The opinion of the court was delivered by: COHEN
Plaintiff, the First County National Bank and Trust Company of Woodbury, New Jersey, as the executor under the will of Clifford H. Shivers, deceased, seeks refund from the United States of America of a $12,949.65 penalty, plus interest, assessed for the delinquent filing of a federal estate gift tax return for the year 1964. The asserted basis for the refund is that the decedent was mentally and physically incapable of timely filing in his lifetime during the due period, which condition constituted reasonable cause for his failure, rather than wilful neglect; and further, that there was reasonable cause, rather than wilful neglect, for the failure of the plaintiff-executor following decedent's death and its qualifying as the decedent's legal representative, to do so. The government's position, in resisting refund, is that the delinquent filing and payment were due to wilful neglect rather than reasonable cause on the part of both the decedent taxpayer in his lifetime and by the plaintiff-executor thereafter, within the meaning of the penalty provision of 26 U.S.C. Sec. 6651.
The matter was tried without a jury. The plaintiff introduced the testimony of the taxpayer's attending physician and of its Vice-President and Trust Officer. After consideration of the testimony, stipulation of facts, exhibits and memoranda submitted by the parties, the Court, pursuant to Rule 52, F.R. Civ. P., makes the following findings and conclusions:
1. Sometime during the first half of 1964, Clifford H. Shivers made gifts of securities to his two daughters amounting to $296,515.00.
2. In the latter part of July, 1964 Shivers became critically ill. His death occurred on June 21, 1965.
3. No federal gift tax return was filed, nor payment made therefor, during the lifetime of Shivers on the gifts in question. The due date for filing, without incurring penalty, was April 15, 1965. In fact, no return was filed until so done by the plaintiff-executor on March 2, 1966, some eleven months after the commencement of the penalty date.
5. Upon probate of the will the estate, including a large investment portfolio of securities, was valued in excess of $1,000,000.00 for federal tax purposes.
6. After qualifying as executor, plaintiff compiled an extensive inventory of the estate. About 5 weeks later, August 15, 1965, it ascertained the existence of the 1964 gifts in question. Thereafter, the nature and approximate values of the gift securities were ascertained by telephone calls and correspondence with the donees, one of whom lived in Virginia, the other in Delaware. The exact value of the securities was obtained from the stock broker on November 1, 1965, some two and one-half months after it learned of the gifts.
7. On or about March 2, 1966, eleven months after the return was due and some seven months after acquiring knowledge of the gifts, the plaintiff-executor filed the return for the 1964 gifts and paid a tax of $51,798.60 with interest of $2,762.59, or a total of $54,561.19.
8. Pursuant to Section 6651 of the Internal Revenue Code, the District Director assessed a 25% delinquent penalty against the estate in the amount of $12,949.65 which was paid on April 15, 1966.
9. Thereafter, on April 22, 1966, plaintiff filed a claim for refund of the penalty payment. No administrative action was taken and the present suit was instituted more ...