The opinion of the court was delivered by: WORTENDYKE
In this action the Government seeks to foreclose an asserted lien for unpaid income taxes upon the cash surrender values of two life insurance policies issued by the defendant insurance companies upon the life of defendant taxpayer and allegedly assigned to taxpayer's codefendant wife during the lifetime of insured. (The insured is still living.)
The complaint alleges that, within the time allowed for collection of the net unpaid balance of taxes, including penalties and interest, the taxpayer submitted offers to compromise his liabilities on that account, which contained waivers of the statute of limitations, one of which were accepted by the Commissioner of Internal Revenue and operated to extend the period within which these taxes were collectible to July 3, 1959. While admitting the submission of the offers in compromise, promise, taxpayer's answer denies that the period for collection was extended to the date asserted, and alleges that the taxes have become uncollectible because of lapse of time.
Upon pretrial conference there were marked in evidence the documents embodying the offers in compromise made by the taxpayer and the responses of the representatives of the Internal Revenue Service relating thereto. Upon these documents and the affidavit of the Acting District Director of Internal Revenue in Newark, New Jersey, the Government moves for summary judgment establishing the asserted amount of taxpayer's liability in this case.
The motion presents two questions: (1) Had the statute of limitations prescribed by § 276 of the Internal Revenue Code of 1939 (26 U.S.C. § 276(c) expired when the present action was instituted? And (2) Is the taxpayer liable to the Government for the tax assessments set forth in the complaint?
26 U.S.C. § 276(c) provides:
'Where the assessment of any income tax imposed by this chapter has been made within the period of limitation properly applicable thereto, such tax may be collected by distraint or by a proceeding in court, but only if begun (1) within six years after the assessment of the tax, or (2) prior to the expiration of any period for collection agreed upon in writing by the Commissioner and the taxpayer before the expiration of such six-year period. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon.'
It was conceded in behalf of the taxpayer, upon the argument of the pending motion, that the earliest date upon which the assessment of income taxes was made by the Commissioner of Internal Revenue was June 6, 1947, and that had there been no waiver or agreement to the contrary, the period within which an action might be brought for the collection of the taxes assessed would expire June 6, 1953.
By written offer in compromise dated October 30, 1951, made to the Commissioner of Internal Revenue, the taxpayer offered the sum of $ 3,500 to secure his release from liability resulting from his nonpayment of income taxes plus interest charges for the years 1944-45 and 1946-47. The tax liability recited against which the offer of compromise was made, amounted to '$ 28,196.53, additional 1944, $ 10,397.51, 1945 $ 3,650.19, 1946 $ 10,206.71, 1945 additional $ 3,586.02, 1947 additional $ 356.40' (Which figures total $ 28,196.83, instead of the $ 28,196.53 alleged therein.) The document referred to further provided as follows:
'It is understood that this offer does not afford relief from the liability sought to be compromised unless and until it is actually accepted by the Commissioner, with the approval of the Secretary of the Treasury or of the Undersecretary of the Treasury, or of an Assistant Secretary of the Treasury, and the terms of this offer have been fully complied with.
'In making this offer and as a part consideration thereof, the proponent hereby expressly agrees that all payments and other credits heretofore made to the account(s) for the period(s) under consideration shall be retained by the United State, and, in addition, the proponent hereby expressly waives:
'1. Any and all claims to amounts of money to which the proponent may be entitled under the Internal Revenue Laws, due through overpayments made prior to the date of the acceptance of this offer of any tax or other liability, including interest and/or ad valorem penalty, and interest on overpayments, or otherwise, as are not in excess of the difference between the liability sought to be compromised hereby and the amount herein offered, and agrees that the United States may retain such amounts of money, if any.
'2. The benefit of any statute of limitations applicable to the assessment and/or collection of the liability sought to be compromised, and agrees to the suspension of the running of the statutory period of limitations on assessment and/or collection for the period during which this offer is pending, or the period during which any installment remains unpaid, and for 1 year thereafter.'
The taxpayer certified, over his signature, to the truth and correctness of the conditions of the offer in compromise, and the Commissioner of Internal Revenue, through his deputy, signed an acceptance of the waiver of the statutory period of limitations and stated that the ...