# Amicus Curiae Brief — May v. Heiner

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1930
- **Citation:** 281 U.S. 238

## Text

FILE COPY JAN 6

GHARLLS E:

IN THE

Supreme Court of the United States
OCTOBER TERM, 1929.

No. 311.

WALTER A. MAY, et au., Executors or Pauine May,
Vs.

D. B. HEINER, Co.uector or INTERNAL REVENUE.

BRIEF OF ARTHUR W. MACHEN, JR., Attorney for SAFE
DEPOSIT AND TRUST COMPANY OF BALTIMORE,

Amicus Curiae.

/ ARTHUR W. MACHEN, JR.,

Attorney for Safe Deposit and
Trust Company of Baltimore,
Amicus Curiae.

King Bros., Inc., Printers, 208 N. Calvert St., Baltimore, Md.

uh coli te ne

DPieOMENT OF FACTS... . 0.0 ccccccsscessces Diab ans
I. Sec. 402(c) of the Revenue Act of 1918 in so far

as it Applies to Irrevocable Transfers Executed
Before its Passage Merely Because They Were
Intended to Take Effect in Possession or Enjoy-
ment After the Grantor’s Death is Arbitrary,
Capricious and Confiscatory, and Therefore in
Conflict With the Fifth Amendment...........
Historical Summary of Pertinent Portions of
Hstate Tax Legislation Down to Act of 1918,
Action of Treasury Department and Board of

ge REISE SE rte rere ee
Answers to Arguments for Defendant........

II. The Revenue Act of 1918 is Arbitrary, Capricious

and Confiscatory, in so far as it May Apply to
Transfers of the Kind Involved in This Case
Even Though Made After the Passage of the Act;
and is Therefore in Conflict With the Fifth
ee og ee ag

Ill. Mrs. May’s Deeds of Trust Were Present, Out-

right Transfers and Were Not Intended to Take
Effect in Possession or Enjoyment At or After

Her Death Within the True Construction of the”

meu Bee OF GIG iii is ih vee Ss se eeances cs
Transfer Not Taxable Because Remainders to
Children Art Limited to Vest In Possession
ANer Grantor’s Death... .. 2.0... ccccccyec
The Reservation of a Contingent Life-Estate
Wie INE no sn as due es bade cee Bes

It is Unnecessary Now to Determine How
Much, if Any, Less Than the Whole of the
Trust Property Should Be Included in the
INS iar Pi ieee Awe ek

see eS ee ee eee eeeeeeeeeeeeeeeeeeseeeeeeeeee

4
4

12
14

27

28
31

ii

CASES CITED.

ee eb we beepes 2
Alsop v. Comm’r of Int. Rev., 7 B. T. A. 848
Anderson, Untermyer v., 276 U. S. 440
Bear Lake Irrigation Co. v. Garland, 164 U.S. 1....
Boone, Missouri Pac. R. R. Co. v., 270 U. S. 466
Bowers, Frew v., 12 Fed. (2d) 625
Bromley v. McCaughn, 280 U. 8. 124
Carnill v. MeCaughn, 30 Fed. (2d) 696
Comm’r of Int. Rev., Alsop v., 7 B. T. A. aed
Comm’r of Int. Rev., Duggan v., 8 B. T.
Comm’r of wit Rev., Guaranty. Trust C

A. 314. .

Comm’ r of Int. Rev. : Adana Vv. 11 ‘BL
ber ‘athe of Int. Rev.., McCormick v., 13 ‘BL T. A. 423

Comm ’r of Int. Rev., Morsman v., 14 B. T. A. 108....
a r of Int. Rev., Northern Trust Co. v., 9 B. T. A.

Comm’r of Int. Rev., Pacifie S. W. Trust, ete., Bank v.
16 B. T. A. 1437; 14 B. T. A. 1372

Coolidge, Nichols v., 274 U. 8S. 531. .5, 6, 14, 16, 20, 21, Pr
'28n, 37, 38

Curley v. Tait, 276 Fed. 840 28n, 31, 35, 36, 37

Dartmouth College v. Woodward, 4 Wheat. 625

Davis, Y. M. C. A. v., 264 U. S. 47

Delaware & Hudson Co., United States v., 213 U. 8.

366. .
Doyle, Shwab v., 258 U. 8S. 529
Duggan v. Comm’r of Int. Rev., 8 B. T. A. 482
Edwards v. Slocum, 264 U. 8. 61
Field, United States v., 255: U. S. 257
Flannery v. Willeutts, 25 Fed. (2d) 951
Frew v. Bowers, 12 Fed. (2d) 625
Frick, Lewellyn v., 268 U. S. 238
Garland, Bear Lake Irrigation Co, v., 164 U. 8.1...
Gould v. Gould, 245 U. 8, 151
Greiner v. Lewellyn, 258 U. S. 384
vere a Trust Co. vy. Comm’r of Int. Rev., 16 B. T.
Hanna v. United States, Ct. of Cl
Harris v. Comm’r of Int. Rev., 5 B. T. A. 41

iii

Johnson v. Comm’r of Int. Rev., 11 B. ‘i, A. 534

Joliffe, Steamship Co. v., 2 Wall. 450

Knox v. McElligott, 258 U. S. 546

Levy v. Wardell, 258 U. S. 542

Lewellyn v. Frick, 268 U. S. 238

Lewellyn, Greiner v., 258 U. S. 384

McCaughn, Bromley v., 280 U. S. 124

MeCaughn, Carnill v., 30 Se SED WN o'n0s wivenie ean

McCormick v. Comm "rv of Int. Rev., 13 B. T. A. 423, 436.

McElligott, Knox v., ;

Merriam v. United dates § 258 Ole Mec ee ec cndeceiveust

Missouri Pace. R. R. Co. v. Boone, 270 U. S. 466

Morsman v. Comm ’r of Int. Rev., 14 B. T. A. 108

Nichols v. Coolidge, 274 U. S. 531. .5, 6, 14, 16, 20, 21, 22,
25, 28n, 37

—" Trust Co. v. Comm’r of Int. Rev., 9 B. T. A.

ectharn Trust Co., Reinecke v., 278 U. S. 339. .22, 28n, 29,
30, 31, 32, 33, 34, 35, 36, 37, 38
Pacific 8S. W. Trust, ete., Bank v. Comm’r of Int. Rev.,
16 B. T. A. 1487; 14 B. T. A. 1372
Page v. Skinner, 298 Fed, 731

Reinecke v. Northern Trust Co., 278 U. S. 337. .22, 28n, 29,
30, 31, 32, 33, 34, 35, 36, 37

Shukert v. Allen, 273 U. S. 545 28n, 29

a er Se Bly Oh, Os. oo vewscccceseccancus 4,9

Skinner, Page v., 298 Fed. 731

Slocum, Edwards v., 264 U. S. 61

Steamship Co. v. Joliffe, 2 Wall. 450

Tait, Curley v., 276 Fed. 840

Union Trust Co. v. Wardell, 258 U. S

United States v. Delaware & 7“ Go. 213 U. S. 366. *

United States v. Field, 255 U. S

United States, Merriam v., 258 U. i: BIOx sock dancnas 38

United States, Hanna v., ie Ts ce ee 19, 20

—— — Wilmington Trust Co. v., 28 Fed. (2d)

Wardell, Union Trust Co, .

Wardell, Levy v., 258 U.

Willcuts, Flannery v., 25 Fed (38) 951

Wilmington Trust Co. v. United States, 28 Fed. (2d)

P
SraTures: =
Revenue Act of September 8, 1916, 39 Stat. 756... 2,4,
7, 8, 9, 11, 17, 18,19
ED Ole 6s4 bios bre ees ks din Wh ede k ose pees 6
Revenue Act of March 3, 1917, 39 Stat. 1000... .2, 4,7,
8, 9, 10, 11, 17, 18, 19
Revenue Act of October 3, 1917, 40 Stat. 300... .2,4,6,
8, 9, 10, 11, 15, 17) 19
EL isk bad ch bWed nd opin shar berhedes eens s 7
Revenue Act of 1918, 40 Stat. 1057... .2, 6,9, 11, 12,15
19, 20, 21, 22, 24
RPG cs actu teek obuscedoctipeces eee a 17
a RET a Sg eas pcre uP ep Fae 1
OE Ee eS reer ee 3, 4, 5, 12, 26, 27, 32
MEME CAL aes UNS OER Gie reddened esvesdeds 9
Ss Re ge eae Or Seer ye 10
EE SWELL b6s'p bans eedonséeecheneesocs 10
EEE GUC CCV cc sei Nencas dp sop bedvecect 10
EE Ge UU GU bat co ube cits ob be dueeens 10
ESET Sarr Pre ee ere ep oe 10
EAE aN cl ken pent bh oeenes veer a 8, 17, 18
GN eae sd es tenases ceases one 8,1
I FUE OE BEE oc so ceo wns secret cebes 13, 14, 19,
RS Sal Goa cas gaa k opie ak eae % be 14
A SG sc oc vu cespecean des cenns 12, 13, 2%
eg 6 ey rrr erry 12
Treasury Reeu.ations:
Treasury Regulations No. 37, Art. 24........... 12,33 ©
Treasury Regulations No. 63...............0006: 12
Treasury Regulations No. 63, Art. 19............. 33
Treasury Regulations No. 68............000e0085 12
Treasury Regulations No. 68, Art. 18............. 33
Treasury Regulations No. 70, Art. 18........... 12, 33
Treasury Decisions:
Treasury Decision No. 4064...............0000es 12
Treasury Decision No. 4065............00cee ewes 12

Treasury Decision No. 4066..............e00eees vie

IN THE

Supreme Court of the United States

OCTOBER TERM, 1929.

No. 311.

WALTER A. MAY, er au., Execurtors or Pauiine May,
vs.
D. B. HEINER, Cotuector or Inrernat Revenue.

BRIEF OF ARTHUR W. MACHEN, JR., Attorney for SAFE
DEPOSIT AND TRUST COMPANY OF BALTIMORE,
Amicus Curiae.

Statement of Facts.

The case made by the ‘‘Statement of Claim’’ (R. 2-9) and
the exhibits therewith filed (R. 9-31) is briefly as follows:

Pauline May, on May 15, 1917, executed an agreement
under seal to transfer certain property to trustees upon
trusts therein outlined, and covenanted to execute a more
formal instrument of trust (R. 12).

On October 1, 1917, she executed a formal agreement or
deed of trust (R. 13-16), transferring certain securities
therein mentioned to the same trustees upon almost identi-
cal trusts, viz: in trust to pay the income to Barney May,
her husband, for his life, and thereafter to the grantor
if she should survive him for her life, and upon the death
of the survivor to transfer the corpus to their four chil-
dren, equally, or the issue of such of them as might be then
deceased. The only substantial difference between the
trusts declared is that the paper of October 1, unlike the

informal paper of May 15, gave to each child who should die
before the survivor of the grantor and her husband, a
power of testamentary appointment over his or her share,
No power of revocation or alteration or management was
reserved to the grantor. Both instruments were executed
while the Act of September 8, 1916 (39 Stat. 756, 777-780)
as amended by the Act of March 3, 1917 (39 Stat. 1000,
1002) was in force, and before the passage of either the
Revenue Act of 1918 (40 Stat. 1057, 1096-1101) or the
Revenue Act of October 3, 1917 (40 Stat. 300).

The Record does not distinctly disclose whether the Deed
of October 1, 1917, was simply the ‘‘formal instrument of
trust’’ contemplated in the earlier paper, or whether the
two instruments were separate and independent transfers.
We assume that the former was the case, as the Commis-
sioner valued at zero the property passing under the earlier
instrument (R. 21).

Pauline May died on March 25, 1920, when the Revenue
Act of 1918, approved February 24, 1919 (40 Stat. 10657,
1096-1101) was in force.

The Commissioner of Internal Revenue inckaded the
property passing under these instruments in the gross
estate of the decedent for purposes of the Estate Tax under
the Revenue Act of 1918; and accordingly collected an al-
leged deficiency of $5,524.42 (R. 18, 7) which the plaintiffs,
executors of Pauline May, paid under protest on September
11, 1923 (R. 8). After claim for refund duly filed (BR.
27-9), which was refused on February 20, 1924, by the Com-
missioner (R. 8, 29-31), the plaintiffs as executors insti-
tuted this suit on July 15, 1924 (R. 1).

A motion to strike out the Statement of Claim (R. 31),
was granted and judgment entered for the defendant by
the District Court (R. 38). The Cireuit Court of Appeals
for the Third Circuit affirmed this judgment on a per curiam
opinion (R. 41), 32 Fed. (2d), 1017. The case is before
this Court on writ of certiorari granted on October 21,
1929 (R. 43). )

3

The only question is whether the property passing under
the two instruments above mentioned is to be included in
the gross estate for purposes of Estate Tax under the Rev-
enue Act of 1918, (sec. 402 (c), 40 Stat. 1097), as property
of which the decedent had made a transfer or created a
trust intended to take effect in possession or enjoyment
at or after her death. The transfers were made more than
two years before Mrs. May’s death and there is no claim
or suggestion that they were in contemplation of death.

The Record does not distinctly show that Barney May
survived his wife, the grantor, Pauline May, so ‘that she
did not in her lifetime receive any of the income or enjoy
any benefit from the trust property after the execution of
the deeds. But as it appears that he was living when the
deeds were executed and as there is nothing to indicate that
he died before his wife, the presumption is that he was still
living when she died. At all events, it is stated in the
Petition for Certiorari (p. 3) that he survived his wife and
actually joined in filing the estate tax return as one of her
executors, and certainly after his wife’s death the Com-
missioner addressed to him a letter as one of the executors
of his wife (R. 18). We stress this point because in the
view we take of the case, the fact of his survivorship is of
very great importance. The case would have been very
different if Barney May had predeceased his wife, and if
she had thus become entitled to the usufruct of the prop-
erty during her life.

We respectfully submit:

1, That Section 402(c) of the Revenue Act of 1918, if
construed to apply retroactively to transfers such as those

in this case, is to that extent unconstitutional under the
Fifth Amendment.

2. That the Act of 1918 is unconstitutional in so far as
it may apply to transfers of the kind involved in this case,
though made after its passage.

4

3. That the transfers in this case passed both posses.
sion and enjoyment from Pauline May in her lifetime, and
did not take effect either in possession or enjoyment at or
after her death.

I.

Sec. 402 (c) of the Revenue Act of 1918 in so far as it Applies
to Irrevocable Transfers Executed Before its Passage Merely
Because They Were Intended to Take Effect in Possession
or Enjoyment After the Grantor’s Death is Arbitrary, Ca.
pricious and Confiscatory, and Therefore in Conflict With the
Fifth Amendment.

Historical Summary of Pertinent Portions of Estate Tax
Legislation Down to Act of 1918.

Section 402(c) of the Revenue Act of 1918 is applicable
by its terms to transfers intended to take effect in posses-
sion or enjoyment at or after death ‘‘whether such trans-
fer or trust is made or created before or after the passage
of this Act.’’

The prior estate tax law—that is to say, the Act of
September 8, 1916 (39 Stat. 756), as amended by the Act
of March 3, 1917 (39 Stat. 1002), with the additions thereto
made by the Act of October 3, 1917 (40 Stat. 300), did not
contain the words printed in quotation marks in the fore-
going paragraph, but was expressed to be applicable mere-
ly to property in respect of which the decedent ‘‘has at
any time made a transfer’’ of the character specified. This
Court held that the Act of 1916 by its proper construction
was not intended to be retroactive so as to tax transfers
executed before it was passed.

Shwab v. Doyle, 258 U. S. 529;

Union Trust Co. v. Wardell, 258 U. S. 537;
Levy v. Wardell, 258 U. S. 542;

Knox v. McEHligott, 258 U. S. 546.

5

It being apparent by reason of the words ‘‘whether such
transfer or trust is made or created before or after the
passage of this Act’’ in the Revenue Act of 1918, that that
Act was intended to apply retroactively 'to transfers of the
kind specified made prior to its passage, the constitution-
ality of the Act in that respect was challenged in Nichols
v. Coolidge, 274 U. 8. 531; and the conclusion of this Court
was expressed as follows:

‘‘We must conclude that Section 402(c) of the stat-
ute here under consideration,’’—i.e., the Revenue Act
of 1918, approved February 24, 1919 (40 Stat, 1057)—
‘tin so far_as it requires that there shall be included in
the gross estate the value of property transferred by
a decedent prior to its passage’’—i. e., the passage of
the Act of 1918 on February 24, 1919—‘‘merely be-
cause the conveyance was intended to take effect in
possession or enjoyment at or after his death, is arbi-
trary, capricious and amounts to confiscation. Whether
or how far the challenged provision is valid in re-
spect of transfers made subsequent to the enactment,
we need not now consider’’ (274 U. S. 542-3).

The ‘‘statute here under consideration’’ was the Revenue
Act of 1918, approved February 24, 1919. In a previous
part of the opinion the Court quoted in full the ‘‘relevant
portions of ‘Title [V—Estate Tax’ Act, February 24, 1919”’
(274 U. S. 534-6).

It is said, however, that the transfers involved in Nichols
vs. Coolidge, were executed long prior, not merely to the
passage of the Act of 1918, but also to the passage of the
Act of 1916, and that the language of the Court should be
construed as applicable only to transfers prior to Septem-
ber, 1916, and is at any rate a mere dictum so far as it may
apply to transfers after September 8, 1916.

It is, indeed, almost inconceivable that this Court used the
language ‘‘prior to its passage’’ inadvertently, and without
considering the distinction between transfers executed be-
fore and after September 8, 1916; for one of the points most
strongly emphasized by the defendants in error in Nichols
vs. Coolidge, as well as in briefs of amici curiae, was that

6

the provision of the Act of 1918 that transferred property
should be included ‘‘whether such transfer or trust is made
or created before or after the passage of this Act’’ should
be construed to apply only to such transfers prior to the
passage of the Act of 1918 as were made subsequent to
the passage of the first Federal Estate Tax Law—i. e¢,
subsequent to September 8, 1916. See brief for the De.
fendants in Error in Nichols vs. Coolidge, p. 27, and brief
of Mr. Russell L. Bradford, amicus curiae, pages 13 to 20,

This Court overruled this point as to the construction
of the Statute; and, its attention having been thus directed
to the question of transfers made before the passage of
the Act of 1918, but after September 8, 1916, concluded its
discussion with the declaration that the Act is unconstitu-
tional as to any such transfers made ‘‘prior to its passage”
—4i. e., the passage of the Act of 1918.

As, however, the transfers involved in Nichols vs. Cool-
idge were executed before the passage of the Act of 1916,
anything which fell from this Court as to transfers after
September 8, 1916, and before February 24, 1919, may be
in a sense a dictum; and therefore we shall endeavor to
show that on principle there is no justification for distin-
guishing in this regard between transfers before and after
September 8, 1916.

The Revenue Act of September 8, 1916, Title II, (39
Stat. 756, 777), imposed a graduated estate tax at rates
ranging from 1% on ‘‘net estates’’ of less than $50,000 to
10% on estates of over $5,000,000. The Act of March 3,
1917 (39 Stat. 1000, 1002), amended this act by increasing
the rates from 14%2% in the lowest bracket to 15% in the
highest. The amendatory act provided however that the
estates of persons dying before its passage but after Sep-
tember 8, 1916, should continue to pay the old rates.

This was the state of the law when the informal trust
agreement of May 15, 1917 (R. 12) and the more formal
settlement of October 1, 1917 (R. 13-16) were executed.

Two days after the execution of the latter instrument, |
the Revenue Act of October 3, 1917 (40 Stat. 300) was

. 7

passed; and Title IX of this Act imposed an additional
‘“‘War Estate Tax’’ on the estates of all persons thereafter
dying, at rates beginning with 4%% in the lowest bracket
and going up to 10% on estates of more than $10,000,000
(40 Stat. 324). This act did not further amend the Act of
1916, but superadded a new and additional tax, as distinct
from the ordinary estate tax as the Excess Profits Tax was
from the Income Tax.

The combined rates of the ordinary Estate Tax and of
the War Estate Tax began with 2% in the lowest bracket
and ran up to 25% on estates of over $10,000,000.

Now, we opine that under the rule enunciated in Nichols
vs. Coolidge, 274 U.S. 531, that a retroactive tax of this kind
on transfers irrevocably made before the passage of the
taxing act merely because the transfer was to take effect in
possession or enjoyment at or after death is unconstitu-
tional, there can be no reasonable doubt that if Pauline
May had died while the Act of October 3, 1917 was in force,
the new and additional tax imposed by that act could not
have been collected from her estate, in respect to this
transferred property. Her estate would have been subject
to the tax imposed by the Act of September 8, 1916 as
amended by the Act of March 3, 1917; and for purposes of
that tax the transferred assets could have been constitution-
ally included in the gross estate, unless as urged infra pp.
20-7 the Act is unconstitutional even as to transfers exe-
cuted after its passage. But the additional tax imposed by
the Act of October 3, 1917, could not have been constitution-
ally applied retroactively to an irrevocable transfer made
before its passage; and for the purposes of that tax the
transferred assets could not have been included in the
‘‘gross estate.’’

Similarly, if an irrevocable transfer had been made after
September 8, 1916, and before March 3, 1917, and the gran-
tor had died while the amendatory act of the last men-
tioned date was in effect, it might have been possible to hold

that the amendment was unconstitutional as to the trans.
ferred property, leaving the lower rates fixed by the Act
of 1916 applicable to the transferred property.

But before the death of Pauline May on March 25, 1920,
the Revenue Act of 1918 (40 Stat. 1057) was passed. This
Act (Sec. 1400 (a), 40 Stat. 1149) repealed outright Title
II, called ‘‘Estate Tax’’ of the Act of 1916, Title ITI, called
‘‘Hstate Tax’’ of the Act of March 3, 1917 (being the
amendment increasing the rates imposed by the Act of
1916); and Title LX, called ‘‘War Estate Tax’’ of the
Revenue Act of October 3, 1917, which imposed the separate
and additional tax. In spite of the repeal, it was declared
that the said repealed provisions should ‘‘remain in force
for the assessment and collection of all taxes which have
accrued thereunder, and for the imposition and collection of
all penalties or forfeitures which have accrued and may
accrue in relation to any such taxes’’ (Revenue Act of 1918,
Sec. 1400 (b), 40 Stat. 1150). There was also a provision
that the method of assessing and collecting estate taxes
previously accrued under the Act of 1916 as amended by the
Act of March 3, 1917, or under the Act of October 3, 1917,
should be according to the Revenue Act of 1918.

But, for the future, the Revenue Act of 1918 provided in
substance a totally new system differing in rates and in
basis both from the Act of 1916 as originally passed and
as amended by the Act of March 3, 1917, and from those
acts as supplemented by the extra ‘‘War Hstate Tax’’ im-
posed by the Act of October 3, 1917.

The following is a table of rates as imposed by the vari-
ous Acts:

Act of Act of Act of Revenue
Sept. March Oct. Act of
Amount of Net Estate. 8, 1916. 3, 1917. 3, 1917, 1918.
plus the Act
of March 3,
1917.
Up to $50,000.............. 1% 1%% 2% 1%
$50,000 to $150,000......... 2 3 4 2
$150,000 to $250,000........ 3 4% 6 3
$250,000 to $450,000........ 4 6 8 4
$450,000 to $750,000........ 5 1% 10 6
$750,000 to $1,000,000....... 5 1% 10 8
$1,000,000 to $1,500,000..... 6 9 12 10
$1,500,000 to $2,000,000..... 6 9 12 12
$2,000,000 to $3,000,000..... 7 10% 14 14
$3,000,000 to $4,000,000..... 8 12 16 16
$4,000,000 to $5,000,000..... 9 13% 18 18
$5,000,000 to $8,000,000..... 10 15 20 20
$8,000,000 to $10,000,000.... 10 15 22 22
Over $10,000,000 ........... 10 15 25 25

This, however, is only half of the story; for the Revenue
Act of 1918 radically altered the method of computing the
“net estate’’ on the transfer of which the tax is laid, so that
in many cases a lower rate produced a larger tax.

The following are a few examples:

(1) The Revenue Act of 1918, unlike the Act of 1916,
either as originally passed (Shwab v. Doyle, 258 U.S.
529; Union Trust Company v. Wardell, 258 U. S. 537;
Levy v. Wardell, 258 U. S. 542; Knox v. McElligott,
258 U. S. 546) or as amended by the Act of March 3,
1917, and unlike the Act of October 3, 1917 (which ap-
plied to the same basis of taxation as the earlier acts)
undertakes to include, retroactively, in the gross estate
the value of property previously transferred in con-
templation of death or to take effect after death (Rev-
enue Act of 1918, Sec. 402(c), 40 Stat. 1097).

(2) The Revenue Act of 1918, unlike the earlier acts
(United States v. Field, 255 U. S. 257) requires prop-
erty passing under exercise of a general power of
testamentary appointment to be included in the gross

estate (Revenue Act of 1918, Sec. 402(e), 40 Stat.
1097).

10

(3) The Revenue Act of 1918 (Sec. 402(f), 40 Stat. ;
1097) requires that the gross estate shall include in.
surance taken out by the decedent on his own life and
payable to his executor or (in excess of $40,000) to
any other person; but none of the prior laws contain
any similar provision.

(4) The Revenue Act of 1918 (Sec. 402(b), 40 Stat,
1097) provides that the interest of a surviving spouse
by way of dower, curtesy, etc., shall be included in the
gross estate; but no prior act contained any such pro-
vision.

(5) The Act of 1918 (Sec. 403(a)1, 40 Stat. 1098) for.
bids the deduction of income taxes upon income re.
ceived after the death of the decedent, or any estate,
succession, legacy or inheritance taxes; but the earlier
laws contained no such clause.

(6) The Act of 1918 (Sec. 403(a)2, 40 Stat. 1098)
allows a deduction for the value of property previously
taxed, as part of the estate of another decedent dying
less than five years earlier, under this Act or the Act
of October 3, 1917; but no similar deduction was per.
mitted by any former Act,

(7) The Act of 1918 (Sec. 403(a)3, 40 Stat. 1098)
allows a deduction for charitable, ete., bequests; but
no such deduction was previously permitted.

(8) The Act of 1918 (Sec. 403(b)1, 40 Stat. 1098)
provides that in case of non-resident decedents, not
more than 10% of the value of the gross estate situated
in the United States shall be deducted for debts, ete.,
whereas in the earlier laws no limit was fixed.

Sundry other differences of greater or less importance
might be pointed out.

At all events, it is clear that irrespective of any question
of rates of tax it might often be better to be taxed under any
of the earlier acts, even the Act of October 3, 1917, anda
fortiori the Act of March 3, 1917, which was in force when
Mrs. May’s transfers were made, rather than under the
Act of 1918, under which it is now sought to tax her estate. ,

11

For instance, suppose property worth $1,000,000 was set-
tled upon the decedent with a general power of testament-
ary appointment, and he leaves $50,000 which he owned out-
right and having exercised by will the power of appoint-
ment. Under the Act of 1916 either as originally passed
or as amended and added to by the Acts of 1917, there would
be no tax. But under the Act of 1918 there would be a tax
of $51,500. ,

If such a person on, say, October 30, 1917, had trans-
ferred his $50,000 to a trustee in trust for himself for life,
with remainders over, he could do so with the ‘assurance
that no tax would be payable in respect of the transferred
property under the existing law; but the Act of 1918, if
valid, would sweep away the entire trust fund from the
beneficiaries, whose rights had vested at the time the deed
was executed.

Many other illustrations of the same kind might be given
in which there would be in all respects the same injustice
in applying the Act of 1918 retroactively to transfers made
between September 8, 1916, and February 24, 1919, as if the
transfer had been made prior to September 8, 1916, when
the first estate tax law took effect.

It may be said, indeed, that there is nothing to show that
the changes in the basis of taxation—. e., the method of
computing the ‘‘net estate’’—made by the Revenue Act of
1918 operated to the prejudice of this estate, so that her
estate being less than $750,000, the Act of 1918 may have
actually reduced the tax which would have been payable
under the Act of March 3, 1917, which was in force when
the transfers were made. But of course, it would be im-
possible in each individual case to ascertain whether the
Act of 1918 or the Act in force at the time of the deed
would produce the heavier tax, and hold the Act valid or
invalid according as it would produce in the particular
ease a smaller or a larger tax. The fact is that on large
estates, the Act of 1918 is almost sure to be more onerous
than the Act of March 3, 1917, and on small estates it may
or may not be more onerous according to circumstances.

12

The only possible course, therefore, is to hold that Section
402(c) of the Act of 1918 in so far as it requires that there
shall be included in the gross estate the value of property
transferred by the decedent ‘‘prior to its passage,” be.
cause the decedent reserved the income for his life, is wholly
unconstitutional.

Action of Treasury Department and Board of Tax Appeals.

After Nichols v. Coolidge, 274 U. S. 531, amendments to
Treasury Regulations 63 (as to the Act of 1921), Regula-
tions 68 (as to the Act of 1924), and Regulations 70 (as to
the Act of 1296) were promulgated which undertake to ap-
ply those acts retroactively to all transfers made after Sep-
tember 8, 1916, even though made before the passage of the
particular act in question.

T. D. Nos. 4064, 4065 and 4066, Cum. Int. Rey.
B-'L VI-2, pp. 345-6, 340-1, 337-8.

Even the Treasury Department, however, has not pre
sumed to make similar amendments to Regulations 37, re-
lating to the Act of 1918, which this Court explicitly de
clared to be unconstitutional as to transfers executed prior
to ‘‘its passage,’’ and which is the Act involved in this case.

Moreover, the Board of Tax Appeals has refused to fol-
low these amended regulations, and has repeatedly applied
Nichols v. Coolidge to transfers made before the passage
of the Act under which the tax is sought to be levied, even
though made after September 8, 1916.

Alsop v. Comm’r of Int. Rev., 7 B. T. A. 848
(as to Act of 1921);

Duggan, Executor, v. Comm’r. of Int. Rev., 8
B. T. A. 482 (as to Act of 1921);

Northern Trust Co., Executor of Van Schaick,
v. Comm’r of Int. Rov., 9 B. T. A. 96 (as to
Act of 1921);

Johnson v. Comm’r of Int. Rev., 11 B. T. A. 534
(as to Act of 1921);

13

McCormick v. Comm’r of Int. Rev., 13 B. T. A.
423, 436 (as to Act of 1924);

Morsman v. Comm’r of Int. Rev., 14 B. T. A.
108 (as to Act of 1924);

Pacific S. W. Trust, etc., Bk., Executor of Sykes,
v. Comm’r of Int .Rev., 16 B. T. A. 1437,
modifying S. C., 14 B. T. A. 1372 (as to Act
of 1921). '

The impossibility of construing the Revenue Acts of
1918 or 1921 as continuations of the pre-existing laws and
the necessity for regarding them as entirely new enact-
ments, is illustrated by—

Harris v. Comm’r of Int. Rev., 5 B. T. A. 41.

In that case, the decedent in 1912 had taken out a policy
of insurance on his own life, but by changing the beneficiary
had made it payable to his wife on September 30, 15 20.
Under the Act of 1918, which was in force at the time of t!
change of beneficiary, the proceeds of this policy in exc.»
of $40,000 would have been liable to estate tax as part of his
estate; but the Revenue Act of 1921 repealed the Act of
1918, as the Act of 1918 had repealed the Act of 1916,
although repeating in totidem verbis the insurance provi-
sions of the Act of 1918. This Court had held that the
Act of 1918 was not retroactive as to insurance policies
taken out before its enactment unless the beneficiary had
been changed after its passage (Lewellyn v. Frick, 268 U.
S. 238) i and the Board of Tax Appeals held that the same
construction must be given to the Act of 1921, although the
result was that a policy which (at least in the view of the
Board) would have been taxable if the Act of 1918 had
continued in force, escaped taxation. The opinion states:

‘We are of the opinion that with the repeal of Title
IV of the Revenue Act of 1918, the authority to include
in the gross estate the proceeds of the policy of insur-
ance here in question was lost and that the right ceases
and determines with the statute upon which it depends.
The effect of the repeal of Title IV of the Revenue

14

Act of 1918 was to obliterate the repealed statute just
as completely as if it had never been enacted into law,
and it must be considered as a statute that never ex-
isted, except for the purpose set forth in Section
1400(b) of the Revenue Act of 1921”’ (5 B. T. A. 44),

This decision was acquiesced in by the Commissioner of
Internal Revenue.
Cum. Int. Rev. Bull, VI-1, p. 3.

Answers to Arguments for Defendant.

The argument for the Defendant must be that although,
as held in Nichols v. Coolidge, 274 U. S. 531, Congress has
no power retroactively to impose a tax of this kind on irre.
vocable transfers previously executed, yet if it has once
adopted an estate tax it may retroactively increase the rates
and change the basis even as to transfers irrevocably made
before the passage of the amendatory act. The argument
must be that the presence of any estate tax on the statute
books operates as a red flag to warn every citizen that the
rates may be increased and the basis changed, so that the
provision of the Fifth Amendment (as construed in Nichols
v. Coolidge, 274 U. S. 531) against retroactive legislation
of this kind may be circumvented.

If this argument needs any answer, it may be found, we
submit, in—

Untermyer v. Anderson, 276 U. S. 440.

This Court there held that even the pendency of a bill in
Congress retroactively taxing gifts is not such a warning to
taxpayers as to avoid the prohibition of the Fifth Amend-
ment against a retroactive tax of this sort, or make the
tax constitutionally applicable to a gift made only a week
before the bill was signed by the President.

Mr. Justice McReynolds, delivering the opinion of the
Court said:

15

‘“‘The taxpayer may justly demand to know when
and how he becomes liable for taxes—he cannot fore-
see and ought not to be required to guess the outcome
of pending measures’’ (276 U. S. 445-6).

If this be true, how could Mrs. May ‘‘be required to
guess’’ that Congress would increase the rates in force at
the time of her gifts from a maximum of 6% on a net estate
of some $300,000 to 8% as was done by the Act of October
3, 1917, or that Congress would increase the basis by re-
quiring the inclusion of property passing under a general
power of testamentary appointment, property passing to
her husband by courtesy or the like, and the amount of in-
surance taken out on her own life, as was done by the Reve-
nue Act of 1918?

Reliance is placed by the Government on cases such as
Bear Lake Irrigation Co. v. Garland, 164 U.S. 1, 11-12 and
Steamship Co. v. Joliffe, 2 Wall. 450, 459, holding that when
a statute is repealed and simultaneously re-enacted in sub-
stance, but with minor changes, the repeal and re-enactment
operate substantially as an amendment, so that as to trans-
actions covered by the old law it may be enforced with the
amendments.

But such cases have nothing to do with the question of
constitutional power. They raised,—at least this branch
of them raised—no constitutional question whatsoever.

They give absolutely no countenance to the contention
that Congress can cireumvent a prohibition of retroactive
legislation of any kind by passing it either as an amendment
to, or as a repeal and re-enactment of, existing legislation.

For example, who has ever supposed that the constitu-
tional prohibition of ex post facto laws can be got around
by making an amendment to existing laws?

Who has ever dreamed that the prohibition of that form
of retroactive legislation known as laws impairing the
obligation of contracts can be evaded by calling the im-
pairment of obligation an amendment to existing laws?
Indeed, the Dartmouth College Case itself (4 Wheat. 518)

16

invalidated an amendment to the charter of Dartmouth
College.

If such cases as Bear Lake Irrigation Co. v. Garland, su-
pra, had any bearing on the case at bar, they would lead
to the conclusion that the Act of 1916 as amended by the
Act of March 3, 1917, should be applied to Mrs. May’s
Estate, with only such changes as could constitutionally be
made,

But this, of course, was not what the Bureau of Internal
Revenue did in the present case. No one claims that the
Act of 1916 as amended should apply. The decision of the
lower court is, not that the Act of 1916 as amended by the
Act of March 3, 1917, should apply, but that the Act of
1918 should apply m toto—both as to rate and basis, in- ‘
cluding property irrevocably transferred before its passage.
Our point is that this is forbidden by the Fifth Amend-
ment as construed in Nichols v. Coolidge, 274 U.S. 531, and
Untermyer v. Anderson, 276 U. 8S. 440. That contention is
not affected by the question whether the Act of 1918 can
be regarded under the rule in the Bear Lake Irrigation
Case as an amendment to the Acts of 1916 and 1917. The
contention would be just as strong if the Act of 1918 were
an amendment.

We do not believe, however, that the Act of 1918 is within
the rule in the Bear Lake Irrigation Case. It is in form at
least entirely new legislation, expressly declared to be ‘‘in
lieu’’ of all the earlier tax laws. It is not substantially the
same, but radically different, both as to the basis and as to
the rate of taxation. |

It would be perfectly impracticable to hold that the Acts |
of 1916 and 1917 remain in force as to Mrs. May’s Estate
except as constitutionally altered by the Act of 1918. Con-
gress contemplated but one estate tax, not two, on Mrs.
May’s Estate. There is no doubt that as to all property
except the transferred assets, the tax must be computed
under the Act of 1918, and it would defeat the intention of
Congress to compute separately a tax on the transferred

17

assets under the Act of 1916 as amended by the Act of
March 3, 1917.

Perhaps it would have been constitutionally possible
for Congress to declare that a tax should be computed under
the Act of 1918 but excluding the transferred assets from
the gross estate, and that another tax should be computed
under the Act of 1916 as amended by the Act of March 3,
1917, including the transferred assets as part of the estate,
and that the higher of the two should be paid. But most
certainly it has done nothing of the kind. The courts, it is
submitted, cannot rewrite the law so as to produce that
result. = ~~

Indeed, the intention of Congress that the Acts of 1916
and 1917 should be altogether inapplicable to Mrs. May’s
estate is clear. Section 401 of the Revenue Act of 1918
provides as follows:

‘Sec. 401. That (in lieu of the tax imposed by
Title II of the Revenue Act of 1916, as amended, and
in lieu of the tax imposed by Title IX of the Revenue
Act of 1917) a tax equal to the sum of the following
percentages of the value of the net estate (determined
as provided in Sec, 403) is hereby imposed upon the
transfer of the net estate of every decedent dying after
the passage of this Act, whether a resident or a non-
resident of the United States.’’

. As Mrs. May died after the passage of the Act of 1918,

it is clear that her estate is subject to the tax imposed there-
by, and that the tax so imposed is ‘‘in lieu’’ of any tax im-
posed under the Acts of 1916 and 1917. Congress has clear-
ly declared that the Acts of 1918, and it alone, shall govern
Mrs. May’s estate. In so far as it can not constitutionally
apply thereto, there is no law in force taxing the same.

Further, Section 1400 of the Revenue Act of 1918 pro-
vides as follows:

_ “See. 1400. (a) That the following parts of Acts
are hereby repealed, subject to the limitations pro-
vided in subdivision (b): * * *

**(1) The following titles of the Revenue Act of
1916: * * °

18

‘Title II (called ‘Estate Tax’); * * *

**(2) The following parts of the Act entitled ‘An
Act to provide increased revenue to defray the ex.
penses of the increased appropriations for the Army
and Navy and the extensions of fortifications, and for
other purposes,’ approved March 3, 1917:

‘‘Title III (called ‘Estate Tax’); * * *

‘*(3) The following titles of the Revenue Act of
YF Palatten

‘‘Title IX (called ‘War Estate Tax’); * * *

‘**(b) Such parts of Acts shall remain in force for
the assessment and collection of all taxes which have
accrued thereunder, and for the imposition and collec.
tion of all penalties or forfeitures which have accrued
and may accrue in relation to any such taxes, and
except that the unexpended balance of any appropria-
tion heretofore made and now available for the ad-
ministration of any such part of an Act shall be avail-
able for the administration of this Act or the corre-
sponding provision thereof: * * * Provided further,
That the assessment and collection of all estate taxes,
and the imposition and collection of all penalties or
forfeitures, which have accrued under Title II of the
Revenue Act of 1916 as amended by the Act entitled
‘An Act to provide increased revenue to defray the
expenses of the increased appropriations for the Army
and Navy and the extensions of fortifications, and for
other purposes,’ approved March 3, 1917, or Title IX
of the Revenue Act of 1917, shall be according to the
provisions of Title IV of this Act. In the case of any
tax imposed by any part of an Act herein repealed, if
there is a tax imposed by this Act in lieu thereof, the
provision imposing such tax shall remain in force until
the corresponding tax under this Act takes effect under
the provisions of this Act.’’

Now Congress has expressly declared that the Acts of
1916 and 1917 shall remain in force for the assessment and
collection of all taxes which have accrued thereunder, and
until the estate tax imposed in lieu of the taxes imposed
by the ‘earlier Acts shall take effect under the provisions
of the Act of 1918. As Mrs. May was not dead at the date
of the passage of the Act of 1918, so that no tax had ac

19

erued under the Acts of 1916 and 1917, and as before she
died the Estate Tax imposed by the Act of 1918 had taken
effect, this provision is not applicable.

Congress has in effect said that the Acts of 1916 and
1917 shaii be repealed except as to the estates of persons
dying before the passage of the Act of 1918, and that even
in that case the method of assessing and collecting the taxes
imposed by the earlier laws shall be according to the Act
of 1918.

Having therefore expressly declared that the Acts of
1916 and 1917 shall remain in force for a particular pur-
pose which does not touch the case at bar, Congress has by
necessary implication declared that the Acts of 1916 and
1917 shall not remain in force for any other purpose. Ez-
pressio unius exclusio alterius.

Some difference of judicial opinion has existed as to
whether the parallel clause in the Act of 1921 had the effect
of relieving from any payment of tax the estates of persons
who had died within one year prior to the passage of the
Act of 1921. The contention that it did so was based on
the provision of the saving clause in the Act of 1921 to the
effect that the Act of 1918 should remain in force for the
assessment and collection of all taxes which had ‘‘acerued”’
under the Act of 1918. It was contended that a tax could
not be said to have accrued until it was due. This argu-
ment prevailed in Wilmington Trust Co. v. U. S., 28 Fed.
(2d), 205, but the weight of authority is to the contrary.

Hanna v. United States, Court of Claims
decided Nov. 4, 1929;

Flannery v. Willeuts, 25 Fed. (2d), 951;

Page v. Skinner, 298 Fed. 731.

Both lines of authorities, however, agree that the
earlier Act is absolutely repealed except as to matters with-
in the saving clause—the only point in these cases bearing
upon the matter now in hand. The Court of Claims, after
quoting the saving clause, said:

‘‘A casual survey of the provisions set forth above
clearly shows that the intent and purpose of Congress

~~

20

was that the estates of all those who died prior to the
enactment of the 1921 Act should be taxed under the
1918 Statute, and the estates of those who died after
the enactment of the 1921 Act taxed under the pro-
visions of the later Act. In fact, this intent is so plain
that he who runs may read and understand.”’

The Board of Tax Appeals, in reaching the same con-
clusion, fully recognized that the earlier act is absolutely
repealed except as to cases within the saving clause:

‘The question is thus narrowed to whether the tax
involved here had accrued on November 23, 1921. If
it had not accrued, the decedent’s estate is not subject
to any estate tax, regardless of the amount of the net
estate.’’

Guaranty Trust Co. v. Commr. of Int. Rev., 16
B. T. A. 314, 317-8.

If, therefore, as we contend, the Act of 1918 can not con-
stitutionally be applied to transfers irrevocably consum-
mated by Mrs. May before its passage, it follows neces-
sarily that those transfers can not be taxed at all.

IT.

The Revenue Act of 1918 is Arbitrary, Capricious and Con-
fiscatory, in so far as it May Apply to Transfers of the Kind
Involved in This Case Even Though Made After the Pas-
sage of the Act; and is Therefore in Conflict With the
Fifth Amendment.

In Nichols v. Coolidge this Court left open the question

whether the Revenue Act of 1918 is unconstitutional even
as to subsequent transfers. ‘The opinion of the Court con-
cludes as follows:

‘Whether or how far tie challenged provision’’—
i. e.,the provision that property transferred irrevocably
by a decedent prior to his death shall be included in the
taxable estate at its valtte at the time of the decedent’s
death merely because thé conveyance was intended to
take effect in possession or enjoyment at or after his

21

death—‘‘is valid in respect of transfers made subse-
quent to the enactment we need not now consider’’
(274 U. S. 543).

We start with the proposition upon which the decision in
Nichols v. Coolidge is based, that—

‘“‘A statute purporting to tax may be so arbitrary
and capricious as to amount to confiscation and offend
the Fifth Amendment’’ (274 U. S. 542).

To show the ‘‘arbitrary and capricious’’ character of
the present ‘‘tax,’’ let us take a few illustrations. A man
worth, say; $1,000,000 settles one-half of his fortune upon
trust for himself for life, with remainder to a collateral
relative, or strangers to his blood. The trustee by wisely
retaining the original investments, or by wisely changing
investments, succeeds in augmenting the trust estate, orig-
inally $500,000, to $4,000,000. The estate which the grantor
retains does not increase in value. If the trust estate is in-
cluded at its value at the time of the grantor’s death, the
tax under the Revenue Act of 1918 would be $542,500, and
thus the estate which the grantor had reserved for his wife
and family would be absolutely wiped out by circumstances
over which he had no control whatsoever.

The recent Federal Revenue Acts have remained in force
only a comparatively few years, but their constitutionality
must be judged, of course, by supposing them to be, as they
are on their face intended to be, permanent. For example,
if the Revenue Act of 1918 would be valid as to a decedent
who had made a transfer on the day after its passage, and
was struck by lightning the next day, it would necessarily
also be valid if the same decedent had lived for forty years
afterwards. Conversely, if it would be invalid in the latter
case, it must also be invalid in the former.

In other words, in order to determine whether the Act is
arbitrary and capricious in character, we cannot take into
account the fact that it remained in force for only a few
years. It can’t be valid for a brief period, and invalid
after the lapse of a time.

According to its terms, if a man made a transfer in 1919,
reserving the income to himself for life, but no power what-
soever over the property, the estate which he might leave,
say, in 1950, would be affected by what the trustee had done
during the intervening years.

It may be said that the provision is necessary to pre-
vent evasion; but is it not true that all legitimate purposes
of tax evasion may be accomplished by taxing only trans-
fers made after passage of the statute in contemplation of
death—that is, transfers made when death from some exist-
ing peril other than the natural frailty of the human body
is anticipated in the ‘‘near future,’’ and when such antici-
pation is the moving cause of the deed? As said by this
Court in Nichols v. Coolige:

‘*Undoubtedly, Congress may require that property
subsequently transferred in contemplation of death be
treated as part of the estate for purposes of taxation.
This is necessary to prevent evasion and give practical
effect to the exercise of admitted power, but the right
is limited by the necessity’’ (274 U.S. 542).

If, in addition, property is taxed over which the decedent
reserved dominion, as by a power of revocation, as the law
undoubtedly does (Reinecke v. Northern Trust Co., 278 U.
S. 339), surely the requirements of the prevention of tax
evasion would be met.

Finally, if it be necessary for the prevention of tax eva-
sion to include property which th decedent had trans-
ferred, reserving the income to himself for life, the only
reasonable way would be to make the tax depend upon the
then value of the property, rather than its value as en-
hanced by subsequent circumstances over which the grantor
had no control whatsoever.

The Revenue Act of 1918 provides that the value of the
gross estate shall be determined by including the value at
the time of the decedent’s death of all property of which he
has at any time, whether before or after the passage of the
Act, made a transfer or created a trust intended to take
effect in possession or enjoyment at or after his death:

23

‘‘That the value of the gross estate of tlie decedent
shall be determined by including the value at the time
of his death of all property, real or personal, tangible

or intangible, wherever situated.
* » ~ * * * . o .

‘*(c) To the extent of any interest therein of which
the decedent has at any time made a transfer, or with
respect to which he has at any time created a trust—
(1) in contemplation of or (2) intended to take effect
in possession or enjoyment at or after his death
(whether such transfer or trust is made or created
before or after the passage of this Act), except in the
case of bona fide sale for a fair consideration in money
or money’s worth. * * *”’

Now, if property is transferred to a trustee upon trust
for the grantor for life with remainders over upon his
death, and the power to vary investments is given to the
trustee, the question arises whether the value at the time
of the grantor’s death is to be computed with reference
to the prpperty which he transferred, or to the property
which the trustee holds by change of investments, at the
time of his death. In either event, the Act is equally arbi-
trary and capricious. F

If the Act means that the property originally transferred
is to be included at its value at the time of the decedent’s
death, irrespective of the fact that it has been sold by the
trustee in the meantime,—and such is certainly what the
act says—then the tax will be levied in respect of prop-
erty which has passed entirely out of the hands not merely
of the grantor, but of all those whom he intended to benefit,
. 80 that perhaps for years before his death neither he nor
they had any interest whatsoever in it.

For example, suppose a deed of trust is made of certain
stock worth at the time $10,000. The Trustee immediately
exercises a power of sale, and invests the $10,000 thus ob-
tained in bonds which are worth at the time of the grantor’s
death exactly the amount paid for them. But, suppose the
stock of which the trust estate originally consisted greatly
increases in value, and is worth at the time of the grantor’s

24

death $500,000. Is a tax to be levied with respect to this
$500,000, and thus completely wipe out the trust estate?
Nothing could be more absurd or irrational. Yet such js
certainly the literal language of the statute. The property
which the testator transferred was the stock and not the
bonds. The Act declares that the gross estate shall be eal-
culated by including the value at the time of the decedent's
death of all property of which he has at any time made a
transfer or created a trust to take effect in possession or
enjoyment at or after his death. The only property which
he so transferred was the stock.

If on the other hand the taxable estate is to be computed
by taking the value of the trust investments as they exist
at the time of the testator’s death—as was assumed in
Frew v. Bowers, 12 Fed. (2d) 625, 628, (2nd C. C. A., June
1, 1926), and made the basis for concluding that the Act is
unconstitutional—the result is equally arbitrary and ¢a-
pricious. In Frew v. Bowers, just cited, the property had
increased in value by prudent reinvestments by the trustee
from $200,000 at the time of the transfer to $500,000 at the
time of the grantor’s death. Where the grantor reserves
no power to control the investments, his estate is thus to be
taxed by reason of circumstances over which he had no con-
trol and from which he could derive no benefit. Could any-
thing be more arbitrary and capricious?

Judge Hough in Frew v. Bowers, said:

‘*A tax on a transfer by A, but measured by any-
thing other than the estate of A, may be a duty or
excise in form, but it is a palpable effort to tax some-
thing other than the transfer’? (12 Fed. (2nd) 625,
628).

When it is borne in mind that the Act of 1918 is by its
terms a permanent enactment intended to last for an indefi-
nite period, it will be seen that all the circumstances which
this Court mentioned as showing the ‘‘arbitrary, whimsical
and burdensome character of the challenged tax’’ would
apply as well to subsequent transfers as to transfers pre-
viously executed.

25

This Court said in Nichols v. Coolidge, 274 U. 8. 531:

‘‘An excise is prescribed, but the amount of it is
made to depend upon past lawful transactions, not
testamentary in character, and beyond recall. Prop-
erty of small value transferred before death may have
become immensely valuable, and the estate tax, swollen
by this, may leave nothing for distribution. Real estate
transferred years ago, when of small value, may be
worth an enormous sum at the death. If the deceased
leaves no estate there can be no tax. If, on the other
hand, he leaves ten dollars both that and the real
estate become liable. Different estates must bear dis-
proportionate burdens determined by what the de-
ceased did one or twenty years before he died” (274
U. S. 542).

If the Act had been limited to transfers made within some
reasonable period anterior to the grantor’s death—say, one
or two years—a somewhat different question would have
been raised. But applicable as the Act is, not merely to such
transfers made within a reasonable time prior to his death,
but to all transfers made after its enactment, whether made
within one, or ten, or twenty, or thirty years before death,
it is submitted that the provision is ‘so arbitrary and ca-
pricious as to amount to confiscation and offend the Fifth
Amendment.’’

The only reason for holding the tax valid as to transfers
made after its passage which does not apply to transfers
made before it became effective, is that in the former case
both the grantor and the grantees know that the transferred
estate at its value at the time of his death will] be included
as part of his taxable gross estate. But what good does it
do them to know this? They cannot foretell what the value
will then be, or what estate the grantor may leave. There-
fore, nobody can in any possible way compute what the tax
will be. They cannot even tell whether there will be any tax.
They are in quite as bad a fix as if there had been no estate
tax law in effect; for even then they would know, of course,
that Congress might pass such an act.

This makes the arbitrary character of the statute stil]
more apparent. If property which was transferred by an
irrevocable transfer, and which is absolutely vested (sub.
ject to an equitable life estate in the grantor) is to be
taxable or not according to whether the grantor subsequent-
ly has successes or reverses in business, then indeed you
have a tax laid by chance rather than according to any
conceivable rule of reason. It would be just as sensible
to say that the liability to tax should be determined by
flipping a coin or throwing a die.

Moreover, this Court has repeatedly held that the Fed.
eral Estate Tax is levied upon a transfer by death or upon
an interest which ceased by reason of death.

Y. M. C. A. v. Davis, 264 U. S. 47, 50;
Edwards v. Slocum, 264 U. 8. 61, 62-3;
Greiner v. Lewellyn, 258 U. 8. 384, 387.

This being true, how can the tax be constitutionally im-
posed on the full value of transferred property although
the only interest which the decedent reserved and the only
interest which came to an end with his death was a remote
contingent interest infinitesimal in value in comparison
with the value of the whole property transferred?

The recent decision of this Court, upholding the Gift
Tax provisions of the Revenue Act of 1924, as apylied to
gifts made after the passage of the Act (Brovaley v. Me-
Caughn, 280 U. S. 124) may be thought to have some ad-
verse bearing; but in point of fact it only brings into
sharper relief the vice in Section 402 (c) of the Revenue Act
of 1918. Both laws, indeed, ‘‘tax’’ gifts; but there the
resemblance stops. The amount of the Gift Tax was fixed
at the time of the gift, and was measured by the value of
the property given, and by its value at that time. But the
provision now challenged grades the rate of tax according
to purely fortuitous circumstances—namely, the amount
of other property which the donor may happen to own
at the time of his death. Moreover, the rate of tax is
fixed not by the value of the property given—nor even by

27

the value of the donor’s remaining property—at the time
of the gift, but by values at some date in the perhaps remote
future, and by values affected by the character of manage-
ment—prudent or imprudent re-investments—in the mean-
time.

Ill,

Mrs. May’s Deeds of Trust Were Present, Outright Transfers and
Were Not Intended to Take Effect in Possession or Enjoy-
ment At or After Her Death Within the True Construction
of the Revenue Act of 1918.

We trust we have demonstrated that Sec. 402 (c) of the
Revenue Act of 1918, in so far as it undertakes to exact
estate tax in respect of Mrs. May’s transfers, irrevocably
executed before the passage of that Act, on the ground that
they were to take effect in possession or enjoyment at or
after her death, are unconstitutional under the decisions of
this Court. At all events, it can hardly be denied that the
foregoing contentions raise ‘‘a grave constitutional ques-
tion.’’ And of course, as every law-student knows, if there
is any reasonable way, by construction or otherwise, of
avoiding the decision of ‘‘a grave constitutional question,’’
this Court conceives it its duty to adopt it.

United States v. Del. & Hudson Co., 213 U. 8.
366, 407-8;

Lewellyn v. Frick, 268 U. 8. 238, 251;

Missouri Pac. R. R. Co. v. Boone, 270 U. 8. 466,
471-2.

Indeed, in Reinecke v. Northern Trust Co., 278 U. 8. 339,
348-9, this Court held that this very constitutional question
is such ‘‘a grave constitutional question”’ as to necessitate
any reasonable construction of the Statute in order to avoid
its decision.

We shall now endeavor to show that it is quite unneces-
sary to decide any constitutional question, because the trans-
fers here involved are not within the Revenue Act of 1918,
Sec. 402 (c), properly construed.

Tranfer Not Taxable Merely Because Remainders to Chil.
dren Are Limited to Vest in Possession After
Grantor’s Death.

The learned Judge of the District Court’ rested his deei-
sion squarely on the ground that if a deed of trust contains
such limitations that estates in remainder are bound to vest
in possession after the death of the grantor, then the whole
deed is deemed to be intended to take effect in possession
or enjoyment at or after the grantor’s death, even though
the grantor reserved no interest in, or benefit from, the
property during his lifetime. He said:

**Tt is certainly true, that the property covered by
the gift included in the gross estate, came into
sion or enjoyment of the donees only after the death of
the donor. It seems to be settled by the authorities
that the phrase ‘to take effect in possession or enjoy-
ment at or after death,’ is used to designate a situation
in which the donee’s rights with respect to the prop-
erty (as distinguished from an estate or interest in the
property) change at, or after, and because of, the
donee’s death. It is perfectly clear that the donor by
adopting a trust form of conveyance, manifested her
intention that the property should not come into the
present possession of the beneficiaries. By providing
in effect for the termination of the trust after death,
the possession is made to take effect at that time.
While it is true that the trust may be said to take effect
in enjoyment at once, the settlor by imposing the trust
has made a transfer of the corpus, which not only was
intended to, but actually does, take effect in possession
after death. From its very nature a trust deprives the

beneficiaries of possession as long as the trust con-
tinues.’’ (R. 34-5.)

* It should be added that the learned Judge of the District Court in his
opinion cites the case of Shukert v. Allen, 6 Fed. (2d) 561, in the Cirenit
Court of Appeals (R. 36), but seems unaware of the fact that this decision
had been reversed by this Court in Shukert v. Allen, 273 U. 8. 545. Strange
too, - cites Nichols vr. Coolidge, 4 Fed. (2d) 112, in the District Court
(R. 37), but
reviewed by this Court on writ of error. Nichols v. Coolidge, 274 U.
531. It is also strange that Judge Thomson, although he cites cases
sundry State Courts as to State statutes, nowhere mentions the
of the Circuit Court of Appeals for the Eighth Circuit
Northern Trust Co., 24 Fed. (2d) 91, which was later affi
material to the present case, by this Court. Nor does he ci
the decision of Judge Rose in Curley v. Tait, 276 Fed. 840,
which was absolutely on all fours with the case at bar.

And again, later on in his opinion, he says:

‘The persons who were to take the corpus could not
be determined until after the founder’s death. How
could it be said, therefore, that either the property or
an interest therein is in possession or enjoyment at a
time when the person who is to own the property is not
ascertained’’? (R. 37.)

Now, of course, it is obvious that this reasoning is alto-
gether inconsistent with the decision of this Court in—
Reinecke v. Northern Trust Co., 278 U. 8. 339.

That case involved five irrevocable trusts, in all of which
it was provided that the corpus should not come into the
possession of the beneficiaries until after the grantor’s
death. Some of them provided for accumulation of the in-
come in whole or in part during the grantor’s lifetime (see
report of same case in the lower Court, 24 Fed. 2d 91, 92),
and some of them provided that some or all of the income
should be paid to beneficiaries during the grantor’s lifetime,
though the corpus was not to come to them until after her
death. This Court said:

‘But the question much pressed upon us remains,
whether, the donor having parted both with the posses-
sion and his entire beneficial interest in the property
when the trust was created, the mere passing of pos-
session or enjoyment of the trust fund from the life
tenants to the remaindermen after the testator’s death,
as directed, and after the enactment of the statute, is
included within its taxing provisions. That question,
not necessarily involved, was left unanswered in Shu-
kert v. Allen, 273 U. S. 545. There the gift of a re-
mainder interest, having been made without reference
to the donor’s death, although it did in fact vest in pos-
session and enjoyment after his death, was held not to
be a transfer intended to take effect in possession or
enjoyment at or after the donor’s death, and for that
reason not to be subject to the tax. But here the gift
was intended to so take effect, although the transfer
which effected it preceded the death of the settlor and
was itself not subject to the tax unless made so by the
circumstances that the possession or enjoyment passed
as indicated.’’ (278 U. S. 347.)

30

Again, this Court said:

‘‘One may freely give his property to another by ab-
solute gift without subjecting himself or his estate to a
tax, but we are asked to say that this statute means
that he may not make a gift inter vivos, equally abso-
lute and complete, without subjecting it to a tax if the
gift takes the form of a life estate in one with remain-
der over to another at or after the donor’s death. It
would require plain and compelling language to justify
so incongruous a result and we think it is wanting in
the present statute.’’ (278 U. 8S. 347.)

After this authoritative interpretation of the law, it is
obvious that the foundation of Judge Thomson’s opinion is
cut away, and that the superstructure must fall.

Under such circumstances it would be a waste of time
to discuss decisions of State Courts construing State stat-
utes which were relied upon by Judge Thomson in the Court
below (R. 36). We may remark in passing, however, that
one patent fallacy in attempting to apply State cases as
authorities upon the construction of the Federal statute
is that the State cases related to taxes upon the several
estates or legacies, whereas the Federal Tax is on the
estate as a whole. In other words, if a statute taxes the
transfer of any individual estate which vests in possession
after the grantor’s death, it may plausibly be contended
that where a remainder is to vest in possession after death,
the remainder must be taxable, though supported by a par-
ticular estate which vested in the grantor’s lifetime; but
where the tax is laid upon the passing of the estate as an
entirety, it makes absolutely no difference to whom it goes
so long as it passes from the grantor, and the shifting of
estates in the property from one Gee RLdb to another is
quite immaterial.

The distinction made in the last paragraph is not the
technical distinction between a tax on the right to transmit
and a tax on the right to receive, but between a tax on the
transfer (or receipt) of the estate as a whole and a tax on
the transfer (or receipt) of particular legacies, shares or
estates.

31

The late Judge John C. Rose in Curley v. Tait, 276 Fed.
' 840, one of the earliest cases construing the Federal estate
tax laws, a case practically identical on the facts with the
case at bar, with that legal perspicacity which was so
characteristic of him, anticipated the decision of this Court
in Reinecke v. Northern Trust Co., 278 U. 8. 339, saying:
‘Tf all beneficial ownership and possession irrevoca-
bly passes from the transferor at the time of the trans-
fer, it would seem to be immaterial whether it goes to
one person or to several, and, if to several, whether
their enjoyment is to be simultaneous or successive,
and, if the latter, at what time or upon the happening
of what event the rights of one give place to those of

the other’’ (276 Fed. 842).

The Reservation of a Contingent Life-Estate in Remainder.

The only possible distinction between the present case
and Reinecke v. Northern Trust Co. is that here a contin-
gent equitable life estate was reserved to the grantor if
she should survive her husband, Barney May,—an event
which never happened—whereas in Reinecke v. Northern
Trust Co. nothing was reserved to the grantor beyond a
power to alter the trusts with the consent of all or a ma-
jority of the beneficiaries, and a power to supervise the
investment of the trust funds and vote the trust stocks.

Now we have the simple case where a woman settles
property upon trust for her husband for his life with re-
mainder to herself for her life if she should survive him,
and after her death to her children or their issue. In order
to support the decision below the Government must con-
tend that the reservation of this contingent life estate to
the grantor, a reservation which never came into effect
and from which she never derived the least benefit, never-
theless makes the entire transfer taxable.

In this connection, when we speak of the equitable life
estate in remainder reserved to Mrs. May as ‘‘contingent,”’
we are not using that word in the sense in which it is used
in the law of real property. Technically, no doubt, the

32

remainder was vested, as the only contingency was the
termination of the preceding estate before the expiration
of the life estate in remainder. But tax laws are practical
matters, and do not regard the technicalities of the feudal
law of real property. For all practical purposes, Mrs,
May’s estate in remainder was a contingent one, and of
very problematical value. So, where property is limited
to A for 2,000 years, remainder to B for life, remainder
to C in fee, the remainder to B is technically vested, but
not even an antediluvian patriarch could have the remotest
hope of ever enjoying it, and it could not be sold for the
tenth part of 1a peppercorn.

Under Section 402 (c) of the Revenue Act of 1918, that
which is to be included in the gross estate is ‘‘any interest
** * of which the decedent has at any time made a transfer
or with respect to which he has at any time created a trust
* * * intended to take effect in possession or enjoyment at
or after his death’’—that is to say, ‘‘any interest’’ of which
the decedent has reserved to himself the benefit during his
life.

As demonstrated by Reinecke v. Northern Trust Co., 278
U. 8S. 339, an ‘‘interest’’ in property is transferred, or
setlted in trust, so as to take effect in possession or enjoy-
ment at or after the grantor’s death, only when the bene-
ficial enjoyment of that ‘‘interest’’ is reserved to the
grantor during his life. It is immaterial that a remainder
can vest in possession only after the grantor’s death if it is
supported by a particular estate which vests in possession
during his lifetime.

Now, in the ordinary case where the grantor reserves to
himself a certain proportion or part of the income for his
life, it is quite clear that the ‘‘interest’’ which is settled to
take effect in possession or enjoyment after his death, is the
same proportion, or corresponding part of the principal. |
This has been consistently recognized by the Treasury Regu-
lations :

33

‘Where the grantor reserves a proportionate part
of the income, only a corresponding proportion of the
property should be included in the gross estate, unless
the transfer was made in contemplation of death. If,
for example, he reserves one-half of the income, the
value of one-half of the property transferred should be
included in the gross estate. If he reserves an annuity,
so much of the property as is necessary to produce the
annuity should be included in the gross estate. Where
the property does not produce income, its value as of
the date of the decedent’s death should be ascertained,
and so much of this sum as is necessary to produce the
annuity should be included in the gross estate.’’

Regulations 37, Art, 24 (as to the Act of 1918).

Cf. Regulations 63, Art. 19 (as to the Act of 1921);
Regulations 68, Art. 18 (as to the Act of 1924) ;
Regulations 70, Art. 18 (as to the Act of 1926).

Where the reservation is of some definite proportion, or
some fixed part—e. g., an annuity—of the income, the com-
putation is comparatively easy, and the case perfectly clear.
If the grantor reserves one-half of the income during his
life, the “‘interest’? which the grantor has transferred in
such a way as to take effect ‘in possession or enjoyment
after his death is one-half of the corpus. If the grantor
reserves an amount of $10,000, the ‘‘interest’’ so settled is
so much of the corpus as will produce a net income of $10,000
a year.

If the reservation is of some trivial or insignificant right.
not affecting in any substantial degree ‘the economic
benefits or enjoyment of the property,” it may be wholly
disregarded. This is demonstrated by Reinecke v. North-
ern Trust Co., 278 U. 8. 339, where this Court held that the
reservation to the grantor of a right to control the trust
investments, and to vote the trust stocks, during his life,
and even to alter the trusts with the consent of a majority
of the cestuis que trust, is immaterial.

34

On the other hand, if the entire income is reserved to the
grantor subject only to some absurdly improbable contin-
gency —for example, unless ‘the independence of the
United States shall cease—-we suppose no one would
doubt but that the contingency should be disregarded and
the transfer as a whole held to take effect in possession or
enjoyment after the grantor’s death.

In the present case, the whole income was in a certain
contingency — which never happened — reserved to the
grantor. She never in fact received any benefit from the
reservation, and she had but a slim chance of ever doing
so—how slim we do not know.

The record does not disclose the age of either Mrs. Paul-
ine May, the grantor, or Barney May, her husband, so that
we can not compute by any mortality tables the value of
the chance that Mrs. May might survive her husband.

The contingent and problematical benefit reserved to
Mrs. May was even more illusory, uncertain and negligible
as a reservation of ‘‘economic benefits and enjoyment of
the property’? than the reservation of a right to control
investments and to vote in respect of the trust stocks, both
of which were held immaterial in Reinecke v. Northern
Trust Co., 278 U. 8. 339.

Three views are possible, indeed, in such a case as the
present, as it would seem to us:

1. That in view of the uncertain and problematical
character of Mrs. May’s reserved equitable life estate
in remainder,-it should be disregarded for Federal tax
purposes,

2. That regard should be had to the events which
have happened, so that if Barney May had predeceased
his wife and she had come into enjoyment of her equi-
table life estate, then the transfer should be deemed
to have taken effect in possession or enjoyment at or
after her death, but that in the events which have
actually happened in the present case, no tax in re-
spect of this transfer should be imposed.

35

3. That the Court should endeavor to calculate by
reference to mortality tables the value of Mrs. May’s
equitable life estate, and treat as taxable, at its value
at the time of her death, that portion of the trust prop-
erty a present estate in which for Mrs. May’s life
would, at the time of the execution of the deed, have
equalled the value of her contingent life estate in re-
mainder in the whole. .

The third of these alternatives seems to have been that
preferred by Judge Rose in Curley v. Tait, 276 Fed. 840,
842, but all that he decided, on this branch of the case, was
that the reservation of the contingent life estate in remain-
der did not render the whole property taxable. At all
events, this Court has said that mathematical formulas are,
if possible, to be avoided in matters of taxation, and the
complexities of any such method would seem to us to render
preferable one or the other of the other two possible views
above mentioned, both of which lead to the same result on
the facts of this case.

As laid down in Reinecke v. Northern Trust Co., if Mrs.
May had not in her lifetime ‘‘any control over the economic
benefits and enjoyment of the property’’ (278 U. S. 346),
no part of the trust property is taxable. The tax is imposed
upon the shifting of the economic interests in the trust prop-
erty (tbid.) ; and the question is whether in any proper sense
of the word Mrs. May could be held to have had during her
lifetime ‘‘any control over the economic benefits and enjoy-
ment of the property,’’ or whether there could be held to
have been upon her death any real passing of the economic
interest in the property from her. It would seem that the
contingent life estate reserved to Mrs. May was too uncer-
tain and illusory in character to be regarded at all, particu-
larly in view of the fact that Mrs. May predeceased her
husband, so that this estate never actually came into posses-
sion or enjoyment. In the events which have happened,
Mrs. May parted with the entire estate as completely as if
she had made an outright deed of the same. From the day
of the execution of the deed she never had one particle of

beneficial interest or enjoyment in the property. She de.
rived no economic benefit from the same.

If it be said that it is impossible to determine whether
Mrs. May reserved any substantial benefit, and if so how
much, the result would be that the transferred assets should
not be included in the gross estate. For, the rule, of course,
is well-settled that prima facie, a citizen is free from tax,
and that in order to hold him liable to tax all doubts must
be resolved in his favor.

Reinecke v. Northern Trust Co., 278 U. S. 339,
348 ;

Gould v. Gould, 245 U. S. 151, 153;

United States v. Merriam, 258 U. S. 179, 187.

It is Unnecessary Now to Determine How Much, if Any, of
the Trust Property Should Be Included in the
Gross Estate.

The Commissioner of Internal Revenue included the whole
value of the trust property in the gross estate, and the
Government assessed and collected a tax accordingly. If
any part of that value ought not to have been included in
the taxable estate, the tax so collected was excessive, and
the plaintiffs were entitled to recover something.

At the present time, therefore, all that it is necessary for
the Court to decide is that the whole value of the transferred
property cannot lawfully be included in the taxable estate.
If the tax on any portion of that value was improper, it
was error to strike out the statement of claim, and thus, in —
effect, sustain a demurrer thereto. In Curley v. Tait, 276
Fed. 840, 842, already cited, Mr. Grafflin, had made a deed —
of trust in trust for his wife for her life, with remainder —
to himself for his life, and with ultimate remainder in fee to
a charity. The case arose on demurrer to the declaration;
and Judge Rose, after pointing out that the utmost which
could be taxed was that interest, if any, in the property of
which the grantor retained the benefit during his life, and

37

after pointing out the difficulty in calculating the amount of
that interest, particularly in view of the fact that in the
events which had happened he actually had no benefit from
the trust property during his life, said:

‘‘At the hearing the government was so confident
that it was entitled to tax the full value of his interest,
and the plaintiff so certain that none of it should be
taxed, that neither of them discussed the question now
mooted. As from what has been said it follows that
the entire interest was not taxable, the demurrer to
so much of the plaintiff’s declaration as seeks to re-
cover the tax exacted on all of it must be overruled.
The question of whether the government was en-
titled to any part of the tax less than the whole need
not be passed upon, and should not be, until the Court
is enlightened by further argument’? (276 Fed. 842).

We submit, therefore, that beyond doubt, under the deci-
sion in Reinecke v. Northern Trust Co., this transferred
property cannot, to the extent of the full value thereof, be
treated as property of which Mrs. May made a transfer to
take effect at or after his death, and that at most only that
proportion of the trust property a life estate in which at
the time of the execution of the deed, for a woman of Mrs.
May’s age, would have been equal in value to a contingent
life estate in the whole to a person of her age, expectant
upon the determination of a preceding life estate to a per-
son of the age of her husband.

The decision of the Cireuit Court of Appeals in the
present case was rendered on January 9, 1929. The brief
per curiam opinion states merely ‘‘this case is distinguish-
able from Nichols v. Coolidge, 274 U. S. 531, on the facts’’
(R. 41), but makes no mention of Reinecke v. Northern
Trust Co., which had been decided in the Cireuit Court of

38

Appeals some months before, and must have been pendi
in this Court when the present case was argued below. In
fact, Reinecke v. Northern Trust Co. was decided by this
Court exactly one week before the Circuit Court of Ap.
peals announced its decision in the present case, and on
motion for a reargument, the decision of this Court in the
Reinecke Case was strongly pressed on the Circuit Court
of Appeals, but without avail. It is a matter of common
knowledge, however, that on motion for a reargument a
Court is apt to exercise the Christian virtue of persever-
ance, and it is therefore not incomprehensible that the Cir-
cuit Court of Appeals should adhere to a decision which
seems to us to ignore a controlling decision of this Court.

It is not surprising, therefore, that Judge Dickinson, in
the District Court for the Eastern District of Pennsyl-
vania, has refused to follow the decision of his own Circuit
Court of Appeals in the case at bar, on the ground that it
is inconsistent with the decisions of this Court in Nichols
v. Coolidge, 274 U. S. 531, and Remecke v. Northern Trust
Co., 278 U. S. 339.

Carnill v. MeCaughn, 30 Fed. (2d), 696, 699.

We are confirmed in the belief that the decision of the
Court below is inconsistent with the decision of this Court
in Reinecke v. Northern Trust Co., 278 U. 8. 339, by the
fact that the learned counsel for the Government in their
brief in the Circuit Court of Appeals, filed before the deci-
sion of this Court in Reinecke v. Northern Trust Co., con-
ceded that the decision of that case would in all probability
control this case. The brief stated:

‘«The attention of the Court is called to the fact that
the issue presented by the present case will probably
be settled by the decision of the Supreme Court in
Reinecke, Collector, v. The Northern Trust Co.,* * °.
It seems likely the decision of the Supreme Court in
this case will largely if not entirely settle the conten-
tion now existing between taxpayers and the Govern-
ment relative to transfers of the character under dis-
cussion in the case at bar.’’ (Brief for Appellee be-
low, pp. 24-5.)

39
CONCLUSION.

Upon the whole, therefore, we respectfully submit that on
each and all of the three grounds above set forth, the judg-
ment for the defendant should be reversed, and the cause
remanded for further proceedings.

ARTHUR W. MACHEN, JR.,

Attorney for Safe Deposit and
Trust Company of Baltimore,
Amicus Curiae.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386007_0361%3A6. Public record. Not legal advice.