Estate of Reimer v.
Commissioner
Chris J. Anderson
TX 8020
July 23, 2007
Estate of Reimer v. Commissioner
 Citation:

12 TC 913 (1949)
Aff’d per Curiam 180 F2d 159 (6th Cir. 1950)
 Justice:
Arundell
 Code Sections: 293(b)
Facts
 Charles Reimer was a partner in an operation known as
Reimer & Bloomgren Machine Co. located in Ohio.
 1941-1944: Reimer filed annual returns for the
partnership.
 June of 1945: Reimer filed amended returns for years
1943 and 1944.
 February 23, 1947: Reimer died.
 November 5, 1947: IRS made jeopardy assessments
against Reimer’s estate including a 50% addition to the
tax for fraud for the tax years in question (1941-1944).


Reimer’s wife is the executor of his estate and is the
petitioner in this case.
She admits he fraudulently understated his correct net
income in order to evade tax for the years involved.
Issue
 Is the 50% addition to the tax for fraud
provided by section 293(b) allowed to be
imposed against and collected from the
estate of a decedent who during his lifetime
fraudulently understated his correct net
income with intent to evade tax?
Ruling
 Yes, the estate is still liable for the 50%
additions to tax and is not avoided due to
the death of the taxpayer.
Case History
 There was no Federal statute covering the survival of
the cause of action provided by Sec. 193 (b) against a
taxpayer’s estate where proceedings had not been
instituted prior to his death.
 Before 1940: The Commissioner took the position that
imposing additions to the tax were penalties inflicted
as personal punishment for the failure of the taxpayer
to comply with the revenue laws and did not survive
the death of the taxpayer.
 National City Bank of New York, Executor
 Van Choate v. General Electric Co.
 Schreiber v. Sharpless
Case History
 1940: Decision was reversed in Helvering v. Mitchell,
303 U.S. 391, 401.
 Supreme Court held the 50% tax due to fraud with the
intent to evade tax under 293 (b) was not barred by the
acquittal of the taxpayer on an indictment charging
willful attempt to evade tax under 146 (b) (criminal).
 The court held that the 50% tax penalty was a civil
penalty and was properly imposed against the
decedent’s estate.
 The 50% addition to the tax for fraud is imposed as a
remedial measure to indemnify and compensate the U.S.
for the loss resulting from the wrongful act or tort
committed by the taxpayer.
 The final question is whether a cause of action of this
nature survives against the estate in Reimer’s case.
Reasoning
 Court ruled in Sullivan v. Associated Billposters &
Distributors that the cause of action survives “if the
injury upon which it is based is one affecting
property rights as distinguished from an injury
affecting the person.”
 Therefore, a cause of action for injury done to
these rights can achieve its purpose as well after
the death of the owner as before if it affects the
right to property.
 The primary purpose of taxation is to obtain money
which the sovereign may use in the performance of
its many governmental functions. The result of the
taxpayer filing fraudulent income tax returns which
understates his true tax liability is to deprive the
sovereign of money it is entitled to receive and
obligated to collect.
Reasoning
 The Government also had to expend other funds in
order to uncover the fraud and collect the proper
tax due. These are monetary losses.
 The Court ruled that the taxpayer’s wrongful act is
in the nature of an injury to the property of the
U.S.
 The fraudulent cause of action survives against the
estate of the taxpayer, regardless of whether
proceedings were initiated before or after his death.
The respondents deficiency notice must be
sustained due to the petitioner conceded that
decedent, fraudulently understated his correct net
income for the tax years involved.
Aff’d Per Curiam
 Sixth Circuit U.S. Court of Appeals
affirmed this decision in Kirk v.
Commissioner, 1950, 179 F2d 619.
 The decision was based on reasoning
from the Supreme Court ruling in the
Mitchell case along with the Tax Court
ruling in this case.