Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 55-69

1955-1 C.B. 461

Caution: Superseded by Rev. Rul. 61-58

IRS Headnote

Where an allowance of credit for State inheritance taxes is made after a final determination of the Federal estate tax liability, the refund attributable to the allowance of such credit does not bear interest.

Full Text

Rev. Rul. 55-69

Advice has been requested whether a refund of Federal estate tax due under the facts hereinafter set out bears interest in view of the following provisions of section 813(b) of the Internal Revenue Code of 1939:

SEC. 813. CREDITS AGAINST TAX.

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(b) ESTATE, SUCCESSION, LEGACY, AND INHERITANCE TAXES.-The tax imposed by section 810 or 860 shall be credited with the amount of any estate, inheritance, legacy, or succession taxes, actually paid to any State * * *.

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Refund based on the credit may * * * be made if claim therefor is filed within the period above provided. Any such refund shall be made without interest.

The facts of the present case are as follows:

The executor of the estate filed a Federal estate tax return showing a gross tax liability of $65,700, credit for State inheritance tax of. $3,920, and a net tax liability of $61,780 which was assessed and paid. Upon audit of the return, an additional deduction of $10,000 was allowed for administration expenses which reduced the gross tax liability to $62,700. As the evidence in support of the credit claimed for State inheritance taxes was not submitted, the audit resulted in a deficiency of $920. A statutory notice was subsequently issued determining a deficiency of $920. As a petition was not filed with The Tax Court of the United States, the deficiency was duly assessed and paid. Thereafter, the executor filed a timely claim for refund of $3,600 and submitted therewith evidence which entitled the estate to a credit of $3,600 for State inheritance taxes paid, resulting in an overpayment of $3,600.

It is clear from the foregoing that proof of the payment of the State inheritance taxes, which was a prerequisite to the allowance of the credit for such taxes, was not furnished until fater the determination of the estate's Federal estate tax liability. Accordingly, the refund then found due was based on the allowance of the credit for State inheritance taxes and the refund, under section 813(b) of the 1939 Code does not bear interest.

The conclusion so reached is supported by the decision of the United States Court of Appeals for the Second Circuit in Guaranty Trust Co. of New York (as executor of the estate of Grayson M. P. Murphy ) v. United States , 192 Fed.2d 164, in which a refund of Federal estate taxes resulting from the allowance of a credit for New York estate taxes, under circumstances similar to the circumstances of the present case, was held not to bear interest. The court's decision is in part as follows:

* * * It was not until the New York estate taxes were actually paid that the taxpayer became entitled to a credit, and hence to a refund. Until then the estate was the Government's debtor. If the executor had never proved payment of the New York taxes it would never have been entitled to any refund. Therefore, we think it plain that the refund was `based on a credit' and so within both the literal words and the policy of section 813(b), which expressly forbids the payment of interest on any such refund.

Accordingly, it is held that where an allowance of credit for State inheritance taxes is made after a final determination of the Federal estate tax liability, the refund attributable to the allowance of such credit does not bear interest