subject to collateral attack, yet the proceedings are in the nature not of a trial inter partes, but of an allowance or disallowance, by officers of the county, of a claim against it. The court added that "the trial in the Circuit Court of the county was 'the trial' of the case, at any time before which it might be removed into the Circuit Court of the United States, . . ."

Chicot County v. Sherwood, 148 U.S. 529, involved procedure for the collection of county bonds. State legislation declared that a county could not be sued or proceeded against in any court except as in the act provided. Demands against the county were to be presented to the county court for allowance or rejection. From the order of that court appeals were allowed as provided by law. If in any such appeal the judgment of the county court was reversed, the reversal was to be certified by the superior court to the county court, which was required to enter it as its own judgment. This court said, p. 532:

"If, however, the presentation of a demand against the county, duly verified, according to law, to the county court thereof, 'for allowance or rejection' is not the beginning of a suit or does not involve a trial inter partes, it is then only a preliminary proceeding to a suit or controversy which, by the appeal of either side, is or may be carried to an appellate court, before which there is an actual trial between the parties interested. The right to maintain this revisory trial in the state court . . . will be sufficient to maintain a like suit by original process in a federal court where the requisite diverse citizenship exists."

In Smith v. Douglas County, 254 Fed. 244, it appeared that a Nebraska statute imposed a tax on inheritances, for the benefit of the county of the decedent's residence, at a stipulated rate upon the appraised value of the property. The method of levying the tax was, that the county judge appointed an appraiser to report the valuation to the

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Opinion of the Court.

judge, who then fixed the value and the amount of tax and gave notice to all interested parties. Anyone dissatisfied with the judge's finding might appeal within sixty days to the county court upon filing bond to cover costs and the tax which might be fixed by the court. The statute provided that county courts should have jurisdiction to hear and determine all questions in relation to all taxes arising under this article." It will be noted how closely the procedure resembles that prescribed with respect to the tax in controversy. It was held that the proceeding was ex parte until it reached the county court; but thereafter became a controversy inter partes, and the court's action in determining all questions in relation to the tax was not merely administrative, but judicial.

If the Dauphin County court were by the act of Assembly granted only the right to revise the valuation of the appraiser, and precluded from considering any other question, its proceedings would be purely administrative, and the contention that the appellant had failed to pursue to the end its administrative remedy would be sound (Upshur County v. Rich, 135 U.S. 467), at all events where the valuation is a subject of controversy.

The court below relied upon Keokuk & Hamilton Bridge Co. v. Salm, 258 U.S. 122, where a bill to enjoin collection of a state tax was held to lack equity. That case is, however, distinguished by the fact that before resorting to any court the taxpayer could have appealed to the board of review to correct the assessment of which he complained, and the record failed to show that he had pursued the administrative remedy so afforded him (p. 125).

The Acts of Assembly of Pennsylvania direct the Department of Revenue to collect, and the Attorney General to bring suit for, the amount of the tax, if it is not paid within one year of assessment. If, therefore, the appel

46305-343

lant should omit to take an appeal to the Dauphin County common pleas court, the assessment would become final and the appellant liable to suit for the amount of the tax.* As the Commonwealth is the plaintiff in the action, the cause could not be removed, for reasons already stated.

We are of opinion that upon the making of the appraisement the administrative procedure is at an end, and the appellant can thereafter resort to a federal court of equity to restrain further action by the state officers if in violation of constitutional rights.

3. The question, then, is whether the bill was prematurely filed. In view of what has been said, the appellant's cause of action in equity will not, strictly speaking, arise until an appraisement is made and certified to the Department of Revenue and notice of the fact is given appellant. However, in view of the allegations of the bill, we are not inclined to hold the suit premature. The bill charges that the Secretary of Revenue has refused to issue a waiver of tax, and that the Attorney General has notified the appellant and the State's appraiser the property is subject to the tax, and the appellant's claim for exemption will be denied. The Commonwealth's law officers plainly intend to perform what they consider their duty, and will, unless restrained, cause the assessment and imposition of the tax. The action the legality of which is challenged thus appears sufficiently imminent and certain to justify the intervention of a court of equity. Compare Pennsylvania v. West Virginia, 262 U.S. 553, 592. Moreover, no purpose would be served by dismissing the bill, if, as we hold, the moment the proposed assessment is made another suit may be instituted in the federal court.

'Act of April 9, 1929, P.L. 343, § 203 (h), § 1406; 72 Purdon's Pa. Stats. § 203 (h), § 1406.

The decree of the District Court is reversed and the cause remanded with instructions to reinstate the bill and proceed to a hearing upon the merits.

Reversed.

FREULER, ADMINISTRATOR, v. HELVERING, COMMISSIONER OF INTERNAL REVENUE.*

CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE NINTH CIRCUIT.

No. 129. Argued December 8, 1933. Decided January 8, 1934.

1. Under § 219 of the Revenue Act of 1921, the fiduciary of a trust estate, in computing the net income for the taxable year, makes the same deductions from gross income that are allowed in cases of individual income, including deductions for depreciation; those parts of the net income which, by the instrument or order governing the distribution, are distributable during the tax year to beneficiaries, are specified in the fiduciary's return, but they are income of the beneficiaries as of the time of their receipt by the fiduciary and are returnable by and taxable to the beneficiaries, whether distributed to them or not; if, by mistake, the fiduciary omits to make proper deductions for depreciation, and so overstates the net income of the estate and overpays a beneficiary, the excess received by the latter is no part of his income and need not be included in his return. P. 40.

2. A decree of a state court having jurisdiction of a trust, determining that annual deductions for depreciation of the trust property should have been taken from gross income before making distributions to

* Pursuant to stipulation, the decisions in the following cases are reversed on the authority of this case: Nos. 130 and 131, Freuler, Administrator, v. Helvering, on writs of certiorari to the Circuit Court of Appeals for the Ninth Circuit; No. 139, Marguerite T. Whitcomb v. Helvering; No. 140, Charlotte A. W. Lepic v. Helvering; No. 141, Marie M. E. G. T. Whitcomb v. Helvering; Nos. 142 and 143, Charlotte A. W. Lepic v. Helvering; and No. 144, Marie M. E. G. Whitcomb v. Helvering, on writs of certiorari to the Court of Appeals of the District of Columbia.

life income beneficiaries, and requiring them to make restitution accordingly, establishes the rights of the parties and is an "order governing the distribution" of the income within the meaning of § 219 (d) of the Revenue Act of 1921. Pp. 43, 45.

3. Proceedings in a state court resulting in such a decree, held not to have been collusive. P. 45.

4. Retention by the income beneficiaries of the excess paid them by the trustee, under an agreement with the possible remaindermen permitting substitution of promissory notes, held not to have rendered it taxable as income from the trust. P. 45.

62 F. (2d) 733, reversed.

CERTIORARI, 290 U.S. 610, to review a judgment reversing, on appeal, a decision of the Board of Tax Appeals, which had set aside a deficiency assessment of income tax. 22 B.T.A. 118.

Messrs. Claude R. Branch and Felix T. Smith, with whom Messrs. W. W. Spalding and Robert A. Littleton were on the brief, for petitioner.

Mr. Erwin N. Griswold, with whom Solicitor General Biggs and Messrs. Sewall Key and John MacC. Hudson were on the brief, for respondent.

MR. JUSTICE ROBERTS delivered the opinion of the Court.

A. C. Whitcomb, a resident of California, died in 1889, and by his will, probated in that State, gave the residue of his estate in trust, one-third of the income to be paid to his widow for life, with limitations in remainder. The petitioner is the administrator of the estate of Mrs. Whitcomb, who died in 1921. The will of A. C. Whitcomb contained no direction for the computation of trust income, none for the keeping of the trustee's accounts, and none for any allowance or deduction representing depreciation. Beginning about 1906, the trustee converted trust assets into real estate and other forms of investment