16 T.C. 727">*728 This proceeding arises from respondent's determination that the decedent as a transferee was liable for a deficiency in income tax for the calendar year 1930 in the amount of $ 375.

The sole issue herein is whether the decedent's estate is liable as a transferee for the unpaid income tax of the Southern and Atlantic Telegraph Company for the year 1930 under the provisions of section 311 of the Revenue Act of 1928.

FINDINGS OF FACT.

The petitioners, Robert Woodward Barnwell Elliott and William Byrd, are the duly appointed and qualified executors of the last will and testament of Robert Lewis Harrison who died on July 20, 1932, a resident of the County of New York.

The Southern and Atlantic Telegraph Company, hereinafter referred to as Southern and Atlantic, is a New York corporation whose principal office is and was at all times material to the issue herein, located at 60 Hudson Street, New York, N. Y. Prior to July 10, 1876, Southern and Atlantic was engaged in the business of transmitting messages by telegraph. The capital of Southern and Atlantic consists of 37,962 shares of common stock of the par value of $ 25 per share.

The Western Union1951 U.S. Tax Ct. LEXIS 232">*234 Telegraph Company, hereinafter referred to as Western Union, is a New York corporation whose principal office is, and was at all times material to the issues herein, located at 60 Hudson Street, New York, N. Y.

On July 10, 1876, Southern and Atlantic leased its telegraph system and all of its other property to Western Union for a term of 92 years, and thereafter for such further term as would make a full term of 999 years for the following consideration:

FOURTH. And in consideration of the premises the said party of the second part hereby covenants and agrees for itself its successors and assigns to pay to the said party of the first part during each and every year of the term herein created a rental equal to five per centum on the par value of so much of the Capital Stock of the party of the first part now outstanding and also of so much more thereof as the existing contracts and the actual and contingent liabilities of the party of the first part may require it to issue provided however that such sum so to be paid as the annual rental to the party of the first part shall not exceed five per centum on nine hundred and fifty thousand dollars 16 T.C. 727">*729 capital stock; said payment 1951 U.S. Tax Ct. LEXIS 232">*235 to be made semi-annually at the office of the Treasurer of the WESTERN UNION TELEGRAPH COMPANY in the City of New York on the first days of April and October during the full term of this Lease.

FIFTH. And it is further agreed that the party of the second part in lieu of making payment to the party of the first part through its Treasurer or other officer shall, except as hereinafter otherwise provided in sections fourteen and fifteen pay the rental herein reserved to the several stockholders of the party of the first part rateably and in proportion to the number of shares of stock held by each Stockholder respectively. Provided however that payment to the several stockholders as aforesaid shall not affect or impair the right of the party of the first part to bring suit in its own name for any default by the said party of the second part in making any payment at the time specified in this agreement.

* * * *

SIXTEENTH. The party of the second part will well and truly pay the said rental as hereinbefore provided for semi-annually at the times and in the manner herein provided without any deduction or abatement for or on account of taxes or assessments on the aforesaid demised property1951 U.S. Tax Ct. LEXIS 232">*236 or for any other purpose whatsoever excepting only for the debts and liabilities of the party of the first part due or incurred prior to the turning over of the property hereby demised to the party of the second part as provided for in the next preceding article.

Thereafter, Western Union took complete possession of the property covered by the lease agreement and Southern and Atlantic has at no time since then had possession of or operated its telegraph system. The leased properties have been so intermingled with the properties of Western Union that they are not now subject to identification or segregation. Western Union has in all years since, including 1930, paid and distributed the annual rental of $ 47,500 to the stockholders of Southern and Atlantic in accordance with the terms of the lease agreement.

The $ 47,500 received by the stockholders of Southern and Atlantic in the year 1930 constituted taxable income to Southern and Atlantic and that company was liable for Federal income tax for the year 1930 in the amount of $ 5,700.

The Commissioner assessed a deficiency in income tax for 1930 against Southern and Atlantic in the amount of $ 5,700, consisting of original tax of 1951 U.S. Tax Ct. LEXIS 232">*237 $ 3,347.55 and additional tax of $ 2,352.45. The collector of internal revenue for the second district of New York served notice and demand upon Southern and Atlantic for payment of the original tax of $ 3,347.55 on September 11, 1931, and for the payment of the additional tax of $ 2,352.45 on March 2, 1939, but Southern and Atlantic has paid no part of the tax. A warrant of distraint was issued by the collector with respect to the original tax of $ 3,347.55 on May 5, 1932, which was returned unsatisfied. No warrant of distraint was issued with respect to the additional tax of $ 2,352.45.

Western Union, as a transferee, has paid $ 2,345.85, and other persons, as transferees, have paid $ 368.99 of the total tax of $ 5,700, presently 16 T.C. 727">*730 leaving an unpaid tax liability of Southern and Atlantic for 1930 in the amount of $ 2,985.16.

Robert Lewis Harrison was the owner of 300 shares of Southern and Atlantic common stock during the taxable year 1930 and by reason thereof received in that year rental-dividends in the amount of $ 375 from Western Union. A notice of transferee liability in the amount of $ 375 was issued by the Commissioner on February 21, 1940, in the name of "Mr. 1951 U.S. Tax Ct. LEXIS 232">*238 Robert S. Harrison, Transferee" which was received in due course by the petitioners herein as executors of the decedent's estate. On April 5, 1940, the petitioners, as the duly appointed and qualified executors of the last will and testament of decedent filed a petition with this Court contesting the respondent's determination. In 1942, a final accounting was conducted in the estate of Robert Lewis Harrison and the estate was closed and the petitioners discharged as executors.

On or about February 27, 1950, the United States, at the request of the Commissioner, commenced a civil action against Western Union and Southern and Atlantic in the United States District Court for the Southern District of New York for income tax and interest due from Southern and Atlantic for the years 1931 to 1939, inclusive, and praying that a decree be entered enjoining Western Union from paying rental-dividends to the stockholders of Southern and Atlantic until the income taxes due to the Government and the interest thereon have been satisfied in full. On or about March 10, 1950, a preliminary injunction to this effect was issued by the District Court.

The estate of Robert Lewis Harrison is liable as1951 U.S. Tax Ct. LEXIS 232">*239 a transferee for the unpaid income tax of Southern and Atlantic for 1930 to the extent of $ 375 representing the rental-dividends received by the decedent from Western Union in that year.

OPINION.

Our decision in , serves to dispose of the objections raised by the petitioners to respondent's determination of a transferee liability with the exception of several secondary points.

Petitioners suggest that Western Union is required under the terms of "Article Sixteenth" of the lease agreement to pay the income taxes of Southern and Atlantic. We shall not attempt to determine the rights of the respective parties under the lease agreement. It is our understanding that the Commissioner must assess and collect the tax in compliance with the applicable revenue laws and the procedures prescribed therein, and is in no way bound by an agreement between 16 T.C. 727">*731 taxpayers as to who shall pay a tax even though the agreement may be valid and enforceable between the parties thereto. Cf. . Moreover, it is not at all clear that Western Union is obligated to pay Federal income taxes1951 U.S. Tax Ct. LEXIS 232">*240 of Southern and Atlantic under the terms of the lease agreement and no effort, so far as we know, has ever been made by Southern and Atlantic to establish any such obligation on the part of Western Union. Cf.

Petitioners further argue that they were justified in distributing the assets of the decedent's estate in 1942 in view of the decisions of the Court of Appeals for the Second Circuit in , certiorari denied, , and , certiorari denied, , and that the estate having been closed should not now be held as a transferee. However, petitioners admit they received the notice of transferee liability in 1940, at which time they were acting as executors of the estate. Cf. ; . They apparently recognized it as a claim against the estate for in that same year they instituted1951 U.S. Tax Ct. LEXIS 232">*241 this proceeding, which proceeding was still pending at the time of the distribution of the estate in 1942. We think it is immaterial that petitioners may have believed that the claim made by the Commissioner against the decedent would be defeated by the cases decided at that time, for so long as the present case was before the court, the petitioners were on notice that the Commissioner had not abandoned his position and there remained a possibility for the estate's being held liable as a transferee for the unpaid income taxes of Southern and Atlantic.

Nor can we accept the argument that the estate can only be held for its pro rata share of the tax. It is well settled that a transferee is severally liable for the unpaid tax of the transferor to the extent of the assets received and other stockholders or transferees need not be joined. . In the event that one transferee is called upon to pay more than his pro rata share of the tax, he is left to his rights of contribution from the other transferees.

It follows that the estate of Robert Lewis Harrison is liable as a transferee under the provisions of section 1951 U.S. Tax Ct. LEXIS 232">*242 311 of the Revenue Act of 1928 for the unpaid income tax liability of Southern and Atlantic for 1930 to the extent of $ 375, representing the rental-dividends received by the decedent from Western Union in that year.

Decision will be entered for the respondent.