in the amount of $12,919.55 for the year 1945. On December 27, 1954, plaintiff filed another claim for refund in the amount of $16,164.38 for the year 1945.

14. By letter dated November 4,1955, plaintiff was advised of the proposal to reject the claims for refund filed July 2, 1953 and December 27,1954, but he was given thirty days to file a protest. Under date of November 25, 1955, plaintiff filed a protest of the proposed rejection of the refund claims and requested a conference with the Appellate Division of the Office of the Regional Commissioner. After a hearing, plaintiff was advised by letter dated February 28,1956, that the two claims for refund for the year 1945 would be disallowed. Thereafter, by letter dated March 23, 1956, the statutory disallowance of the two refund claims was given to plaintiff by registered mail as provided in Section 3772(a) (2) of the Internal Revenue Code of 1939.

FINDINGS RELATED TO BOTH PLAINTIFFS

15. The Herbert Manufacturing Co. was a family partnership engaged in the business of converting rayon fabrics. The brothers, Herbert Rosengarten, David Rosengarten and Walter Eosengarten, were the senior partners. Their respective wives and. children became partners in 1941, when the three senior partners each gave them interests in the partnership, and filed gift tax returns for the interests so conveyed. All the members of the partnership filed Federal income tax returns for each of the years 1944 and 1945, and reported their distributive shares of the partnership profits and paid the resulting income tax thereon. After an examination, the revenue agent in reports dated June 13, 1947, disallowed the family partnership for the years 1944 and 1945, and distributed the partnership profits among the three senior partners, Herbert, David and Walter Eosengarten. The resulting deficiencies for each year were assessed against the three brothers and overpayments scheduled for the disqualifying partners were applied as credits in payment of the deficiencies. After the filing, on February 7, 1950, of the 1944 claims for refund by Herbert and David Eosengarten, and the filing, on March 3, 1950, of claims for refund for the years 1944 and 1945 on behalf of Walter Eosengarten, who had died on February 10,1946, a re-examination was made by a revenue agent. Upon reappraisal of the facts regarding the family partnership, the revenue agent concluded that the family partnership was valid, and reallocated the partnership income among the various members in proportion to their partnership interest. The following tabulation shows the interest of each partner and the income attributable to each for the year 1945:

Percentage of Uame of partner partnership and partnership interest Share of partnership income Reported on returns Revised per RAR 6/&&/5S
Herbert Eosengarten (Brother 26(4 of David and Walter). $57, 929. 61 $63, 727.07
Olae Eosengarten (Wife of 13% Herbert). 25, 064. 80 21,463.53
Trust for benefit of Frank 6%e Eosengarten (Son of Herbert). 12, 532. 41 10, 731. 85
Trust for benefit of Johanne 6%e Eosengarten (Daughter of Herbert). 12, 532. 41 10, 731. 85
David Eosengarten (Brother 13% of Herbert and Walter). 34,058. 37 38, 085. 64
Percentage of Píame of partner partnership and partnership interest Share of partnership income Reported on returns Revised per EAR e/n/ss
Eva Rosengarten (Wife of 6% David). $13,129.19 $11, 242. 80
Charles Rosengarten (Son of 2%i David). 4, 376. 39 3, 747.54
Trust for benefit of Elliott 2%^ Rosengarten (Son of David). 4, 376. 39 3, 747. 54
Trust for benefit of Frances 2%.± Lillian Rosengarten (Daughter of David). 4, 376. 39 3, 747. 54
Walter P. Rosengarten (Broth- 10 er of Herbert and David). 25, 597. 00 31, 953.17
Cecile A. Rosengarten (Wife of 10 Walter). - 19, 097.00 16, 353.17
Totals_100 213, 069.96 215, 531.70

The claims for refund filed for Walter Eosengarten for both the years 1944 and 1945 were allowed, but part of resulting refund was applied as a credit against the deficiencies asserted for these years against the partner members of his family. The claims for refund filed by Herbert and David Eosengarten for the year 1944 were allowed, but part of the refunds was applied as a credit against the deficiencies asserted against their partner families. The 1945 claims for refund filed July 2,1953 by Herbert and David Eosengarten were timely to the extent of payments made within two years of their filing date, which were $3,137.38 for Herbert and $2,177.86 for David. These amounts were not refunded.

16. Claims for refund for the years 1944 and 1945 were prepared in pencil for plaintiffs Herbert and David Eosen-garten by an employee of the accounting firm of George Muhlstock & Co. of New York City. After checking calculations and making changes therein, the four claims for refund were typewritten in duplicate and were then given to another employee, Samuel J. Eossman, with instructions to have them signed by the two plaintiffs, notarized, and then send them to the Collector of Internal Eevenue at 110 East 45th Street.

17. Penciled claims for refund for the years 1944 and 1945 were prepared by the same employee of the accounting firm for Walter Eosengarten, deceased. The first draft of such claims for refund was prepared on the same day as those for Herbert and David. Corrections were necessary and they were accomplished the nest day, after which typewritten copies were made. Since these claims for refund were prepared for signature of the widow of Walter, who was ad-ministratrix of the estate, arrangements were made for the administratrix to come to the office of the accounting firm to sign the claims for refund for the years 1944 and 1945 on behalf of Walter, deceased. The original of these claims was filed on March 3, 1950. No evidence has been submitted showing the method or manner of filing these two claims on behalf of Walter Kosengarten, deceased, or by whom they were signed. The months of February and March 1950 were in the tax period and the employees and members of the accounting firm were quite busy.

18. Upon being entrusted with the prepared claims for refund, Mr. Kossman carried them to the Herbert Manufacturing Co. and notified Herbert and David Kosengarten through their secretaries that he had some forms for their signature. The two brothers assembled in Herbert’s office and signed their names to documents placed before them after which their signatures were notarized. Herbert and David Kosengarten paid no further attention to the documents after placing their signatures thereon. They presumed that either Mr. Kossman or the secretary picked them up. David Kosen-garten thereafter requested Mr. Kossman to give him a memorandum explaining what he had signed which he did approximately a half hour later. The memorandum stated that David had signed claims for refund for the years 1944 and 1945. Mr. Kossman picked up the documents, requested the secretary to address two envelopes to the Collector of Internal Revenue, separated the documents and put them in such envelopes. After stamping the envelopes, Mr. Kossman stated he put them in his pocket and when he went out to lunch, put them in a mail box on the corner. There is no evidence that on or about February 6, 1950, anyone in the accounting firm conferred with Mr. Kossman upon his return from the Herbert Manufacturing Co. concerning the documents upon which he was to secure signatures.

19. The original and duplicate claims for refund filed by David and Herbert Kosengarten for the year 1944 were stamped received February 7, 1950 in the mail room of the Collector of Internal Revenue, Third District, New York. These refund claims were then forwarded to the claims section of that office and given the same file number as had previously been assigned to the 1944 income tax return of each plaintiff. The claims for refund and the returns of these two plaintiffs were transmitted to the audit division of the New York Internal Revenue Service, Third District, for their disposition. Upon receipt of these refund claims in the claims section, 815 cards were prepared which gave the name, address, account number of each plaintiff and the date the claims were received which became the permanent record. There was also placed upon the assessment list a stamp showing that a claim for refund was filed by each plaintiff for the year 1944.

20. There is no evidence showing receipt by the Internal Revenue Service of the 1945 claims for refund of Herbert and David.

21. During the year 1953, a claims examiner in the office of the Internal Revenue Service, Third District of New York was contacted by a representative of David and Herbert Rosengarten concerning the filing of claims for refund by these plaintiffs for the year 1945. After a thorough check of the open and closed 815 files and the assessment lists and every known source, the claims examiner informed the representative that there was no record in the office of the Internal Revenue Service that plaintiffs had filed refund claims for the year 1945. A search was also made of the correspondence file, but there was no record of a transmittal letter accompanying any claims for refund mailed in by plaintiffs during the year 1950. The claims examiner further checked all records to ascertain whether there had been an incorrect association of refund claims and returns for 1944 and 1945 of plaintiffs when forwarding to the audit division, but the records failed to disclose an improper association.

22. When claims for refund and returns were received through the mail by the Internal Revenue Service during the year 1950, the envelopes were placed over a glass scope to ascertain that no document was left therein after which they were destroyed. By reason of this precaution, there is serious doubt that plaintiffs’ claims for refund for the year 1945 were lost in the office of the Internal Revenue Service.

23. It is found that no claims for refund for 1945 were filed on behalf of Herbert and David Rosengarten, until July 2,1953.

24. Under date of July 2, 1953, claims for refund were filed by David and Herbert Rosengarten for the year 1945 which were accompanied by an original and a copy of transmittal letters. Received stamp dated July 2, 1953 by the Director of Internal Revenue was placed on each copy of the transmittal letter and these were returned to plaintiffs’ representative. On December 27, 1954, plaintiffs filed amended claims for refund for the year 1945, which were likewise accompanied by an original and copy of a transmittal letter, upon which the Director of Internal Revenue placed a received stamp. The copy was returned to plaintiffs’ representative. Although the transmittal letters of July 2, 1953 refer to a duplicate copy of the claims for refund, there is no evidence of their receipt by the Internal Revenue Service. These refund claims were associated with the returns, 815 cards were made, a received stamp was placed upon the assessment lists, and they were sent to the audit division for disposition. Thereafter, rejection letters were issued on the refund claims.

25. Refunds of $3,137.38 for Herbert, and $2,177.86 for David for the year 1945 were not made by the Internal Revenue Service because plaintiffs would not agree to offset for deficiencies due by their family partner members of the partnership.

CONCLUSION OE 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 plaintiffs are entitled to recover, and it is therefore adjudged and ordered that plaintiff Herbert Ro-sengarten (No. 307-56) recover of and from the United States the sum of three thousand one hundred thirty-seven dollars and thirty-eight cents ($3,137.38), with interest thereon as provided by law, and it is adjudged and ordered that plaintiff David Rosengarten (No. 308-56) recover of and from the United States the sum of two thousand one hundred seventy-seven dollars and eighty-six cents ($2,177.86), with interest thereon as provided by law. 
      
       26 U.S.Q.' 623(b)(1) (1952 Ed.).
     
      
       The cited section of the 1939 Code provides, In pertinent part:
      “SeC. 322. REFUNDS AND CREDITS.
      “(b) Limitation on allowance — (1) Period of Limitation. — Unless a claim for credit or refund Is filed by the taxpayer within three years from the time the return was filed by the taxpayer or within two years from the time the tax was paid, no credit or refund shall be allowed or made after the expiration of whichever of such periods expires the later. If no return is filed by the taxpayer, then no credit or refund shall be allowed or made after two years from the time the tax was paid, unless before the expiration of such period a claim therefor is filed-by the taxpayer.
      “(2) Limit on amount of credit or refund.
      
      “The amount of the credit or refund shall not exceed the portion of the tax paid—
      “(A) If a return was filed by the taxpayer, and the claim was filed within three years from the time the return was filed, during the three years Immediately preceding the filing of the claim.
      “(B) If a claim was filed, and (i)' no return was filed, or (ii) if the claim was not filed within three years from the time the return was filed the taxpayer, during the two years immediately preceding the filing of the claim.” (26 U.S.C. 322 (1952 Ed.).]
     