Comptroller of Treasury v. Davidson, Co-Exec.

Henderson, J., delivered the opinion of the Court. This appeal is from a decree of the Circuit Court No. 2 of Baltimore City directing the Comptroller to pay interest on a refund of Maryland estate tax previously paid. The facts are virtually undisputed. Morris Macht died on November 29, 1954, and the appellees qualified as executors.

Because of the complexities of the holdings, consisting of real estate and interests in numerous closely held corporations, they petitioned the Circuit Court No. 2 to assume jurisdiction and it did so. The estate was ultimately valued at in excess of $9,000,000. On August 29, 1956, concurrently with the Federal estate tax return, the original Maryland estate tax return was filed, showing a net amount of ²⁷¹ $256,069.37, which was paid. After a subsequent audit of the Federal estate tax return, the gross estate was increased and a deficiency assessment made.

Before filing an amended Maryland estate tax return, the executors filed a petition making the Comptroller and Register of Wills parties defendant. Upon a case stated, a decree was entered confirming a former ruling of the Attorney General that the executors would be entitled to a refund of any overpayment. The decree provided in part that “by the true construction of Maryland Code (1957), Art. 62A, sec. 5, the said Executors will be entitled to refund of any overpayment of Maryland estate tax shown to have been made by them after the settlement of their final distribution account in these proceedings * * The executors thereupon filed an amended return and paid additional taxes, with interest, amounting to $165,182.59, on July 21, 1959. Inheritance taxes were not fixed or paid until distribution was made pursuant to an account stated on September 28, 1962.

It is not suggested that the executors were in any wise lacking in diligence in failing to make an earlier distribution. It is also conceded that the inheritance taxes were not due until that date. A second amended Maryland estate tax return, because of a compromise of the Federal estate tax deficiency and the payment of inheritance taxes, disclosed an overpayment of Maryland estate tax. The Comptroller declined to pay interest on the overpayments due to credit for inheritance taxes, although conceding that the entire amount of the overpayments should be refunded, and interest on the portion due to the recomputation of Federal estate tax.

The amount of interest found to be due by the court below was $50,052.96. Code (1957), Art. 62A, sec. 5, provides in part: “Said Comptroller shall thereupon cause to be paid to said ‘executor’ from the fund retained by him, as provided in § 4 of this article, the amount of refund found to be due, together with interest thereon at the rate of six per centum (6%) from the date of payment of the ‘Maryland estate tax’ * * The Maryland estate tax imposed is equal to the extent, if any, of the excess of the maximum credit allowable to Maryland under section 2011 of the Internal Revenue Code of 1954 over the total inheritance taxes paid to Maryland in connection with the distribution of ²⁷² the estate. Code (1957), Art. 62A, sec. 2. Since the inheritance taxes imposed upon the distributees were not payable until distribution, the final credit was not claimable until some years