stating that we deviated from use of the mortality table because the elderly widow's health was poor
How later courts described this case
- stating that we deviated from use of the mortality table because the elderly widow's health was poor
- life expectancy not greater than 1 year
Written by the judges who cited it.
The opinion
Opper, </., dissenting: Even if the opinion is correct in assuming that we may look at the actual yield of the petitioner estate to determine the invalidity-of respondent’s assumed interest rate, the record fails to establish that the effective yield of petitioner’s investments was in fact less than 4 per cent. Without knowing the tax status of petitioner and its beneficiaries, it is impossible to determine that the tax-exempt securities forming the bulk of the estate corpus did not produce for the owners a net return greatly in excess of the coupon rate. And certainly the failure to adduce the necessary facts can not authorize a determination favorable to petitioner. Burnet v. Houston, 283 U. S. 223 .
The individual situation of an owner of tax-exempt securities is a practical consideration which can not be overlooked. 1 Not only that, but there are legal precedents for such consideration. For example, in Pennsylvania Co. for Insurances on Lives and Granting Annuities v. Gillmore, 137 N. J. Eq. 51; 43 Atl. (2d) 667, where the question was whether the trustees should dispose of tax-exempt securities, and reinvest in nontax exempts, the court pointed out:
Counsel for the life tenants * * * have attached to their brief tables to show the result of a sale of all or half of the tax exempts on the life tenants * * * which tables, generally speaking, show * * * “that if the sales are made on the basis as requested in the bill of complaint, and then reinvested on a 2% basis as now suggested, Mrs. Hemsley will sustain a 58% loss in her retained income after payment of income tax; Mrs. Gillmore will sustain a 40% loss * * *»
The court, after commenting that these tax exempts are ‘blue chip’ investments,” concluded that “instructions to the trustee will be that it is not its duty to sell all or any part of the securities herein referred to as tax exempts.”
I can not concur in the disregard of realities which is required for us to assume that the effective yield on these tax exempts under any facts shown here is the 3 per cent average carried by the coupons. Without that premise, it is impossible to say that the estate yield is actually less than 4 per cent, and the necessity for deciding the difficult legal question of whether the particular situation of any taxpayer warrants a departure from the 4 per cent rate assumed in respondent’s regulations would accordingly disappear. I am consequently compelled to dissent from so much of the opinion as disregards the interest rate assumed in respondent’s tables.
TURNER, /., agrees with this dissent. “The effect of tax exemption upon Investment is due to Its value to Individuals In high income classes. An Individual with a $50,000 Income would have to derive a yield of 4.3 per cent from a taxable security to afford him the same yield after Federal Income tax as he obtains from a 8 per cent wholly tax-exempt security. * • *” (Testimony of under Secretary of the Treasury, John W. Hanes, at Hearings before the Committee on Ways and Means on Proposed Legislation Relating to Tax-Exempt Securities, 76th Cong., 1st sess., p. 7.)