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income taxes, civil penalties for fraud, delinquency penalties,
and interest against the surviving spouse individually and the
estate for the years 1932 to 1948. The assessment for tax was
made in 1952, after the time for filing a claim for refund of the
estate taxes had expired. The administratrix filed suit for
refund of the estate taxes that would not have been due if the
income tax deficiency had been deducted from the value of the
estate, but the District Court dismissed this suit as untimely.
The administratrix then paid the income tax deficiency, which
greatly reduced the size of the estate, and sued for refund of
the income taxes paid on the theory that the estate was entitled
to equitable recoupment of the overpayment of the time-barred
estate tax. The District Court approved this theory and gave
judgment for the estate in the amount claimed, and the Government
appealed.
In affirming, the Court of Appeals for the Fourth Circuit
distinguished Rothensies v. Electric Storage Battery Co., 329
U.S. 396 (1946), on the ground that there the transactions "were
too remote from one another to justify recoupment and that claims
so long dead could not be resurrected under the doctrine."
United States v. Herring, supra at 227. The Court of Appeals for
the Fourth Circuit found that, although the case might differ in
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