Mandell v. Pierce.

that the gains, profits, or income were derived from a business or avocation which from its nature could not be pursued, or was not pursued, only for a part of the income year.

Great inequality would flow from the opposite rule of construction, as all persons who changed their business within the income year, and all those engaged in avocations which from their nature cannot be pursued throughout the year, would escape all such taxation. Obviously such a construction would defeat, instead of carrying into effect, the intention of Congress, and therefore it cannot be admitted. When ascertained as required by law, the intention of Congress was, that gains, profits, and income received within the income year, from the sources therein defined, should be subject to the prescribed taxation, whether such gains, profits, or income were derived from any kind of property, rents, interest, dividends, salaries, or from any trade, profession, employment, vocation, owned, collected, pursued, or followed for the whole or any part of the income year.

All such gains, profits, or income received within that year prior to the 2d of July were liable to taxation, under the internal-revenue laws, subject to the deductions which those laws allowed in ascertaining the aggregate amount as the basis for the computation of the tax. In ascertaining the aggregate amount of the gains, profits, or income liable to such taxation, the same deductions were required to be made, as would have been if the testatrix, instead of having deceased, had ceased on that day to be the owner of any property, and for the residue of the income year had received nothing as gains, profits, or income within the meaning of those laws.

Argument is unnecessary to show that all the gains, profits, or income received by the decedent, within that income year, are those which accrued prior to July 2, and that it would be absurd to suppose that she continued to own property after that day, or that she sustained any subsequent loss, within the meaning of those laws. The principal objection to this theory is, that the death of the testatrix occurred before the time appointed for making the required return; and the argument is, that in that state of the case no return can be required by her legal repre

Mandell v. Pierce.

sentatives. All guardians and trustees, whether as executors, administrators, or in any other fiduciary capacity, are required - under the law then in force to make and render a list or return, in such form and manner as the commissioner should prescribe, to the assistant assessor of their district, of the amount of gains, profits, or income of any minor or person for whom they acted as guardian or trustee. 13 Stat. at Large, 480.

Taxes or duties on incomes thereby imposed are required to be levied on the 1st of May, and the provision is, as before explained, that they shall be due or payable on or before the 30th of June in each year. 13 Stat. at Large, 283.

Guardians are required to make return for their wards, trustees for their cestuis que trust, and executors or administrators for whom they act. Suggestion is made that the testatrix, after her decease, was not a person residing in the United States, but the suggestion is quite too technical to be entitled to weight, as the executor in the case of a will is the legal representative of the deceased, and by virtue of his appointment, and the probate of the will, is bound to execute the trust reposed in him, by the terms of the will and the testamentary laws of the State.

He is bound to collect all debts which are due, or which fall due to the decedent, and to pay all debts due from the decedent, or which fall due after his decease, unless the assets of the estate are insufficient. Such taxes as accrued before the decease of the testator or testatrix are a debt against the estate, and as such must be paid by the executor out of the assets of the estate. Liability to taxation arises, and in some sense it may be said that the taxes accrue, at the time the gains, profits, and income pass into the hands of the recipient. Return is required in every case before the day of levy, so that it is clear that the tax is due, that is, the recipient of the gains, profits, and income is liable for it before it is assessed, as the return is only to ascertain whether the liability exists, and its extent. 13 Stat. at Large, 225.

Evidently such liability, in a case like the present, accrues in the lifetime of the recipient of the gains, profits, and income, and at his or her decease it passes over to the executor or administrator as a debt against the estate. Where the recipient dies

Mandell v. Pierce.

within the year, he or she cannot make any return, and the duty of making it in that event devolves on the executor or administrator, as the legal representative of the deceased. The requirement of the law is, that the return shall be made in the collection district where the person resides upon whom the duty of making it is imposed; and it seems but a reasonable construction of that provision, to hold that in cases like the present, it may include the executor or administrator, as no return can be made by the actual recipient of the gains, profits, or income. Concede that an executor or administrator under that provision may be regarded as a trustee, still the argument is, that it is impossible to regard him as the trustee for the decedent, which perhaps is a sound proposition as a technical rule; but he is the legal representative of the deceased, and as such is bound to collect the dues and pay the debts, and administer the estate, which is a sufficient answer to the proposition as applied to the case before the court. Internal-revenue taxes are also levied on persons having in charge or trust as executors, administrators, or trustees any legacies or distributive shares arising from personal property, where the whole amount shall exceed $1,000 in actual value; and the argument is, that those taxes in case of deceased persons, dying within the income year, are a substitute for the income taxes required to be paid by persons in full life; but it is impossible to adopt the proposition, as the legacy and succession taxes are entirely distinct from the taxes on gains, profits, and incomes. 13 Stat. at Large, 287.

Income taxes accrue on gains, profits, or income received by the testator or intestate in his lifetime; but legacy and succession taxes accrue subsequent to the death of such testator or intestate. A suit may be maintained against a collector of internal revenue, to recover back taxes illegally exacted, if the payment was made under written protest to prevent a distraint of the plaintiff's property; but the taxes in this case, under the agreement of the parties, were in judgment of law legally assessed against the plaintiff as executor of Sylvia Ann Howland, deceased.

Judgment for the defendant for the costs of suit.

Union Sugar Refinery v. Mathiesson.

THE UNION SUGAR REFINERY v. FRANCIS 0. MATHIESSON.

BEFORE CLIFFORD AND LOWELL, JJ. '

Upon the final hearing of a cause in equity, a final decree was entered, and the cause referred to a master, to take, and state to the court, an account of all gains and profits made by the defendants. No report was made by the master, but the following entries were made upon the docket: " May 27th. Master's certificate upon settlement of interrogatories, with state of facts, and schedule filed." "Roll containing nine drawings filed with certificate." "May 31st. Exceptions to master's certificate and report filed." Ordered, that the filings entered by the clerk be stricken out, and that the several papers filed be returned by the clerk to the master.

Explanation of the correct practice in this circuit, where a cause has been referred to a master to state an account.

In case the decretal order was ambiguous, the master might have authority to report the case back for more specific instructions.

The court might have power to revise each act of the master, as it progressed, but such a practice would be productive of delay, and will not receive countenance from the

court.

When a suit in equity has been heard, neither party has a right to file any paper in the cause, except by leave of court.

The correct method is, for a master, if possible, to complete his investigations under the rules, make up his draft report, file it in the clerk's office, and give time for the parties to make their objections thereto.

It is ordered, adjudged, and decreed that the letters-patent, dated January 27, 1863, granted to the complainant as assignee of Gustavus A. Jasper, for an improvement in purifying and cleansing sugar, is a good and valid patent; that said Jasper was the original and first inventor of the improvements therein described and claimed; that the defendant has infringed upon the said patent and the exclusive right of the complainant thereunder; that the complainant recover of the defendant all gains and profits by him made from his infringement of the said patent by his unlawful using of the patented invention in purifying and cleansing sugars, at any time since January 18, 1864; that the complainant recover of the defendant his costs and charges in this suit to be duly taxed; that it be referred to George S. Hillard, Esquire, one of the masters of this court, residing in the city of Boston, to take and state to the court an account of

Union Sugar Refinery v. Mathiesson.

all such gains and profits made by the defendant as aforesaid; that the complainant in such accounting have the right to cause an examination of said defendant ore tenus, or otherwise, and also the production of all books, vouchers, and documents relative and pertinent to such accounting; and that said defendant attend for such purpose before said master, from time to time, as said master may direct; also, that an injunction according to the prayer of this bill be issued against the said defendant, to stand until the further order of this court.

B. R. Curtis, Chauncey Smith, George H. Preston, C. W. Huntingdon, for complainant.

E. W. Stoughton, Robert Gilchrist, Jr., Causten Browne, A. C. Washburn, W. P. Walley, for respondent.

CLIFFORD, J. Strong doubts are entertained whether the case is properly before the court, under circumstances which will authorize it to make any order therein. The cause went to final hearing upon pleadings and proofs, and the conclusion of the court was expressed in the decree entered on the occasion. The substance of the decree was, that the inventor was the original and first inventor of the improvements described in the patent; that the defendant had infringed upon the patent; that the complainant should recover of the defendant all gains and profits made by him from his infringement of the patent, by his unlawful use of the invention, in purifying and cleansing sugar, after the time alleged in the bill; that the cause be referred to a master, to take, and state to the court, an account of all such gains and profits made by the defendant; that the complainant in such accounting should have a right to cause the examination of the defendant ore tenus, or otherwise, and also the production of all books, vouchers, and documents relative and pertinent to such account; and that the defendant attend for such purpose before the master from time to time as the master may direct.

No report has been made by the master, but we find upon the docket the following entries :

"May 27th. Master's certificate upon settlement of interrogatories with state of facts and schedule filed." "Roll con