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UNITED STATES v. JACOBS

April 5, 1957

UNITED STATES of America, Plaintiff,
v.
Josephine E. JACOBS, Administratrix of the Estate of Michael S. Jacobs, Deceased; Twentieth Century Sporting Club, Incorporated, Defendants



The opinion of the court was delivered by: FORMAN

In the first count of the complaint in this case, as amended, the plaintiff, the United States of America, alleges that the Commissioner of Internal Revenue assessed the defendant, Twentieth Century Sporting Club, Incorporated, a New York corporation (hereinafter called Twentieth Century), on July 3, 1952, for the deficiency in its 1946 income, excess profits and declared value excess profit taxes in the amount of $ 21,086.92, and $ 100,118.83, plus interest, and on February 19, 1953, for a like deficiency in the amount of $ 13,500.87 for the year 1948, plus interest, or an aggregate of $ 134,706.12; that the said defendant Twentieth Century is entitled to credit for $ 39,973.05 collected against the said assessments by virtue of plaintiff's tax levy, leaving a balance due of $ 94,733.57 together with interest; and that the late Michael S. Jacobs, prior to his death was, and his estate, or which the defendant Josephine E. Jacobs is administratrix, now is, indebted to the said defendant Twentieth Century in the sum of $ 173,701.71, which debt is subject to the tax liens arising out of the said assessments on defendant Twentieth Century's property and rights to property in the sum of $ 94,733.57, as aforesaid.

In the second count of the complaint, in the form of an amendment thereto, the plaintiff alleges that during and after the period 1943 to 1947 the said Michael S. Jacobs was a shareholder and an officer and director of the defendant Twentieth Century; that during the said period 1943 to 1947 the defendant Twentieth Century made a series of loans to him totaling $ 173,701.71; that the said Michael S. Jacobs in his capacity as an officer and director of the defendant Twentieth Century knew and assented to the making of the said loans on which there is, as alleged, a balance of $ 154,701.71 still due; that the assessments and levies were made on the defendant Twentieth Century, as described in the first count of the complaint, leaving an unpaid balance of $ 94,733.57 still due and owing by Twentieth Century; that under the provisions of the New York Stock Corporation Law, McK.Consol. Laws, c. 59, Section 59, the said Michael S. Jacobs was, and his estate now is, personally liable for the corporate tax debt, which debt arose prior to the repayment of the above mentioned loans; that the liability of the estate of Michael S. Jacobs to the plaintiff United States is direct and not derivative and that it is not barred from asserting such liability under the New York statute by any state statute of limitations.

 Plaintiff demands that the merits of all claims and liens upon the alleged debt of Michael S. Jacobs be finally determined and that the court order a distribution according to the findings of the court in respect to the interest of the parties herein.

 The defendant Josephine E. Jacobs, Administratrix of the Estate of Michael S. Jacobs, deceased, in probate proceedings pending in the Monmouth County (New Jersey) Surrogate's Court, contends in her motion for summary judgment that the debts alleged to be owing from Michael S. Jacobs and his estate to Twentieth Century are barred by the statute of limitations; that the United States has no greater rights with respect to these alleged debts than the defendant Twentieth Century, and that the United States did not acquire title to these debts prior to the expiration of six years from the respective dates on which they were incurred.

 For the purpose of this motion the parties have stipulated facts as noted in the margin hereof. *fn1"

19570405

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