was after the tax levy. The court really found that there has been no donation in fact, the formal donor being the real donee. Here none of these equivocal acts were present. The grantor was a real donor of the principal of the trust estate and a donee only of the income. This she received from the trustees, having parted with all control over what she had given. She had, it is true, in her hands a power to resume control, but this she never exercised by word or act. The revocation was inert, and remained so to the day of her death. fendant for the sum claimed may be entered, unless defendant shall within 15 days file an affidavit of defense to the fact merits of the cause, in compliance with the Practice Act of 1915 (Pa. St. 1920, §§ 17181-17204). UNITED STATES v. KELLEY. 1. Internal revenue 28 (2)-Formal assessment is not necessary condition precedent to collect tax (Revenue Act 1924, § 310 [26 USCA § 1110]). Under Revenue Act 1924, § 310 (26 USCA We do not see that Stoddard v. Eaton in its facts touches or even approaches the instant case. As counsel for defendant, who by special training are experts in tax matters, concede that if the cited case, upon which they rely, does not in principle rule the ques- $ 1110 [Comp. St. § 6336%]), a formal astion before us, the defense fails, we see no need to pursue the subject further than to state our conclusion that the gain on the sale of the stock which was disposed of should not have been included in the taxable income of the plaintiff's decedent. The Statute of Limitations. [3] This is more than we have thus termed it, because the time limit is a condition of the right of action. We do not have access to the statutes, but take the pertinent provisions from the paper books, the accuracy of which we do not question. There are, it is true, jurisdictions (of which Pennsylvania is one) in which a statute of limitations is held to be a defense which must be pleaded, and hence not the subject of a demurrer to a declaration or statement of claim. This doctrine applies, however, to what are in strictness time limitations upon the assertion of an existing right of action. In the instant and like cases the time limit is a condition of a cause of action. The right to resort to the action begun in such cases would not exist, were it not for these acts of Congress, and the right is given upon the condition (inter alia) that the action be brought within the time limit imposed. We think, therefore, that the statement of claim must show compliance with these time requirements, and that a failure so to do may be made a defense as matter of law. A discussion of these acts with anything like adequacy would extend this opinion to inordinate length. We in consequence content ourselves with a statement of the conclusion reached that the present action was brought in time. We refuse to rule in favor of the defendant the questions of law raised by the affidavits filed, and further direct that judgment in favor of the plaintiff and against the de sessment is not a necessary condition precedent to an action to collect a tax. 2. Internal revenue 28 (2)-Part of estate tax erroneously refunded through mistake of law is not a "deficiency," so that notice to executrix was not required before bringing suit for collection (Revenue Act 1924, § 308 et seq. [26 USCA §§ 1101-1104, 1106-1108 et seq.]; Revenue Act 1926, § 308, subd. [a]; 26 USCA § 1101). Where the return of an executrix for estate tax correctly stated the value of the estate and the tax due, which was paid, but through mistake of law a part was returned, the amount erroneously returned is not a "deficiency," within Revenue Act 1924, § 308 et seq. (26 USCA §§ 1101-1104, 1106-1108 et seq. [Comp. St. § 6336%h]) and Revenue Act 1926, § 308, subd. [a], being 26 USCA § 1101), and notice to the executrix to give opportunity to appeal to the Board of Tax Appeals is not required before bringing suit for its collection. [Ed. Note. For other definitions, see Words and Phrases, First and Second Series, Deficiency.] 3. Internal revenue 28 (2)-Suit to recover estate tax may be brought in district where estate was settled (26 USCA § 142). Under Rev. St. § 3213 (26 USCA § 142 [Comp. St. § 5937]), suit for recovery of estate taxes may be brought in the district where the estate was settled, though the executrix resides in another district. In Equity. Suit by the United States against Lora A. Pratt Kelley, individually and as executrix of the will of Henry A. Pratt, deceased. Decree for the United States. Samuel W. McNabb, U. S. Atty., of Los Angeles, Cal., and Emmett E. Doherty, Asst. U. S. Atty., of San Francisco, Cal. (A. W. Gregg and J. D. Smith, both of Washington, D. C., of counsel), for the United States. Goldman & Altman, of San Francisco, Cal., for defendant. 24 F.(2d) 234 JAMES, District Judge. This is an action on the part of the United States to collect from the defendant, as executrix of the estate of Henry A. Pratt, deceased, the sum of $19,860.95, alleged to be owing by her as an unpaid balance of the tax assessed against the property left by decedent. Of that sum $16,447.51 was once paid by the executrix, and, as the complaint shows, this amount, together with $3,413.44 interest, was, through error and mistake, refunded to the defendant on May 13, 1925. Henry A. Pratt, at the time a resident of Fresno, Cal., died on October 11, 1920. He left an estate of large value. On October 8, 1921, his widow, the executrix, filed her return with the Revenue Department, showing the value of the estate for tax assessment purposes. The assessment was duly made and the amount of the tax-$20,835.00-was paid by the executrix in November, 1921. An additional amount demanded by the collector, to wit, the sum of $2,462.27, was paid on December 5, 1922. On April 3, 1922, the executrix filed a claim asking that $16,974.67 of the tax paid be refunded to her. This claim was not made because of any error occurring in the return filed by the executrix as to the value of the property of the estate, but was based solely upon the assumption that, as the property was admittedly all community property, the wife possessed a vested interest to the extent of one-half thereof, and that hence, as a matter of law, tax on only one-half of the community estate should be paid. The Revenue Commissioner, correcting the amount by subtracting the sum of $527.16 therefrom, allowed the claim for refund as before stated. In so doing he was in error. U. S. v. Robbins et al., 269 U. S. 315, 46 S. Ct. 148, 70 L. Ed. 285; Stewart v. Stewart, 199 Cal. 318, 249 P. 197; Roberts v. Wehmeyer, 191 Cal. 601, 218 P. 22. The error was in a matter of law, and did not involve the correction or change of any statement of fact shown on the original return made by the executrix. The consideration just adverted to is important, in view of the argument made that the Revenue Commissioner, acting in the name of the United States, had no power to maintain an action for the recovery of a tax without first giving notice and allowing time for an appeal to the Board of Tax Appeals to elapse. Section 308 et seq., Revenue Act of 1924 (26 USCA §§ 1101-1104, 1106-1108 et seq. [Comp. St. § 6336h et seq.]); section 308 [a], Revenue Act of 1926 (26 USCA § 1101). [1] Sections 310 and 311 of the Act of 1924 the act of 1924. By that act the taxpayer assessment made against him. The act of 1926 made additional provisions affecting the proceedings before the Board of Tax Appeals, and made the decision of the latter reviewable only by the Circuit Courts of Appeals, and in the District of Columbia by the Court of Appeals of that District. Section 308(a) of the act of 1926 provides that no proceedings for the collection of the tax shall be prosecuted until notice of deficiency assessment is given the executor, and not until the expiration of 60 days, and not then if an appeal to the Tax Board has been taken, in which latter case the restraint continues until the decision of the board becomes final. It is also provided that any proceeding commenced contrary to such restriction may be enjoined. Section 318 of the act (26 USCA § 1118), in general, makes the conditions relative to the collection of taxes applicable to those accruing or accrued under either the 1917, 1918, or 1921 acts. It may be here remarked that it was the evident intent of Congress, by the enlarged provisions of the act of 1926, to make the proceeding authorized to be taken before the Board of Tax Appeals, where availed of by the taxpayer, essential to the ascertainment of the correct amount due. It would have been an idle thing if, after creating the executrix in her return is not questioned the board and giving it jurisdiction to correct assessments, either by deducting there from or adding thereto, and making its determination reviewable only by an appellate tribunal, Congress designed that the government should not be bound to await the board's decision, but might proceed independently and in disregard of it. There ought to be no question of the power of Congress to determine the manner that a tax which is created by its act shall be ascertained and collected; and there is nothing inconsistent with the provisions restraining such independent proceedings in the general terms of section 1122 of the 1926 act (26 USCA §§ 1257, 1258; 28 USCA § 41, par. 20), which preserves to the District Courts the right to act, both in law and equity, to enforce collection of a tax. [2] The argument made by counsel for the defendant, however, wherein he invokes those provisions of the law giving the taxpayer the right to appeal to the Tax Board, is predicated upon the asserted proposition that the demand of the Revenue Department as expressed in the complaint in this suit should be denominated a “deficiency” assessment under the law. In view of the conclusion at which I have arrived, it will not be useful to refer further or more specifically to the various provisions relating to tax appeals and the stay of proceedings pending the exercise of the right in the taxpayer to so appeal. If it be admitted that this demand constitutes properly the subject of a deficiency assessment, and that the assessment was of date October 11, 1926, it would seem that the action was prematurely brought, because the taxpayer was allowed no time to appear after notice and have the claim passed upon by the Tax Appeal Board. I am of the opinion that it cannot be so characterized. The law defines a "deficiency" as relating to the assessment of an estate tax to be "the amount by which the tax imposed exceeds the amount shown as the tax by the executor upon his return." Attention has already been pointed to the fact that the assessable amount as given by as to its correctness. The tax deducible is as to its amount necessarily certain. The Revenue Department collected that amount of tax, which was paid without protest, for it was the amount that the executrix admitted was due the government. Later, through the mutual error of the executrix and the Commissioner, the amount here sued for was handed back to the executrix. It remains as a definite ascertained amount, not subject to further review or question, which is recoverable on such a demand as was here made and by this suit. Section 3213, R. S., U. S. (26 USCA § 142 [Comp. St. § 5937]) v. Stevenson, 215 U. S. 190, 30 S. Ct. 35, 54 L. Ed. 153; U. S. v. Chamberlin, 219 U. S. 250, 31 S. Ct. 155, 55 L. Ed. 204; U. S. v. Ayer et al. (C. C. A.) 12 F.(2d) 194; U. S. v. Nashville, C. & St. L. R. Co. (C. C. A.) 249 F. 678. [3] The point that, as the defendant, at the time this action was brought, resided at Oakland, Cal., outside this judicial district, the court is without jurisdiction, is answered by a reference to the provisions of section 3213, Rev. Stat., which permits tax suits to be brought either in the district where the tax is incurred or where the party from whom such tax is due resides. Decedent died at Fresno, within this district, and his estate was administered there. The tax, therefore, was incurred within the jurisdiction. would seem, too, that defendant waived the point of jurisdiction of her person by making a general appearance, as the record shows. It is admitted that the executrix defendant has in her hands in excess of $50,000 received out of the assets of the estate, and it is from this fund that the government seeks to recover its tax. It Defendant has counterclaimed for certain deductions and allowances. The claim should be denied, both on the merits and because demand was never made heretofore to the revenue officers for a reaccounting. Judgment is ordered to be entered in favor of the plaintiff. An exception on all legal grounds is allowed to the defendant to the entry thereof. 24 F.(2d) 237 STARK et al. v. UNITED STATES. Joseph S. Graydon and Maxwell & Ram District Court, S. D. Ohio, W. D. October 13, sey, all of Cincinnati, Ohio, for plaintiffs. 1927. No. 3614. I. Internal revenue 2(11)-Statute taxing prior property transfers intended to take effect after death is invalid (Revenue Act 1918, § 402 [c], being Comp. St. § 633634c). Revenue Act 1918, § 402 (c), being Comp. St. § 63364c, in so far as it requires that there shall be included in decedent's gross estate for taxation the value of property transferred by decedent prior to its passage, merely because the conveyance was intended to take effect in possession and enjoyment at or after his death, regardless of whether transfer was shown to be made in contemplation of death or evasion of statute, is invalid, as arbitrary, capricious, and amounting to confiscation. 2. Internal revenue 8(11)-Donor's reservation of power to modify, control, and use income of trust, to take effect in possession and enjoyment after death, held not to prevent vesting of remainders (Revenue Act 1918, 402 [c], being Comp. St. § 633634c). Donor's reservation of power to revoke trust intended to take effect in possession and enjoyment at or after his death, and full control over management of trust and benefit of all income for life, held not of itself to prevent vesting of remainders, so as to make transfer taxable under Revenue Act 1918, § 402 (c), being Comp. St. § 63364c, but estates of remainderman vested subject only to donor's power to divest them. 3. Internal revenue 8 (2)-Federal estate tax law is an excise on transfer of property by death. Federal estate tax law is an excise on the transfer of property by death. 4. Internal revenue 8(11)—Statute taxing transfers to take effect after death held not to require donor of previously created trust to surrender reserved rights of modification, revocation, life income, and control (Act Feb. 24, 1919 [40 Stat. 1057]). Where donor created trust to take effect in possession and enjoyment after his death, with right to income during his life and to control property, subsequent enactment of Act Feb. 24, 1919 (40 Stat. 1057), taxing such conveyances, did not place affirmative duty on donor to surocation, life income, control, and management, in order to avoid effect of such statute, on theory that each day of retention of such rights amounted to a reconveyance in trust or redeclaration of conditions of trust deed, since court cannot read into statute provisions not validly included thereunder. render the reserved rights of modification, rev At Law. Action by Edgar Stark, executor of the last will and testament of Jacob G. Schmidlapp, deceased, and others, against the United States. Judgment for plaintiffs. For opinion on demurrer to petition, see 14 F.(2d) 616. Simon Ross, Asst. U. S. Atty., of Cincinnati, Ohio, and H. B. Hunt, Sp. Atty., Bureau of Internal Revenue, Treasury Department, of Washington, D. C., for the United States. HICKENLOOPER, District Judge. This is an action to recover certain federal estate tax payments assessed against the plaintiffs, by including in the value of the estate as of the time of death certain intangible personal property constituting the res of a trust created by the decedent in the year 1915, which taxes were paid under protest. Section 402 (c), Internal Revenue Act, approved February 24, 1919 (Comp. St. § 6336c). The United States is designated as defendant, the collector of internal revenue to whom the payment was made being no longer in office. All applications for refunder, appeals, or other administrative remedies open to plaintiff as a condition precedent to the maintenance of this action have been pursued by him without relief. A more detailed statement of the provisions of this trust will be found in the decision of this court upon demurrer to the petition in the instant case, reported in 14 F. (2d) 616. On the former hearing on demurrer to the petition, the question of the unconstitutionality of that portion of section 402 (c) which provides that there shall be included in the gross estate of the decedent all property "to the extent of any interest therein of which the decedent has at any time made a transfer, or with respect to which he has at any time intended to take created a trust, effect in possession or enjoyment at or after his death (whether such transfer or trust is made or created before or after the passage of this act), or its effectiveness as creating an obligation to pay such tax, was not considered or passed upon by the court. We there remarked: "This question is saved by the plaintiffs as a matter of precaution, but is not urged nor argued. The question is therefore not here considered, but the act is accepted as valid under Shwab v. Doyle, Collector, 269 F. 321 (C. C. A. 6)." The court then decided that the provisions of the trust declared upon clearly showed that it was intended to take effect in possession and enjoyment at or after the death of the donor, and, accepting the provisions of section 402 (c) as valid and applicable to the facts of this case, the additional assessment was held valid, and the demurrer sustained, with leave to amend. Certain allegations of fact as directed to the intention of the donor having been inserted by amendment, the case was continued for hearing on final submission. Subsequently, but before final submission, the Supreme Court of the United States handed down its opinion in the case of Nichols, Collector, v. Coolidge, decided May 31, 1927, 274 U. S. 531, 47 S. Ct. 710, 71 L. Ed. 1184. Upon the present hearing, and by reason of the decision of the Supreme Court in the cause just cited, the position of counsel for plaintiff is reversed, and reliance is placed solely upon the unconstitutionality of that portion of section 402 (c) by which the value of a trust created in 1915 is included as part of the gross estate, or the ineffectiveness of this provision as creating an obligation to pay the tax. The fact that the trust was, when made, intended to take effect in possession or enjoyment at or after the donor's death, is now conceded, but claimed to be immaterial. It is to be noted that the trust here involved, if a transfer was made and a trust created in the true sense of these words, was made in the year 1915, prior even to the passage of the Act of September 8, 1916, section 202 (b) of which was the direct counterpart of section 402 (c) of the act of 1919, except as to the parenthetical clause. See chapter 463, 39 Stat. 756, 777 (Comp. St. § 63362c). [1] Without reviewing the history of this legislation, or the effect of other decisions of the Supreme Court upon its scope and application, this case of Nichols v. Coolidge seems decisive of the issues now here presented. In the last paragraph of the opinion the court, speaking through Mr. Justice McReynolds, says: "And we must conclude that section 402 (c) of the statute here under consideration, in so far as it requires that there shall be included in the gross estate the value of property transferred by a decedent prior to its passage merely because the conveyance was intended to take effect in possession or enjoyment at or after his death, is arbitrary, capricious and amounts to confiscation. Whether or how far the challenged provision is valid in respect to transfers made subsequent to the enactment, we need not now consider." Application of the portion of the opinion above quoted leaves little or no ground for argument by the government. Here, as in Nichols v. Coolidge, it is not contended that the transfer was made in contemplation of death or for purposes of evasion; nor is it contended that the statute merely utilizes the gross estate as augmented by prior transfers as the proper measure of charge upon the transfer by death. These contentions, refuted by the court in Nichols v. Coolidge, are not pressed for reconsideration, but the government frankly admits that under the decision of Nichols v. Coolidge the tax has been improperly levied, "if there had been a transfer of the property sought to be taxed, prior to the passage of the Act of February 24, 1919" (and prior to the Act of September 8, 1916). [2] It is contended that, by reason of the reservation to the settlor of full power of modification and ratification, and of full control over management of the trust as well as the benefit of all income for life, no transfer was actually made, in substance and effect, but the agreement constituted the socalled trustee as practically nothing but a custodian or agent for the management of such portion of the decedent's estate. This is but to deny the fact of transfer and existing trust, for the reason that it was within the settlor's power to undo what had been done. Taken by itself, the reservation of power to revoke, modify, or change the provision of a trust deed does not in any degree affect the legal title of the trustee to the property nor prevent the vesting of estates of the remaindermen. Jones v. Clifton, 101 U. S. 225, 229, 25 L. Ed. 908; People v. Northern Trust Co., 289 Ill. 475, 124 N. E. 662, 7 A. L. R. 709; Hill v. Nichols (D. C.) 18 F. (2d) 139; Stone v. Hackett, 12 Gray (78 Mass.) 227. Estates of the remaindermen vest, subject only to the power in the donor to divest such estates, which power was never exercised. [3] We are also of the opinion that the retention of a life interest in the income of the securities by the donor, of his control of investments and management of the trust, and of his right to change the trustee, considered either separably or in connection with the power of modification, alteration, and revocation, do not negative or prevent the actual creation of the trust, or the fact that at the death of the donor the property so transferred and conveyed in trust passed under the deed of trust the interests which were created in 1915. Nichols v. Coolidge specifically calls attention to the difference between excise taxes upon the right to become beneficially entitled to property and an excise upon the transfer of property by death. The federal estate tax law is of the latter sort, and under the facts of the present case no portion of this trust res was transferred by reason of the death of the donor. At that time the remaindermen became beneficially entitled |