Deficiencies falling in the classes described above may also be assessed at any time; but collection after such assessment by distraint or by a proceeding may be made "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." [Section 278 (d).]

Time for collection of amounts erroneously refunded.-G. C. M. 314 (V-43-2946) holds that the statute of limitations applies only to suits to collect taxes and that "there is no statute of limitation barring a suit to recover moneys wrongfully obtained from the Government, or wrongfully paid out of the Treasury."

The refund was made after the expiration of the statutory period. The refund represented a balance after the collector had credited a certain amount against certain assessments on his books. The ruling holds that the credits should be reversed and that the full amount of the assessments collected because the period for collection had not expired. The ruling further holds that section 1106 (a) does not apply to the refund paid after the expiration of the statutory period, "the claim of the Government not being in respect of any internal revenue tax."

The first point is a close question; but in the opinion of the author section 1106 (a) requires the Treasury to offset the outlawed refund against the collectible assessment for the same year. For a discussion of section 1106 (a), see page 80.

Collection of tax by distraint. The following regulation summarizes sections 3187 and 3196 of the Revised Statutes which authorize collectors to collect taxes by distraint and sale.

REGULATION. If any person liable to pay any tax fails to pay such tax within 10 days after notice and demand, it shall be lawful for the collector or his deputy to collect such tax with any interest or additional amounts assessed in connection therewith, together with interest as provided by section 276 (see article 1261), by distraint and sale of the goods, chattels, or effects, including stocks, certificates, bank accounts, and evidences of debt, or other property or rights to property belonging to the delinquent taxpayer or upon which a Federal lien exists by virtue of section 3186 of the Revised Statutes as amended. When goods, chattels, or effects sufficient to satisfy the tax, interest, penalties, and additions to the tax imposed upon any person are not found by the collector or deputy collector, he is authorized to collect such tax by seizure and sale of real estate. If the tax is not payable on notice and demand from the collector but on a date prescribed by the statute, the collector should nevertheless,

if the tax has been assessed and payment thereof has not been made on or before the date so prescribed, give notice and make demand for the payment of the tax, and then, if payment thereof is not made within 10 days from the date of such notice and demand, proceed to collect such tax by distraint, as outlined above. . . . (Art. 1204.)

RULING. A registered Liberty bond seized under a distraint warrant to satisfy an assessment levied against the estate of A should be advertised and sold in the manner provided in section 3190, Revised Statutes, et seq.

The exclusive jurisdiction given to the probate court in the settlement of a decedent's estate can not affect the claims of the Federal Government nor the remedies given to it under its own laws. (V-39, 2919; G. C. M. 619.)

Bank accounts are subject to distraint, and the Solicitor has held that a bank should turn over to the distraining officer any funds in a bank account with respect to which a warrant has been served in order to avoid possible prosecution. The good offices of the United States district attorneys are offered in cases where taxpayers bring actions against banks. (C. B. V-1, 110; S. M. 3804 A.)

The Solicitor has held (C. B. IV-2, 219; S. M. 3733) that tax, penalty or interest, singly or in combination, are collectible by process of distraint.

RULING. The property of one spouse is not subject to distraint to enforce payment of an income tax obligation of the other spouse unless there has been a transfer of property from one spouse to the other after a tax has been assessed and demand made for payment thereof. (C. B. 5, 239; O. D. 1056.)

But the Treasury holds that "the rights of a delinquent taxpayer in homestead property in Wisconsin are subject to distraint and sale to satisfy Federal taxes." 19 The laws of Wisconsin specifically provide that "a married man cannot alienate his homestead without his wife's consent." And they further provide that homestead property can only be levied upon for "laborer's liens, mechanic's liens, purchase money liens, or mortgages lawfully assessed." This Treasury ruling nullifies all these provisions and also section 916, United States Revised Statutes, which "gives to a party recovering judgment in any common law cause in a Federal circuit or district court the right to similar remedies, 'by execution or otherwise,' to reach the property of the judgment debtor 'as are provided for in like causes by the laws of the State in which such court is held.' " 20

1o C. B. II-1, 172; I. T. 1683. See also C. B., IV-1, 68; S. M. 2836. 20 For remedies in case of illegal distraint see Chapter 17.

RULINGS. Property possessed by a taxpayer at the time a lien for tax attached under section 3186, R. S., is subject to distraint for the collection of the tax and interest in the hands of a person who acquired it by reason of his death. (C. B. 5, 239; O. D. 1144.)

Collection of the full amount of an additional tax for 1917 assessed against a partnership which has since been dissolved may be made from any of the former partners. (C. B. II-1, 172; I. T. 1663.)

The accrued salary or wages of an employee, held by an employer. subject to the call or order of such employee, is regarded as an evidence of debt within the purview of section 3187, R. S., and may be levied upon as any other simple contract debt, such as a bank deposit. (C. B. II-1, 172; I. T. 1557.)

Taxpayers may be unable to stop distraint proceedings by injunction, but when the proceedings have been begun after the statute has run taxpayers may recover the amounts unlawfully collected. In N. Y. & Albany Lighterage Co. v. Bowers [4 F. (2d) 604; affirmed 10 F. (2d) 1017], the taxpayer filed its 1917 return on March 26, 1918. Demand for "additional tax" was made on March 18, 1923. In October, 1923, the government filed notices of liens and collected the tax through warrants of distress. The government claimed that the assessment was a "proceeding" within five years "that, if this is not so the five-year statute of limitations should not be taken to relate to anything but a court 'proceeding.'

The court decided against the government. (See page 113.)

Under section 934 of the Revised Statutes, property taken or detained by an officer or other person, under the authority of any revenue law of the United States is irrepleviable.

Date on which distraint is begun.

LAW. Section 1130. In determining the running of any period of limitation in respect of distraint, the distraint shall be held to have been begun (a) in the case of personal property, on the date on which the levy upon such property is made, or (b) in the case of real property, on the date on which notice of the time and place of sale is given to the person whose estate it is proposed to sell.

Penalty for not surrendering property subject to distraint.—

LAW. Section 1114. (e) Any person in possession of property or rights to property, subject to distraint, upon which a levy has been made, shall, upon demand by the collector or deputy collector making such levy, surrender such property or rights to such collector or deputy, unless such property or right is, at the time of such demand,

subject to an attachment or execution under any judicial process. Any person who fails or refuses to so surrender any of such property or rights shall be liable in his own person and estate to the United States in a sum equal to the value of the property or rights not so surrendered, but not exceeding the amount of the taxes (including penalties and interest) for the collection of which such levy has been made, together with costs and interest from the date of such levy.

Use of collection waivers.-During 1925 the statutory period for collection was about to expire against many assessments made under the 1917, 1918 and 1921 laws. Prior to the passage of the 1924 law, practically all additional assessments were held in abeyance by claims for abatement. Collectors were active in serving distraint warrants or requesting collection waivers, and in a few instances suits were actually started to protect the Treasury's interest.

At first, collectors requested taxpayers to acknowledge service of distraint warrants. The Treasury evidently assumed that such action extended the period, as a distraint proceeding was begun within the six year period. There is serious doubt whether the courts will sustain such a position. Distraint is a highly technical proceeding. There is no such thing as constructive distraint. Webster's Dictionary defines distraint as:

"To seize as a pledge or, later, indemnification; to take possession of a security on nonpayment of rent, the reparation of any injury done, etc.; to take by distress; as, to distrain goods for rent."

The procedure outlined in Article 1204 defines "distraint." Evidently, the Treasury recognized that its position was weak because collectors, after following the above practice for a short time, requested taxpayers to execute the following waiver :

INCOME AND PROFITS TAX Waiver

of

.....

In order to enable the Bureau of Internal Revenue to give
thorough consideration to any claims for abatement or credit filed
by or on behalf of ...
covering any income, excess-profits or war-profits tax assessed
against the said taxpayer under the existing or prior Revenue Acts
for the year (s) .., and to prevent the immediate institu-
tion of a proceeding for the collection of such tax prior to the
expiration of the six-year period of limitation after assessment
within which a distraint or a proceeding in court may be begun
for the collection of the tax, as provided in Section 278 (d) of
the existing Revenue Act, the said taxpayer hereby waives any
period of limitation as to the time within which distraint or a
proceeding in court may be begun for the collection of the tax,

or any portion thereof, assessed for the said year (s), and hereby
consents to the collection thereof by distraint of a proceeding in
court begun at any time prior to the expiration of this waiver.

This waiver is in effect from the date it is signed and will
remain in effect until December 31, 1926.

TAXPAYER

By.....

Taxpayers should not execute these waivers without being fully advised of their legal rights. In many instances collection is probably barred at the time the waiver is requested. For instance, Section 250 (d) of the 1918 law provided "no suit or proceeding for the collection of any tax shall be begun after the expiration of five years after the date when the return was due or was made." Practically the same language appears in section 250 (d) of the 1921 law except the five year period dates from "the date when such return was filed." Subdivision (e) of section 278 of the 1924 law specifically provided that the section shall not authorize the collection of any tax barred at the date of the passage of the law.

The effective date of the 1924 law is June 2, 1924. Therefore, any assessments made by the Treasury prior to June 2, 1924, cannot be collected by distraint or by proceedings in court if on that date the returns had been filed for five years. In such instances, taxpayers can preserve their legal rights by adding the following sentence to the waiver: "This waiver shall not authorize the collection of any tax by distraint or by proceeding in court if at the time of the signing of the waiver such distraint or proceeding was barred by the period of limitation." Collectors can make no objection to this change. Subdivision (e) is specific in this respect.

Taxpayers should also limit such waivers to one year and to the amount of tax that collector desires to protect against the statutory period.

ARE COLLECTION WAIVERS LEGAL?—There is a serious question as to the validity of waivers filed before the passage of the 1926 law extending the statutory period for collection by distraint or by a proceeding in court. The law did not authorize the Commissioner to extend this collection period. The law did provide for an agreement extending the period in case of assessments. Furthermore, the consideration cited in the waiver is "unreal." Another criticism of the waiver is vagueness. The identity and authority of