The opinion
L. HAND, Circuit Judge
(dissenting).
It is not possible, I think, to read section 302 (d) of the Revenue Act of 1926 (26 US CA § 1094 (d), as the Board read it in Lit v. Commissioner, 28 B. T. A. 853; and as the Third Circuit did in the same case on appeal, 72 F.(2d) 551 . The contrast between it and section 219 (g) of the act (26 USCA § 960 note) is too strong an indication that Congress meant in each section exactly what *246 it said; section 302 (d) covers powers whose exercise is conditional on the approval of the beneficiary, as well as of any one else. The statement in the committee reports (House Report 179'; Senate Report 398), that section 302 (d) “is in accord with the principle of section 319 (g) of the bill which taxes to the grantor the income of a revocable trust,” refers only to the general policy of each section, and does not make the scope of each identical. We cannot escape deciding how far section 302 (d) is constitutional, taken literally. I must own that I might have thought that it was entirely so, if confined to gifts made after 1926. A tax upon a gift is an excise and within the competence of Congress. Bromley v. McCaughn, 280 U. S. 124 , 50 S. Ct. 46 , 74 L. Ed. 226 . I cannot conceive that it should make any difference what name is given to it; whether it is classed as testamentary or inter vivos. Of course its incidence is very different in each ease; in the first the legatees bear it, in the second, the donees. Moreover if an estate tax, the valu,e of the gift at the settlor’s death is added to his other property, and the legatees must pay not only upon the sum of both, but often at a higher rate; the tax might conceivably eat up the whole testamentary estate. Yet still I might not have found in all this anything objectionable under the Fourteenth Amendment. Donees and legatees are both mere volunteers, objects of the settlor’s bounty; they have not the slightest claim to equality of treatment from him, and, the gift being by hypothesis made with full knowledge of the law, I should think that its incidence might be taken as deliberately intended.
Therefore, even without any reserved power I might have thought section 302 (d) valid. In that I should however have been altogether wrong because of Heiner v. Donnan, 285 U. S. 312 , 52 S. Ct. 358 , 76 L. Ed. 772 . As to the equitable interests of the children, the addition of the power does make it valid, although the power was not absolute, but required the concurrence of two others, the husband and the trustee. In the case of some conditions we could say with certainty when the power did or did not exist; for example the condition might be that the income from the gift must fall to two per cent, or less; in that case no power would ever exist, unless before the settlor’s death the income did fall so low. If it never did, the case would be throughout like Heiner v. Donnan, supra, 285 U. S. 312 , 52 S. Ct. 358 , 76 L. Ed. 772 . But in the ease at bar the condition continued unascertainable for as long as the settlor lived because no one could say, out of all the possible substitutes she might propose, that she could not persuade her husband and the trustee to go along with any one. I think that it is on the taxpayer to meet this and show that the husband and the trustee would never have concurred in any revocation the settlor might make; otherwise the power was at least formally outstanding and her death was necessary finally to root the limitations beyond displacement. This is as I read Reinecke v. Smith, 289 U. S. 172 , 53 S. Ct. 570 , 77 L. Ed. 1109 , and Witherbee v. Commissioner, 70 F.(2d) 696 (C. C. A. 2). Reinecke v. Northern Trust Co., 278 U. S. 339 , 49 S. Ct. 123 , 73 L. Ed. 410 ; was different; there were no such powers, and no such statute.
Therefore the interests not limited to the husband may be taxed, just as the Third Circuit held in Lit v. Commissioner, supra, 72 F.(2d) 551 . However, the husband’s own interests, disregarding that dependent on the trustee’s discretion, are no different from what they would have been, had the settlor’s power been wholly omitted. Under section 23 of the New York Personal Property Law (Consol. Laws, c. 41), just as in equity, the settlor and the beneficiary might at any time have united to end his interest. So far Heiner v. Donnan, supra, 285 U. S. 312 , 52 S. Ct. 358 , 76 L. Ed. 772 , rules, and section 302 (d) is unconstitutional. There remains only his interest in the corpus, which the trustees might take from his children and give to him. Such an interest is not vested, even in the sense in which that word is used in New York, for it does not succeed upon the termination of the preceding estate. Moore v. Littel, 41 N. Y. 66 . True, a contingent remainder is taxable if the testator’s death ends the contingency (Klein v. U. S., 283 U. S. 231 , 51 S. Ct. 398 , 75 L. Ed. 996 ); but the same does not necessarily follow if it does not then end, as here. The question is therefore as to the person who must forecast an unpredictable event. My brothers think that the burden of proof should be upon the Treasury to show that the trustee will not exercise its power, and that as that remains uncertain, there can be no tax. We do indeed recognize some juridical augurs, actuaries among others; and it is for this reason that we can conventionally apportion between the husband and the children the value of the res here in suit, though nobody can tell which will in fact die first. But though we do affect such a prediction, we require some statistical background before we will, and there are no statistics as to a trustee’s giving the principal of a fund to a life owner. In such a dilemma I think we should ignore the unascertainable possibility and *247 treat the children’s remainders as finally vested, just as we ignore the unpredictable conditions on the settlor’s power to revoke. In each case there is a formally granted interest whose chances of displacement could not be calculated; in each we should ignore the possibility. I am quite aware that this is all largely matter of words, but so is much of the law of property; and unless we treat such formal distinctions as real, that law will melt away and leave not a rack behind. I would therefore add to the settlor’s testamentary estate the entire value of the gift, less the actuarial value of the husband’s interests.