Brief on Behalf of Amicus Curiae — Helvering v. Hallock

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. “DES 11 193%

CHARLES u 768 1E Cn A

ERK

a Supreme Court of the: Anie

co0CcroBkR TERM, 1939.

No. 111.

GUY ss HELVERING, COMMISSIONER OF INTERNAL l

a REV EUS, PETITIONER,

4 ü a VS.

* MARY Q. HALLOCK, EXECUTRIX OF THE ESTATE

J . OF HENRY HALLOCK, DECEASED, °

y RESPONDENT.

7 { : e 4 .

i No. 183.

WALTER J J. ROTHENSIES, COLLECTOR OF INTERNAL

REVENUE, PETITIONER,

VS.

LINFORD B. CASSELL, EXECUTOR OF THE ae.

OF GEORGE F. UBER, DECEASED,

RESPONDENT.

ON WRITS or CERTIORARI TO THE UNITED STATES CIRCUIT

COURTS OF APPEALS FOR THE SIXTH CIRCUIT

AND THIRD CIRCUIT.

—

J. so. BRIEF or AMICUS CURIAE.

BLATCHFORD: DOWNING,

* McCune, CALDWELL & Downline,

, 2000 Fidelity Building,

Kansas City, Missouri,

Amicus Curiae.

— aanss A PLE

INDEX

Nature of Cases and Questions Involved

Summary of oe Argument 4

n Argument

by its terms nor its spirit and intent to the

_ trusts here involved

Il. The incidence of the estate tax is dependent

upon termination by death of the POWER TO

CONTROL further the ultimate devolution of

property. It is not imposed upon mere change

in economic benefit resulting nn acts com-

pleted inter vivos

III. Helvering vs. St. Louis Union Trust Co. and

— Beeker vs. St. Louis Union Trust Co. were

correctly decided. Klein vs. United States is

IV. Independently of constitutional power, it is not

within the intent of Congress to subject to es-

tate tax transfers completely and irrevocably

fixed by act inter vivos when the transfer is

EQUIVALENT OF A LIFE ESTATE IS .

SERVED

Sar TABLE or CASES

Becker vs. St. Louis Union Trust Co., 296 U. S. 48

Guy T. Helvering, Commissioner, Petitioner, vs. Mer-

cantile Commerce Bank & Trust Company, a cor-

poration, and Virginia G. Donnelly, co-administra-

tors de bonis non of the Estate of Paul F. -Donnelly,

deceased, respondents, 25 11572 (reported in 38

B. T. A. —

Interest of Amicus Curiae, Blatchford Downing sin J

I. Section 302 (c) of the Act is applicable neither

distinguishable ei

not in contemplation of DEATH AND NO

Chase National Bank vs. U. S., 278 U. S. 327. 16, 18, 21

II —— 8 INDEX

Heiner vs. Donnan, 285 U. S. 312 2, 28, 24

Helvering: vs. Bullard, 303 U. S. 297 ELI

Helvering vs. City Bank Farmers Trust co. 296

. 9, 19

Helvering vs. St. Louis Union Trust Co., 296 U. S. 39 17

_ Klein vs. United States, 283 U. S. 231 N 6, 19, 20

_ May vs. Heiner, 281 U. S. 238, I. c. 243. 17

Porter vs. Commissioner, 288 U. S. 436, I. c. 4444 14

Reinecke vs. Northern Trust Co., 278 U. S. 339—. 15

Sanford’s Estate vs. Commissioner, (No. 34, Present

Term) 8 i ee + 41. Ed. (Adv. Op.) 53...

pee es — * 6, 11, 14, 17, 18, 22, 23

EP de

_ STATUTES

Sec. 302 (e) and (d), Revenue Act. 4, 7, 8, 10, 18, 19

Vol. 3, C. C. H. Service, 1939, Par. 3417.02, p. 5620— 11

Webster’s New International Dictionary” 12

Supreme Court of the United States

- OCTOBER TERM, 1939.

2 No. 111.

Guy : HELVERN G. COMMISSIONER OF INTERNAL

‘REVENUE, PETITIONER,

VS.

MARY Q. HALLOCK, EXECUTRIX OF THE ESTATE

OF HENRY HALLOCK, DECEASED,

RESPONDENT.

No. 183.

WALTER J. ROTHEN IES, COLLECTOR OF INTERNAL

REVE , PETITIONER,

Vs. oe

LINFORD B. CASSELL, EXECUTOR OF THE ESTATE

OF GEORGE F. UBER, DECEASED,

ses RESPONDENT.

ON WRITS OF CERTIORARI TO THE UNITED STATES CIRCUIT

COURTS OF APPEALS FOR THE SIXTH CIRCUIT

| BRIEF OF AMICUS CURIAE IN SUPPORT OF

A AFFIRMANCE. .

4 nne of l Curios, Diatehiieed Deb

| ‘The interest of the undersigned, an attorney of the

Bar of this Court, is that he is attorney for the respond-

‘2

ent 3 in a certain cause entitled “Guy T. Hel-

vering, Commissioner; Petitioner, v. Mercantile Com-

merce Bank & Trust Company, a corporation, and Vir-

3 ginia G. Donnelly, co-administrators de bonis non of the

Estate of Paul F. Donnelly, deceased, respondents, No.

11572,” now pending before the United States Circuit

Court of Appeals for the Eighth Circuit on petition by

the Commissioner for review of the decision of the same

matter by the United States Board.of Tax Appeals

reported in 38 B. T. A. 1234, which cause involves as a

major contention on behalf of the Commissioner, the same

‘point that is primarily involved in the cases at bar.

Nature of Cases and Questions Involved. ib

* the Hallock case decedent, Henry Hallock, as gran-

tor during his lifetime, by act inter vivos and not in con-

templation of death, created a trust for the benefit of his

wife, Anne Lamson Hallock, in contemplation of divorce

between them, for her life with-remeinder—over—in—fee-

-te—the—Halleel—ehildren, but with provision that if the

life beneficiary, Anne, predeceased grantor, Henry Hal-

lock, the property should revert to said grantor fer—his.

., tife-with-remainder-over to the Hallock children.

In the Rothensies case, the decedent, George F. Uber,

as grantor, in his life, by act inter vivos and not in con-

templation of death, created a trust for the benefit of

his fiancee, R. S., with provision that if the beneficiary,

R. S., predeceased grantor, the trust properties should re-

vert in fee to grantor, but if the beneficiary should after

the marriage, survive the grantor, the trust should ter-.

minate and the properties remain vested in the bene-

ficiary, freed from the trust. |

In each case the grantor predeceased the beneficiary.

The question presented is: Does the existence of the

possibility of reverter to grantor in the event of the death

of the first beneficiary in grantor’s life, operate to cause:

incidence of the estate tax upon the estate of grantor at

his death, the first beneficiary having survived. A dif-

ference between the two cases consists in the fact that

in the Hallock case the first beneficiary’ s estate was for

life only with remainder to the Hallock children subject

to the intervening possibility of reverter to grantor -fer

the-remainder_of-his—life-only—and-then to the children,

while in the Rothensies case there was no remainder

over to third parties. The difference is, we submit, im-

material in view of the suggestions which we desire to

present for the Court's consideration.

SUMMARY OF THE ARGUMENT.

(a)

The scope and express terms of the provisions of Sec.

302 (e) and (d) are restricted in application to include

in gross estate, transfers inter vivos which are of types

reasonably adaptable for use as devices to evade the tax,

i. e., to retain economic benefit; accomplish the equiva-

lent of a testamentary disposition at death; and yet avoid

the estate tax. The transfers involved herein are the

diametric opposite. Grantor did not retain but alien-

ated the economic enjoyment. He did this for the dura-

tion of the life of the first beneficiary, an indeterminate ©

term capable of exceeding grantor’s life. The reverter,

to grantor, contingent upon death of the first beneficiary

and grantor’s survivorship, would if it materialized de-

feat instead of accomplish the equivalent of a testamen-

tary disposition free from estate tax.

The provisions of Sec. 302 (c) and (d) create excep-

tions to transfers inter vivos, which would otherwise be

exempt from estate tax. They cannot be enlarged beyond i

their strict language, nor interpreted to include trans-

fers having none of the fundamental characteristics of

testamentary dispositions. The intent of Congress to pre-

serve the distinction between the scope of the Gift Tax

Act and that of the Estate Tax Act must be given effect.

Sanford’s Estate v. Commissioners (No. 34. Present

Term) emphasized that the distinction is to be preserved.

| (b) |

„ While the Estate Tax is properly imposed upon a

shift of economic benefits caused by death, regardless of

technical refinements of title, the question whether the

shift was caused by death, as the generating source, or

by act inter vivos, is determined by the test whether at

| 5 |

decedent’s death grantor had retained any power to

change at will the ultimate devolution of the property.

If this power to change the economic shift was termi-

nated at and by death, the Estate Tax applies. If it was

terminated by act inter vivos (and not in contemplation

of death, or with retention of beneficial ownership and

enjoyment ‘for. duration of grantor’s life or for period

equivalent thereto in practical result) the — Tax does

not apply.

le)

The possible reverter to grantor contingent upon his

survivorship of the life beneficiary could not materialize, .

or take effect in possession “or enjoyment at or after

grantor’s death. It had to do so, if at all, during his

life. In such event it would thereafter be subject to estate

or gift taxes. |

(d)

Since grantor's interest, and the fact of retention or

no retention, was contingent upon grantor's survivorship

of the life beneficiary, the taxability of the fund is like-

wise contingent on such survivorship by grantor. Since

the contingency did not occur, taxability did not occur.

(e)

The government is not cheated of its taxes. The

contingent reverter, not having vested or materialized, is

as if it had not been. If it had materialized and been

transformed into a vested estate in grantor, it would

thereafter be: subject to estate tax or gift tax upon its

termination by death or alienation by gift.

a <« :

To impose an estate tax when there was no vested

property interest capable of transfer from dead to living

or | Capable of valuation ta ‘measure the tax at death,

Wine be so arbitrary and fictitious. as to violate the in-

tent of Congress to preserve the distinction between Es-

tate Tax ang Gift Tax, and * also violate the Fifth

Amendment. , :

8) 8

The St. Louis Union Trust Co. cases were in the light

_ of the subsequent manifestations of the Congressional in-

tent, as indicated in Sanford’s Estate v. Commissioner,

correctly decided. * v. United States is distinguish-

able. ‘

. 0 =

: I. 5 5 *

Section 302 (e) of the Act Is Applicable Neither by Its

— Trerms Nor Its Spirit and Intent to the a

N Trusts Here Involved.

ln contending that Section 302 (c) of the Act is ap-

plicable to the trusts here involved, we respectfully sug-

gest that counsel for the Commissioner overlook the es-

- sential distinction between fetention of a life estate pre-

ceding the estate granted and the creation of a contingent

remainder, or a mere possibility of reverter after the es-

tate granted. Retention of a life estate assures to grantor

the economic enjoymerit for life and accomplishes the

equivalent of a testamentary disposition thereafter. The

creation of a contingent remainder or mere possibility of

reverter in favor of grantor after the terminatjon of the

life estate granted, on the other hand, is precisely the

opposite. It relinquishes present enjoyment; and the pos-

"sible reverter, if it ever materializes, by the very same

‘contingency defeats accomplishment of the equivalent of

a testamentary disposition. It revests the property in the

grantor, thereafter.to become subject to estate tax on his

death. n

Section 302 (e) of the Act as amended by the joint

resolution of March 3, 1931, and the Revenue Act of 1932,

provides for inclusion in the gross estate to the extent of

any interest of which decedent has at any time made a

transfer, intended to take effect in possession or enjoy-

ment at or after his death?“ This is the fundamental or

paramount provision of the section, of which the subse-

quent clauses are enlargements for the safeguarding of

this fundamental clause. Obviotisly_the’ possible re-

verters here under consideration can hever take effect

at or after grantor's death. On the direct contrary, they

can only take effect, if at all, in his life. His death occur-

ring prior to the death of the life beneficiary, will com-

pletely defeat them.

Coming to the succeeding clauses of the section, the

grantor in these trusts has not retained for his life” or

for any period having relation to his death within the

meaning of the section, the possession or enjoyment of,

or the right to the income from, the property. On the

contrary, far trom retaining such, he has expressly alien-

ated the possession, enjoyment and Tight to the income

for the life of the first beneficiary, an indefinite period of

duration unknown to grantor and beyond his control;

with possibility, as actually transpired, of depriving him

of all further ownership, control or enjoyment.

The creation of this reverter being only a -possible

reverter dependent upon events beyond grant: , control

was not a retention of the use, possession or income. from

the property, or of control thereof. It was on the con-

trary a divestiture thereof. If, the contingency occurred

it would result in the vesting of a new or.subsequent

estate, springing into being only upon the happening of

the contingency (thereafter to be subject to gift or es-

tate tax). It would not be an estate retained by him,

nor one of duration extending from the date of thé grant

to his death equivalent to a retention of ownership for

„life. The provisions of Section 302 (e) and (d) sub-

jecting to the estate tax certain types of transfers inter

vivos are limited to those types of transfer which would

be appropriate and reasonable to be resorted to by any-

one seeking to avoid estate taxes, while at the same time

zccomplishing the equivalent of a taxable testamentary

disposition. It is entirely competent and appropriate that

Congress should by these provisions include within tax- —

able transfers all such devices as might otherwise be

reasonably resorted to to avoid the tax.

The transfers in the cases at bar are not such that any |

person would reasonably resort to them to evade the es-

tate tax by retaining the equivalent of beneficial enjoy-

ment for life, and accomplishing the equivalent of a tes-

tamentary disposition thereafter’ On the contrary, such

transfers as these would defeat both objects. Instead of

retaining beneficial enjoyment for life or a period having

relation to the duration of donor’s life, the grantor has *

alienated the beneficial ownership, and for à period to

be determined by the life of the life beneficiary, a period

which has no relation to grantor’ s life and may or may

not exceed it. Instead of accomplishing the equivalent

of a testamentary disposition after his own death, he

has created a possibility that at the death of the life bene-

ficiary the property may revest in grantor thereafter to

be subject to estate taxes on his subsequent deatlt.

In Helpering v. Bullard, 303 U. S. 297, the court 12500

n further vindication of the exaction is the au- /

. of Congress to treat as testamentary trans- |

fers with reservation of a power or an interest in 5

the donor. The legislative history of the Joint Reso- N

lution, to which reference is made in Hassett v.

J Welch, 303 U. S. 303, post, 858, 58 S. Ct. 559, decided

this day, demonstrates that the purpose of the legis-

lation was to prevent avoidance of estate taxes. As

has been said by the Court of Appeals of New York:

It is true that an ingenious mind may devise other

means of avoiding an inheritance tax, but the one

commonly used is a transfer with reservation of a life

estate.’ ” °

In Helvering v. City Bank Farmers Trust Co., 296

v. s. 85, the court said, I. e. 89: 2

Congress may adopt a measure reasonably cal-

culated to prevent avoidance of a tax. The test of

validity in respect of due process of law is whether

the means adopted is appropriate to the end. A leg-

islative declaration that a status of the taxpayer 's

ereation shall, in the application of the tax, be deemead

the equivalent of another status, falling normally. -

within the scope of the taxing power, if reasonably

requisite to prevent evasion, does not take property

without due process. But if the means are unneces-

sary or inappropriate to the proposed end, are un-

reasonably harsh or oppressive, when viewed in the

light of the expected benefit, or arbitrarily ignore

recognized rights to enjoy- or to convey individual

property, the guaranty of due process is infringed.” 8

The provisions of Sections 302 (e) and (d) are meas-

ures .reasonably calculated to prevent avoidance of the

tax, to the extent, and only to the extent, that they are

applied strictly in accordance with their terms, to trans-

fers which might reasonably have been Tesorted -to as

devices for avoidance of the tax. ö

_ These various provisions of Section 302 (c) and (d)

relating to transfers inter vivos under which reservations

are made of powers or interests for the grantor's lite,

powers of revocation or modification, etc., were grafted

onto the main provision of subjecting to the estate tax

transfers to take effect in possession or enjoyment at or

after grantor’s death, as extensions thereof to prevent. |

evasions of the estate tax while accomplishing practically

testamentary dispositions. They create exceptions to oth-

.erwise estate tax exempt transfers inter vivos, reasonably "

necessary to effectuate the true Scope and purpor ‘the

estate tax. 7 1

To apply them to the transfers invol in the cases

at bar,-one a trust to secure alimony payments .for life,

the other to constitute a pre-nuptial gift in the nature of

a marriage settlement, neither purpose being even re-

.motely testamentary or tax evasive would be hyper-tech-

nical in the extreme.

. The transfers were preeminently. for purposes ‘related

to life, not death. It was, of course, necessary to provide

for events of termination and subsequent devolution to

avoid hiatus in the beneficial title, and oe Rule Against

Perpetuities.

The Court should not engraft by judicial decision

further extensions of these provisions of Section 302 (e)

and (d) beyond what the Congress has specifically en-

acted. Nor should it by judicial interpretation so enlarge

the scope and effect of these exceptions to freedom of

gifts inter vivos from death duties, as to distort the true

scope and purport of the Act as applying solely to trans-

fers essentially testamentary and transfers resorted to as

substitutes for testamentary transfers to evade estate

taxes.

The essential distinctions between gift taxes and es-

tate taxes emphasized and given effect in Sanford’s Es-

tate v. Commissioner should be preserved.

The purposes of the amendments in 1932 to 8

302 (e) adopted to cover other ingenious devices to evade

the estate tax are thus stated in the Senate Finance Com-

mittee's Report on the Revenue Bill of 1932 (Vol. 3,

C. C. H. Service, 1939, Par. 3417.02, p. 5620):

“(1) The insertion of the words ‘or for any

period not ascertainable without reference to his

death,’ is to reach, for example, a transfer where

decedent reserved to himself semiannual payments

of the income of a trust which he had established,

but with the provision that no part: of the trust

income between the last semiannual payment to him

and his death should ‘be paid to him or his estate, or

where he reserves the income, not necessarily for the

remainder of his life, but for a period in the ascer-

tainment of which the date of his death was a neces-

sary element. 3

(2) The insertion of the words or for any

period which does not in fact end before his death,

which is to reach, for example, a transfer where

decedent, 70 years old, reserves the income for an

extended term of years and dies during the term, or

where he is to have the income from and after the

death of another person until his own death, and such

other person predeceases him. This is a clarifying *

change and does not represent new matter.“

. with respect to the possible applicability of the first

paragraph above quoted to the cases at bar it is to be

noted as elsewhere herein pointed out that the grantor

did not “reserve” or “retain” the-trust income or the use,

enjoyment, etc., of the property. Reserve“ and “retain”

signify continuing to hold what one now holds.“ Grantors

herein alienated use, possession, ownership, enjoyment —

and income irrevocably without power to recall. The

mere contingent possibility of a subsequent new revest-

ing springing from the alienation on the death. of the

first beneficiary, if grantor survived, is not a retention

or reservation nor one for a period in the ascertainment

of which the date of the om death was a necessary

element.

With respect to the es applicability of the second

paragraph above quoted, note the additional clause in the

next to the last sentence or where he is to have the

income from and after the death of another person until

his on death, and such other person predeceases him.”

In the cases at bar the “other person,” i. e., the

first beneficiary, did not predecease grantor. This lan-

guage explanatory of the Congressional intent completely

and specifically negatives and rebuts the applicability.

of Section 302 (e) to the cases at bar. On the other

‘hand it confirms our contention that if the first beneficiary |

had predeceased the grantor, grantor would then be re-

vested with an estate which would become taxable vba i

his subsequent death thereafter or subsequent alienation’

by gift. This exactly confirms that if the one is{ |

contingent the taxability is contingent.

The transfers in the cases at bar are not w ithin the

letter and certainly not within the spirit and intent of

these amendatory provisions which are themselves excep-

tions to the general rule of estate tax exemption of

transfers inter vivos. 0 ö ä

“Reserve. 2. To keep back; to retain or hold over to a future

time or place; not to deliver, make over, or disclose at once.

Retain. 2. To continue to hold, have, use, recognize, etc.; to

keep in possession, control, use, custody, etc.; to keep; not to lose,

part with, dismiss, or permit to escape.“

Webster’s New International Dictionary.

Again, the property interest which is to bggincluded

in the gross estate is to be valued as of the time of de-

cedent’s death: The only interest in the property trans-

ferred which decedent had at or prior to his death was

the possibility of a reverter which did not materialize

but was. destroyed at his death. This possibility of re-

verter obviously had no value at any time; if the contin-

gency of survivorship occurred, then for the first time,

upon being transformed into. a vested estate, it would.

have value, and would also thereafter be taxable at his

death occurring subsequently. To attempt to create an

artificial value by legislative fiat would be so contrary to

fact and reason as to be utterly arbitrary and violative

of the 5th Amendment. It would be like * à poll

tax upon the man who was not there.”

II.

The Incidence of the- Estate Tax Is Dependent upon Ter-

mination by Death of the POWER TO CONTROL Further

the Ultimate Devolution of Property. It Is Not Imposed |

upon Mere Change in Economic Benefit Resulting from

Acts Completed Inter Vivos.

While it is true that the estate tax is imposed upon

a shift in economic ownership of property regardless of

technical refinements as to the legal title or estate there-

in involved, this tax is not imposed upon all shifts of

‘ownership, but only upon those having their origin in

death as the generating source, as * from acts

completed inter vivos.

To determine whether the economic shift owes its

origin to death on the one hand or to act inter vivos on

the other, the essential test is whether at death decedent .

retained any vestige of power to control the subsequent

devolution of the property, or whether its devolution had

been completely fixed rs recall or change by act in-

ter vivos.

14 an

2 1

* Porter v. Commissioner, 288 U. 8. 436. the court! a

said (I. c. 444):

“But the reservation heré may not be seul

for, while subject to the specified limitation, it made

the settlor dominant in respect of other dispositions N

of both corpus and income. His death terminated that

control, ended the possibility of any change by him,

and was, in respect of title to the property in question,

the source of valuable assurance passing from the

dead to the living. That is the event on which Con-

gress based the inclusion of property so transferred

in the gross estate as a step in the calculation to

ascertain the amount of what in Section 301 is called

the net estate. Thus was reached what it reasonably

might deem a substitute for testamentary disposition.

United States v. Wells, 283 U. S. 102, 116, 75 L. Ed.

867, 875, 51 S. Ct. 446” (italics supplied).

In Sanford’s Estate v. Commissioner, (Docket No. 34,

Present Term) — U. S. , 84 L. Ed. (Adv. Op.) 53,

in construing the applicability . of the gift tax,“which is

to be interpreted in pari materia with the estate tax, the

donor had completely and irreyocably divested himself 1

of all possibility of economic enjoyment beneficial to him- q

. self, of the property prior to the effective date of the

Gift Tax Act, but he had retained the power to control

the ultimate devolution of the property ‘until his later

relinquishment thereof after the effective cate of the Gift

Tax Act.

In Sanford’s Estate v. Commissioner, the court said,

L. Ed. Adv. Op. p. 56:

“Since it was the relinquishment of the power

_ which was taxed as a transfer and not the transfer

in trust, the statute was not retroactively applied.

Cf. Nichols v. Coolidge, 274 U. S. 531, 71 L. Ed. 1184,

47 S. Ct. 710, 52 A. L. R. 1081; Helvering v. Helm-

holz, 296 U. S. 93, 98, 80 L. Ed. 76, 80, 56 8 Ct. 68. .

g “The rationale of decision in both cases is that

‘taxation is not so much concerned with the refine-

ments of title as it is with the actual command over

the property ‘taxed.’ See Corliss v. Bowers, 281 U.

S. 376, 378, 74 L. Ed. 916, 917, 50 S. Ct. K. 5 8

stall v. Saltonstall, supra (276 U. S. 271, 72 L ü

568, 48 S. Ct. 225); Burnet v. Guggenheim, 3

(288 U: S. 287, 77 L. Ed. 752, 53 S. Ct. 369), and that a

retention of control over the disposition of the trust

property, whether for the benefit of the donor or

others, renders the gift incomplete until the power is

relinquished whether in life or at death. The rule

was thus established, and has ever since been con-

sistently followed by the Court, that a transfer of

property upon trust, with power reserved to the donor

either to revoke it and recapture the trust property

or to modify its terms so as to designate new bene-

ficiaries other than himself, is incomplete, and be-

comes complete so as to subject the transfer to death

taxes only on relinquishment of the power at death”

(Italics supplied).

This Court. has held that although a grantor had in

fact transferred in his lifetime the complete beneficial

ownership of property yet, if he had reserved the right

to recall or change the devolution thereof, even though

such right was not in fact exercised, and even though it

could not bé exercised in his own favor, yet the ter-

mination of the right by death furnished the essential

basis for the incidence of the estate tax:

This Court has consistently held that it is the ter-

mination, by _ 2ath, of a retained power to control future

devolution of property that determines incidence of the

estate tax, while, on the other hand, if this termination

of power to control is effected by act inter vivos, the

Gift Tax Act and not the Estate Tax Act applies (assum-

ing the gift is not in contemplation of death, nor with

reservation of life estate to donor capable of being used

as a device to evade).

In Reinecke v. Northern Trust Co., 278 U. S. 339, the

court had held that the falling in of a life estate at death

of the life tenant effecting transfer or econamic shift to

the remainderman under a tfust created inter vivos was

not a transfer having its origin in death as a generating

source, but had its origin in the inter vivos act of the

settlor and hence was not within the terms of the Estate

Tax Act.

Chase National Bank v. U. S., 278. U. S. 327, decided

on the same date, held, on the other hand, that where

life insurance policies had by act inter vivos been made

payable to beneficiaries, but the decedent had retained

the right to recall or change beneficiaries; which right was

terminated only at his death, the proceeds of the insurance

were properly includible in the gross estate for estate tax

purposes. The court in the Chase National Bank case

emphasized that since the transfer. was incomplete and

not beyond control until death, death was the generating

source, the court saying, 73 L. Ed. 409:

“Termination of the power of control at the time

of death inures to the benefit of him who owns the

property subject to the power, and thus brings about,

at death, the completion of that shifting of the eco-

nomie benefits of property which is the real subject

of the tax, just as effectively as would its exercise,

which latter may be subjected to a privilege tax.

Chanler v. Kelsey, 205 U. S. 466, 51 L. Ed. 882, 27

Sup. Ct. Rep. 550.“

1 -

“As it is the termination of the power of dis-

position of the policies by decedent at death which

operates as an effective transfer and is subjected to

the tax, there can be no objection to measuring the

tax or fixing its rate by including in the gross es-

tate the value of the policies at the time of death,

together with all the other interests of decedent

transferred at his death. Stebbins v. Riley, 268 U.

S. 137, 69 L. Ed. 884, 44 A. L. R. 1454, 45 Sup. Ct.

Rep. 424.“

Consequently, if the power to change future devolution

is completely relinquished inter vivos, the act inter vivos

is the cause of the transfer or economic shift and death is

not the generating source. |

In May v. Heiner, 281 U. S. 238, decedent had created

a trust with’ income payable to her husband during his

life and upon his death to decedent for her life with re-

mainder over to her children. The trust was irrevocable.

In holding it not subject to estate tax as the act then

read, the court said (I. c. 243): aw,

“It was not .testamentary in character and was

beyond recall by the decedent. At the death of Mrs.

May no interest in the property held under the trust

deed passed from her to the living; title thereto had

been definitely fixed by the trust deed. The interest

therein which she possessed immediately prior to her.

death was obliterated by that. event.“

Helvering v. St. Louis Union Trust Co. and Becker v.

St. Louis Union Trust Co. Were Correctly Decided.

. Klein v. United States Is Distinguishable.

That Helvering v. St. Louis Union Trust Co., 296 U. S.

39, and Becker v. St: Louis Union Trust Co., 296 U. S. 48,

were correctly decided and reached correct results is, we

submit, amply confirmed by the recent decision in San-

ford’s Estate v. Commissioner (No. 34 Present Term),

decided when the Congressional intent had become more

manifest. Accordingly, the cases at bar should be af-

firmed. The essence of the matter. is, we believe, or

—

in the light of the Sanford’s Estate case.

If we may be permitted to suggest it, does not ie

dissenting opinion in Helvering v. St. Louis Union Trust

Co. overlook, or at least not give sufficient importance to,

the predominate idea that Section 302 (c) of the Act was

to govern gifts inter vivos which, by their provisions,

are “intended to take effect in possession or enjoyment

at or after death” and thereby accomplish the same result

in practical effect as a tes*.mentary disposition? When,

/ °

a 1 © aks,

as in the St. Louis Union Trust Co. case and in the cases : b

at bar, the grantor alienated and divested himself of the

immediate possession or enjoyment, by granting the life

estate to the immediate beneficiary, he effected the dir

opposite of a retention of the possession or enjoymént for

his life or the equivalent, thereof. He alienated them for

the period of the life beneficiary’s life. If the contingent

reverter was, at the death of the first life beneficiary, to

revert to grantor only in the event he ‘was then alive,

obviously it was not one to take effect at or after his

death, but the direct contrary. ;

If the contingency had occurred and the possibility a

reverter had materialized, then grantor would have been

again vested with a life. estate which he had himself

created in his own favor with_remainder-over, but not

with one which he had retained, since he had alienated

it beyond his power to change, dominate or control. It

might then, at his death thereafter, properly become

subject to estate taxes under Section 302 (c) upon his

subsequent death. On the other hand, if the first con-.

_ tingency does not occur, grantor will never become re-

vested with anything and will not have retained anything.

In other words, since the revesting in grantor is con-

tingent upon his survivorship of the life beneficiary, the

taxability of the trust at his death is, likewise, contingent

upon his surviving the life beneficiary. He will have

created an estate to take effect at or after his death only

in the event he shall have survived the life beneficiary,

a contingency. irrevocably: fixed inter vivos and beyond

his control.

Furthermore, does not the dissenting opinion fail to

give sufficient consideration to the essential point em-

phasized in Sanford's Estate v. Commissioner and in

_ Chase National Bank v. United States, that if the future

devolution of the property is irrevocably fixed by act

inter vivos, beyond any reserved power of grantor to

‘change or control any subsequent shift of the economic

f benefit, it is not due to death as a generating source, but

to the act inter vivos.

The provisions of Section 302 (c) for taxability where :

a life estate, or its equivalent, is retained aré exceptions to

and outside the scope of the principle that death must be

the generating source of the transfer and were enacted for

the purpose of preventing estate tax evasions by adoption

of technical methods having the practical effect of ac-

complishing retention of ownership Aor life and a tes-

tamentary disposition thereafter. In the cases at bar,

grantor did not retain a life estate continuing the

economic enjoyment in praesenti at the execution of the

trust, but, on the contrary, alienated the possession and

enjoyment for the duration of the first life beneficiary.

The grants. were in no sense equivalent to testamentary

dispositions either in their purpose or effect, and were not

made as evasions or avoidance: of estate taxes. See

Helvering v. City Bank Farmers Trust Co., 296 U. 8.

85, 1. c. 89.

Klein v. United States, 283 U. S. 231, is plainly dis-

_tinguishable on its facè, and as frequently pointed out

both in the St. Louis Union Trust Company cases and

numerous lower court decisions. The deed in the Klein

case consisted of two sections the first granting the wife

merely 1 life estate, and the second granting her the fee

upon the condition precedent that she survive grantor.

The court emphasized the separateness of these two

clauses, saying, The two clauses of the deed are quite

distinct—the first conveys the life estate; the second

deals with the remainder.“ It was precisely as if two

separate deeds had been executed—thé first conveying a

life estate immediately; the second embodying merely a

conditional grant of the fee, which latter grant was to

become effective only upon the death of grantor and

- grantee’s survivorship. If the condition precedent of

grantee’s survivorship did not occur, the remainder fee

would have remained vested in grantor and passed by

his will or under the . of intestacy, not by virtue. .

the terms of the trust. N

The distinction between a condition precedent to

vesting of an estate, and a condition subsequent causing

a divesting thereof, though it may seem technical may

nevertheless be the determining factor as to whether

property passes by will or intestacy and subject to ad-

„ ministration, or passes by virtue of the deed and without

administration. The attempt to impose an estate tax upon

a transfer, nontestamentary in character and intent,

merely because there was included a mere possibility oft

. reverter that never in fact materialized, is, we submit,

decidedly more technical one devoid of justifying. basic

substance.

‘In fact in Klein: v. United States, 283 U. S. 231, upon

which the Commissioner relies so heavily, the decision

essentially turned on the distinction between a condition

precedent to the vesting of the grant and .a condition

subsequent which might cause a divesting. In the first

instance there would be a “retaining unless and until

the contingency occurred. In the second instance, there

would be an immediate alienation subject merely to pos-

sible revesting. In the Klein case the Court said, I. c. 233:

„By the second clause the grantee takes the fee

in the event—‘and in that case only — that she shall

survive the grantor. It follows that only a life estate

immediately was vésted. The remainder was retained

by the grantor; and whether that ever would become

—. vested in the grantee depended upon the condition

' precedent that the death of the grantor happen before

that of the grantee. The grant of the Temainder,

therefore, was contingent.” — .

In the cases at bar the original grant of the entire

estate was not contingent upon a condition precedent. -

It was the pogsible reverter that was so contingent, the

converse of the Klein case. Hence the Klein case sup-

ports the taxpayers’ contentions herein.

IV.

Independently of Constitutional Power, It Is Not Within

-the Intent of Congress to Subject to Estate Tax Transfers

Completely and Irrevocably Fixed by Act Inter Vivos

When the Transfer Is Not in Contemplation of DEATH

AND NO EQUIVALENT OF A LIFE. ESTATE IS

RESERVED.

In Heiner v. Donnan, 285 U. S. 312, the court held

unconstitutional the provisions of Section 302 (d) of the

Revenue Act of 1926 establishing a conclusive pre-

sumption that gifts made within two years of death were

made in contemplation: of death and, therefore. subject to

the estate tax. In arriving at this conclusion that such

a provision was so arbitrary and unjust as to violate the

Fifth Amendment, the court pointed out that when a gift,

completely executed inter vivos, without reservation of

power to recall or change, and not made in contemplation -

of death, was subjected to the estate tax, certain utterly

unreasonable and unjust results were entailed. The

donor who received the entire property involved was sub-

jected to no diminution in value thereof by the tax. The

beneficiaries of the donor’s estate upon his death, who

had received no portion of the gift, were subjected to

the burden of payment of tax on the gift. The amount

of the tax was measured by the value of the property as

of the time of donor’s death not at its value as of the date

of the gift. - =; - oe

In Chase National Banł · v. United States, supra, when

it was urged that a similar unjust result would be ‘ef-

fected, the court sustained the constitutional validity of

the incidence of the estate tax by pointing out that since

the decedent had reserved the right to recall or change

the beneficial interests under the insurance policies until

his death, the gift was not complete until the death,

hence, there was nothing unjust or unconstitutionally —

arbitrary in imposing the burden of the estate tax partly ©

upon the beneficiaries of the insurance, and partly upon

the beneficiaries of the remaining estate, the amounts

being valued as of the date of death as that was the final

completion of the transfer. N

In Helvering v. Bullard, 303 U. 88297, the court held

there was nothing unconstitutional in including for es-

tate tax purposes a complete and irrevocable gift inter

vivos (but which reserved a life estate to the grantor)

inasmuch as Congress might by appropriate legislation

have taxed the transfer as a gift and it is of no signifi-

cance that the exaction is denominated an estate tax or

is found in a statute purporting to levy an estate tax,”

and the court held further that Congress might consti-

tutionally classify gifts of different sorts and impose ex-

cise taxes at one rate upon a gift without reservation of

life estate and at another rate upon gifts with such reser-

vation. The events involved in Helvering v. Bullard, oc-

. curred during the interim between the repeal in 1926 of

the 1924 gift tax and the reenactment of the Gift Tax

Act of 1932. However, when Congress reenacted the Gift

Tax Act and subsequently amended both it and the Es-

tate Tax Act, it made no classification such as Mr. Justice

Roberts suggested in the Bullard case, but on the contrary,

gave expression ‘to an intent to preserve the distinction

between gift tax and estate tax. The distinction is, as

forcibly illustrated by Mr. Justice Stone’s opinion in San-

ford’s Estate v. Commissioner, that if the termination of

the power to control the subsequent devolution of prop-

erty was terminated by act inter vivos, then the trans-

action is governed by the Gift Tax Act. If the termina-

tion of this power is by death alone, it is — to the

Estate Tax Act.

In the case at bar the termination of all power of

controt had been completely effected by act inter vivos.

It is an immaterial and fortuitous circumstance that at

the time of such termination there may or may not have

beer. a gift tax in effect. The intent of the Congress,

; 23

as distinguished from its constitutional power, in enact-

ing and amending the Estate Tax Act is to be interpreted

in accordance with these principles of 8 Estate v.

Commissioner.

It should further be noted that in Helvering v. Bul-

lard, the court relied for further. constitutional support of

the exaction on the fact that in that case the decedent

had retained-a true life estate and the court relied (303

U. S. I. c. 301-302) upon the. authority of Congress

to treat as testamentary transfers with reservation of the

power or interest in the donor” and further pointed out

that the commonly used device for avoidance of estate

taxes is a transfer with reservation of a life estate.

As heretofore pointed out, a reservation of a possi-

bility of reverter is not the retention of a life estate,

and if the reverter ever materializes, it is effective to

restore the estate to the grantor, subjecting it to the pos-

sibility thereafter of estate tax and; accordingly, defeats .

any attempt to accomplish a 9 . or

to avoid succession taxes. 5

In the Hallock case now before the court, if the e-

missioner's contentions should be sustained, there would

be precisely the situation of arbitrary and unjust exaction

which the eourt condemned as unconstitutional in Heiner

v. Donnan, 285 U. S. 312, namely, the first wife, Anne

Lamson Hallock; received and continues to enjoy the full

,beneficial use of the trust properties without diminution

by payment of any tax, while the beneficiaries of Mr.

Hallock’s estate, presumably including his second wife as

well as his children, are subjected to the imposition of

the tax upon their shares of his estate, measured by the

amount of value at his death of the property which he

had in 1919 transferred in trust for the first wife. We

—

earnestly ask the Court to read and carefully consider

that portion of the opinion in Heiner v. Donnan, 235 U.

S., beginning at page 330 to page 332.

Respectfully submitted,

BLATCHFORD Downinc,. . |

McCune, CALDWELL & Downline,

2000 Fidelity Building,

Kansas City, Missouri,

Amicus Curiae.

pages 1,2,3,5 8, 4 %ů

SUPREME COURT OF THE UNITED STATES.

Nos. 110, 111, 112, 158 ad 399 —Octosen Tan, 1939.

tie , 4 Helvering Commissioner of)

Internal Revenue, Petitioner,

110

Mary Q.. - Hallock ee Central United

National Bank of Cleveland, Trustees.

Guy T. Helvering, Commissioner of

Internal * Petitioner, | On Writs of Certiorari to

111 the United States Circuit

Mary Q. Hallock, — Estate of f Court of Appeals for the

Henry Hallock, Deceased. Sixth Circuit.

Guy T. Helvering, Commissioner of

rv Internal en Petitioner,

8. H. Squire, 8 of Beata

of the State of Ohio, ete

Walter J. Rothensies, Collector ** In)

ternal Revenue for the First District

On Writ of Certiorati to

: * Pennsylvania, Petitioner, the United States Circuit

vs. peals

Craig Huston, Administrator 2 e

d. b. n. e. t. a. of the Esta A oe

8 George F.Uber, Deceased.

Waldo G. Bryant and Ida Bryant, 0

Executors of the Estate of Waldo C.] On Writ of

ee — Petitioners, | the United soo Cassel. .

Court of — for the

Guy ?. ities Commissioner of Second Circuit.

Internal Revenue. } N

[January 29, 1940.]

Mr. Jeatice FRANKFURTER delivered the opinion of the Court.

These cases raise the same question, namely, whether transfers

of property inter vivos made in trust, the of which will

later appear, are within the provisions of 302(e) of the Revenue

2 Helvering vs. Hallock et al. ae

Act of 1926.) They were heard in succession and may be decided

together. In ea~h case the Commissioner of Internal Revenue in-

eluded the trust property in the decedent’s gross estate. In Nos.

110, 111 and Ii three henclictarics-~umdemthe semen

steumenttehis determination was reversed by the Board of Tax

Appeals (34 B. T. A. 575) and the Board was affirmed by the Cir.

cuit Court of Appeals for the Sixth Cireuit (102 F. (2d) 1). In

No. 183, the taxpayer paid under protest, suecessfully sued for re-

covery ‘in the District Court for the Eastern District of Pennsyl-

vania, anl his judgment was sustained by the Cireuit Court of

Appeals for the Third Cirgeuit. (103 F. (2d) 834). In No. 399,

the Commissioner was in part successful before the Board of Tax

Appeals (36 B. T. A. 669) and the Cireuit Court of Appeals for

the Second Cirenit affirmed the Board (104 F. (2d) 1011).

Neither here nor below does the issue turn on the unglossed: text

of §302(c). In its enforcement, Treasury and courts alike en-

counter three recent decisions of this Court, Klein v. United States,

283 U. S. 231, Helvering v. St. Louis Trust Co., 296 U. 8. 39, and

‘Becker v. St. Louis Trust Co., Ibid 48. Because of the difficulties

“J

‘which lower courts have found in applying the distinctions made

by these cases and the seeming disharmony of their results, when

judged by the controlling — of the estate tax law, we brought

the cases here. 308 U. ; Ibid. —; Ibid. —. All involve

dispositions of property ay way of trast in which the settle-

mnt provides for return or reversion of the corpus to the donor

1 e. 27, 44 Stat. 9, as amended by § 803 of the Revenue Act of 1932, 0 200.

47 Stat. 169, 279: ;

The value of the estate of the decedent shall be-determined by in-

“eluding the value at time of his death of all property, real or, persona’.

tangible or a, wherever situated—

te (e) To the extent of any interest therein of which the b * at any

time made a transfer, by trust or otherwise, in contem * of or intended. to

. Helvering vs. Hallock et al. 3

n a contingency terminable at his death. Whether the transfer

e by the decedent in his difetime is intended to take effect in

ession amd,enjoyment at or after his death! by reason of that

th he retained, is the erux of the problem. We must put to one

questions that arise under. sections of tlie estate tax law other

or / |

1 § 302(¢)—seetions, that is, relating to transfers taking place

eath. Section 302 (e) deals with property not technically pass-

at death but with interests theretofore created. The taxable

it is a transfer inter vivos. But the measure of the tax is the

e of the transfered property at the time when death brings it

enjoyment.

je turn to the cases which beget the difficulties in Klein

‘nited States, supra, decided in 1931, the decedent during

lifetime had conveyed land to his wife for her lifetime, ‘‘and

¢ shall die prior to the decease of said grantor then and in that

it she shall by virtue hereof take no greater or other estate in

lands and the reversion in fee in and to the same shall in that

it remain vested in said grantor, . . . The instrument fur-

provided. Upon epndition and in the event that said grantee

| survive the said aai grantor, then and in that case only the

grantee shall by virtue of this conveyance take, have, and hold

said lands in fee simple. The taxpayer contended

the deeedent had reserved a mere ‘‘possibility of reverter’’

that such a ‘‘remote interest, 2xtinguishable upon the graut-

death. was not sufficient to bring the conveyance within the

on ing of the taxable estate. This Court held otherwise. It

cted formal distinctions pertaining to the law of real property

rrelevant eriteria in this field of taxation. Nothing is to be

ed“, it was said, by multiplying words in respect of the

jous niceties of the art of conveyancing or the law of contingent

“vested remainders. It is perfectly plain that the death of. the

nor was the indispensable and intended event which brought the

er estate into being for. the grantee and effected its transmis-

from the dead to the living, thus satisfying the terms of the

ng act and justifying the tax imposed. Klein v. United States,

‘a, at 234.

he ineseapable rationale of this decision, rendered by a unani- |

Court, was that the statute taxes not merely those interests

h are deemed to pass at death according to refined technicali-

etitioner e Brief, Klein v. United States, pp. 11-13.

4 B vm. Hallock ot ol. *

ties of the law of property. is tenes e ee U

are too much akin to testamentary dispositions not to be subjected

to the same excise. By bringing into the gross estate at his death

that which the settlor gave contingently upon it, this Court fastened

on the vital factor. It refused to subordinate the plain purposes of

a modern fiseal measure to the wholly unrelated origins ‘of the

recondite learning of ancient property law. Surely the Klein de

cision was not intended to encourage the belief that a change merely

in the phrasing of a grant would serve to create a judicially e

nizable difference in the scope Of § 302(c), although the grantor re

tained in himself the possibility of regaining the transferred prop

erty upon precisely the same contingency. The teaching of the

Klein case is exactly the opposite.“

In 1935 the St. Louis Trust cases came 3 A rational adh

cation of the principles of the Klein case to the situations now be

fore us calls for scrutiny of the particulars in the St. Louis case

in order to extract their relation to the doctrine of the earlier

decision.

In Helvering v. St. Louis Trust Co. „ supra, the decedent had con-

veyed property in trust, the income of which was to be paid to hi.

daughter during her life, but at her death If the grantor still te

living, the Trustee shall forthwith . . . transfer, pay, and de

liver the entire estate to the grantor, to be his absolutely. Bu

„If the grantor be then not living’’ then the income was to be de

voted to the settlor’s wife if she were living, and upon the death of

both daughter and wife, if he were not living, the trust property

was to go to the daughter's children, or if she left none, to th

' grantor’s next of kin.

In Becker v. St. Lowis Trait Ga.’ n the uss end teh

clared himself trustee of property with the income to. be accumt

lated or, at his discretion, to be paid over to his daughter during

her life. The instrument further provided that If the said best

_ fieiary should die before my death, then this trust estate dhl

Ng revert to me and become mine

SP _ EU TELE ears aa eee

—

| * Helvering vs. Hallock et al. 5

In the authority of the Klein case the Commissioner had included

the taxable estates the gifts to which, in the St. Louis Trust cases,

) grantor’s death had given definitive measure. If the wife had

deceased the settlor in the Klein case, he would have been re-

sessed of his property. His wife’s interests were freed from this

tingency by the husband 's prior death, and because of the effect

his death this Court swept the gift into the gross estate. So in

Wwering v. St. Louis Trust Co., the grantor would have become

oasessed of the granted corpus had his daughter predeceased him.

t he predeceased her and by that event her interest ripened to

i dominion. The same analysis applies to the Becker case. In

three situations the result and effect were the same. The event

ich gave to the beneficiaries a dominion over property which

did not have prior to the donor 's death was an act of

ure outside the grantor’s control, design or volition.’’ 296

8. 39, 43. But it was no more and no less ‘‘fortuitous’’, so far

he grantor’s ‘‘control, design or volition’’ was concerned, in the .

Louis Trust cases than it was in the Klein case. In none of the

se cases did the dominion over property which finally came to

beneficiary fall by virtue of the grantor’s will, by his

vision that his own death should establish such final and com-

te dominion. And yet a mere difference in phrasing the circuin-

nce by which identic interests in property were brought into

ng—varying forms of words in the creation of the same ey

rests—was found sufficient to exclude the St. Louis Trust stile

its from the application of the Klein doctrine.

‘our members of the Court saw no difference. ise sel

governing principle of 5 302 (e) that Congress meant to in-

le in the gross estate inter vivos gifts ‘‘which may be resorted

as a substitute for a will, in making dispositions of property

rative at death. 296 U. S. at 46. To effectuate this purpose

ttical considerations applicable to taxation and not the ‘‘niceties

he art of conveyancing’’ were their touchstone. ‘‘Having in

d’’,-said the dissenters; the purpose of the statute and the

Wath of its language it would corm to be of no consequence what

jeular conveyancers’ device—what particular string—the de-

mt selected to hold in suspense the ultimate disposition of his

erty until the moment of his death. In determining whether

rable transfer becomes complete only at d we look to sub-

te, not to form. . However we label the device it is

a means by which the gift is rendered incomplete until the

Zu,

3 Helvering vs. Hallock et al.

donor s death.“ 296 U. S. at 47. For the majority in the St. Louis

Trust Company cases, these practicalities had less significance than

the formal categories of property law. The grantor’s death, the

majority said, in Helvermꝑ v. St. Louis Trust Co., simply put an

end to what, at best, was a mere possibility of a reverter by er

tinguishing it—that is to say, by converting what was merely pos

sible into an utter impossibility.’’ 296 U. S. 39, 43. This was pre

cisely the mode of argument which had wane rejected in Klein v.

United States, supra.

We are now asked to accept all three decisions as constituting a

coherent body of law, and to apply their Cutinetions to the trusts

before us.

In Nos. 110, 111 and 112 (Helvering v. Hallock) the decedent in

1919 created a trust under a separation agreement, giving the i in

come to his wife for life, with this further provision:

“If and when Anne Lamson Hallock shall die and in 20

event . . the within trust shall terminate and said

Trustee shall . . . pay Party of the First Part it he then

be living any accrued income, then remaining in said trust fund

and shall . deliver forthwith to Party of the First Part,

the principal of the said trust fund. If and in the event said

Party of the First Part shall not be living then and in such

event payment and delivery, over shall be made to Levitt Hal.

lock and Helen Hallock, respectively son and daughter of the

Party of the First Part, share and share alike °

When the settlor died in 1932, his divorced wife, the life bene-

ficiary, survived him. The Circuit Court of Appeals held that the

trust instrument had conveyed the whole interest of the de

cedent, subject only toa ‘*eondition subsequent,“ which left him

nothing ‘‘except a mere possibility of reverter.’’ Commissioner ¥.

Hallock, 102 F. (2d) 1, 3-4..

In No. 183 (Rothensies v, en) the decedent by an ante-nup-

tial agreement in’ 1925 conveyed property in trust, the income to be

paid to his prospective wife during her life, npn te So

ing disposition of the principal : :

In trust if the said Rae Spektor shall die during the life

time of said George F. Uber to pay over the principal and all

accumulated income thereof unto the. said George F. Uber in

fee, free and clear of any trust.

: “In trust if the said Rae Spektor after the marriage shal

survive the said George F. Uber to pay over the * and

Helvering vs. Hallock et al. | 7

all accumulated income unto the said Rae Spektor—then Rae

Uber—in fee, free and clear of any trust.’’ ;

Mrs. Uber outlived her husband, who died in 1934, The Circuit

Court of Appeals deemed Becker v. St. Louis Trust Co. controlling

against the inclusion of the, trust corpus in the gross estate.

_ Finally, in No. 399 (Bryant v. Helvering), the testator provided

for the payment of trust income to his wife during her life and upon

her death to the settlor himself if he should survive her. The in-

strument, which was executed in 1917, continued:

„Upon the death of the survivor of said Ida Bryant and the

party of the first part, unless this trust shall have been modified

or revoked as hereinafter provided, to convey, transfer, and

pay over the principal of the trust fund to the executors or ad-

‘ ministrators of the estate of the party hereto of the first part.“

There was a further pravision giving to the decedent and his wife

jointly during their lives, and to either of them after the death of

the other, power to modify, alter or revoke the instrument. The

wife survived the husband, who died in 1930. \The Board of Tax

Appeals allowed the Commissioner to inelude i in the decedent’s gross

estate only the value of a vested reversionary interest which the

Board held the grantor had réserved to himself. On appeal by the

tax-payer, the Circuit Court of 2 sustained this determi-

nation.

The terins of these grants differ in detail from one 1 as all

three differ from the formulas of conveyance used in the Klein and

St. Louis Trust cases. It therefore becomes important to inquire

whether the technical forms in which. interests contingent upon’

death are cast should control our decision. If so, it becomes nec-

essary to determine whether the differing terms of conveyance now

in issue approximate more closely those used in the Klein case and

are therefore governed by it, or have a greater verbal resemblance

to those that saved the tax in the St. Louis Trust cases. Such an

eway in linguistic refinement would still further embarrass existing

intricacies. It might demonstrate verbal ingenuity, but it could

hardly strengthen the rational foundations of law. The law of

contingent and vested! remainders is full of casuistries. , There are

great diversities among the several states as to the conveyancing

significance of like grants; sometimes in the same state there are con-

flieting lines of decision, one series ignoring the other. Attempts by.

the Board of Tax Appeals and the Cireuit Cc uta of Appeal to ad-

8 : Helvering vs. Hallock et al.

minister § 302(c) by reference to these distinctions abundantly

illustrate the inevitable confusion.‘ One of the cases at bar, No. 399,

reveals vividly the snares which inevitably await an attempt to base

estate tax law on the ‘‘niceties of the art of conveyaneing.“ In con-

nection with the ascertainiment of its own death duties, the Supreme

Court of Errors of Connecticut defined the nature of the interest

which the decedent in that case retained after his inter vivos trans

fer. Bryant v. Hackett, 118 Conn. 233. And yet the nature

of that interest’ under Connecticut law and the scope of the

- Connecticut Court’s adjudication of that interest were made

the subject of lively controversy before us. The importation

of these distinctions and controversies from the law of property

into the administration of the estate tax precludes a fair and work-

able tax system. Essentially the same ‘interests, judged from the

point of view of wealth, will be taxable or not, depending upon elu-

sive and subtle casuistries which may have their historic justification

but possess no relevance for tax purposes.“ These unwitty diversi-

ties of the law of property derive from medieval concepts as to the

necessity of a continuous seisin:* Distinctions which originated

under a feudal economy when land dominated social relations are

peculiarly irrelevant in the application of tax measures now 20

largely directed toward intangible wealth.

‘Our real problem, therefore, is to determine whether we are to

adiere to a harmonizing priffciple in the construction of § 302 (e),

or whether we are to multigly gossamer distinctions between the

4 See, for example, | the attempts 12

the peculiarities of New York law in the field of vested. and contingent re

mainders. Eiteabeth 5. Wallace, 27 B. T. A. 902; Louis C. Raegner, Jr., 2

B. T. A. 3243. In both of these cases limitations, which would prebabl have

been 001 t’? at ‘‘eommon law’’ were held to

New -York tory rule. Cf. Commissioner v. Schwars, 74 F. (2d) 712;

1 A. 8.

ti 2 of Lee 23-28; Developments in

1. 158. 1209, 22. Note, 49 Harv. L. Rev. 462.

ar ons example, Fearne, — n K * * a

worth, bed of ae Law e Fata Tater § 64-06.

nfusion to engendered ‘

- fiheeteated by the use of the term eu rr:

v. It. Louis Union Trust Co. —

Helvering vs. Hallock et al. 9

present cases and the three earlier ones. Treed from the distine-

tions introduced by the St. Louis Trust cases, the Klein case fur-

nishes such a harmoniring principle. Does, then, the doctrine of

stare decisis compel us to accept the distinctions made in the St.

Louis Trust cases as starting points for still finer distinctions spun

out of the tenuosities of surviving feudal law? We think not. We

think the Klein case rejected the presupposition of such distinctions

‘for the fiscal judgments which § 302(c) demands.

We recognize that stare decisis embodies an important abdial pol-

. ley. It represents an element of continuity in law, and j js rooted in

the psychologic need to satisfy reasonable expectations. But stare

decisis is a principle of policy and not a mechanical formula of

adherence to the latest decision, however recent and questionable,

when such ‘adherence involves collision with a prior doctrine more

‘embracing in its ‘scope, intrinsically sounder, and verified by ex-

Nor have we in the St. Lowis Trust cases rules of decision around

which,-by the accretion of time and the response of affairs, substan-

tial interests have established themselves. No such conjunction of

circumstances requires perpetuation of what we must regard as the

deviations of the St. Louis Trust decisions from the Klein doctrine.

We have not Wefore us interests created or maintained in reliance »

on those cases. We do not.mean to imply that the inevitably empiric

process of construing tax legislation should give rise to an estoppel

against. the responsible exetcise of the judicial process. But it is a

fact that in all the cases before us the settlements were made and

the settlors died before the St. Louis Trust decisions.

Nor does want of “specific Congressional repudiations of the St.

Louie Trust cases serve as an implied instruction by Congress to us

not to reconsider, in the light of new experience, whether those deci-

sions, in conjunction with the. Klein case, make for dissonance —

of doctrine. It would require very persuasive circumstances en-

veloping Congressional siler.re to debar this Court from re-examin-

ing its own doctrines. To explain the cause of non-action by Con-

gress when Congress itself sheds no light is to venture into specu-

lative unrealities.“ Congress may not have had its attention di-

Ce ee

1648, undid the construction which this Court gave

ae suate tax — by a decision rendered on the same day

& were the St. Louis Trust cases. Cf. White v. Poor, 296 U. 8. 98. This

case under not 6 302 (e). in an t, the fact of

Aah

moved the Treasury to stay its hand. But certainly such inaction

practice, through acquiescence, tantamount to an estoppel barring

. Yéexamination by this Court of distinctions which it had drawn“

Congress, but they would only be sufficient to indicate that we

problems ‘created by the St. Louis Trust cases, does not imply controlling ae

10 Helvering vs. Hallock et al.” }

rected to an undesirable decision ;: and there is no indication thet

as to the St. Louis Trust cases it had, even by any bill that found its

way into a committee pigeon-hole. Congress may not have had its.

attention so directed for any number of reasons that may have

by the Treasury can hardly operate as a controlling administrative

Various considerations of parliamentary tactics and strategy might

be suggested as reasons for the inaction of the Treasury and of

walk on quicksand when we try to find in the absence of corrective

legislation a controlling legal principle.

nee by Congress of those cases. g ;

the Joint Resolution of March 3, 1931, e. 454, 46 Stat. 1516, Congress

displaced the construction which this Court put upon § 302 (e) in those cases

wherein it was held that the reservation by a decedent of a life estate in

property conveyed inter vivos, did not constitute a sufficient postponement of

the remainder to bring it into the grantor’s gross estate. May v. Heiner, 281

U. 8. 238; Burnet v. Northern Trust Co., 283 U. 8. 782; Morsman v. Burntt,.

283 U. 8. 783; MeCormick v. Burnet, 283 U. S. 784. The speculative argu

ments that may be drawn from ad hoc legislation affeeting one set of decisions

and the want of such legislation to modify another. set of decisions dealing

with a somewhat different though cognate problem are well: illustra Y this

remedial amendment. For it may be urged with considerable plausibility that

in 1931 Congress had in principle already rejected the general attitude under

1 2 * cases, — pny oy ha the fact that in 4

e majority, at least, re u e Congressionally discarded May t.

Heiner ie og ; * :

Whatever may be the scope of the doctrine that re-enactment of a statute

impliedly enacts a settled judicial construction placed u the re-enacted

statute, that doctrine has fo relevanco to the present problem. Since the de-

cisions in the St. Louis Trust cases, Congress has not re-enacted § 302(c).

The amendments chat Congress made to other a of § 302 ih connection

with other situations than those now before Court, were

States, 252 U. 8. 140, 146-47, and Murphy Oil Co. v. Burnet, . 8. 299,

302-3, we have no conjunetion of lo orm 1 — construction —

53 Stat. III; com are Smiley v. Holm, 285 U. 8. 355, 373, and Warner „.

ö oo i i cr 2 EA 2 2 a 3

N f Helvering \ vs. Hallock et al. : ll

This Court, unlike the House of Lords, has from the beginning

rejected a dostrine of disability at self-correction. Whatever else

may be said about. want of Congressional action to modify by legis-

lation the result in the St. Louis Trust cases, it will hardly ] e urged

that the reason was Congressional approval of those distinctions be-

ween the St. Louis Trust and the Klein cases to which four members

of this Court could not give assent. By imputing to Congress a

hypothetical recognition of coherence between the Klein and the St.

Louis Trust cases, we cannot evade our own responsibility for recon-

sidering, in the light of further experience, the validity of distine-

tions which this Court has itself created. Our problem then i is not

that of rejecting a settled statutory construction. The real

problem i is whether a principle shall prevail over its later misappli-

cations. Surély we are not bound by reason or by the considerations -

that underlie stare decisis to persevere in distinctions taken in the

application of a statute which, on further examination, appear

consonant neither with the purposes of the statute nor with this

Court’s own conception of it. We therefore reject as untenable the

diversities taken in the St. Louis Trust cases in applying the Klein

doetrine - untenable because they drastically eat into the principle

which those cases professed to accept and to which we adhere,

In Nos. 110, 111, 112 and 183, the judgments are

58 EKeversed.

In No. 399, the judgment is 7 N

f Affirmed.

The Cuter Justice concurs in the result upon the ground that

each of these cases is controlled by our decision in Klein v. United

States, 283 U. S. 231.

Ulerk, Supreme Court, U. S.

~ SUPREME couRT OF THE UNITED STATES

Nos. 110, 111 112.—Ocrosn Tann, 1998.

8 *

lvering, Coskiniseioner of Internal On Writs of Certiorari to

Revenue, Petitioner, . the United States Cireuit

* v8. f Court of Appeals for the

* Hallock,etal Sixth en, 8

[January 29, 1940.

i, 2 Ar. Justice Bonmirs,

There is certainly a distinction in fact between the transaction |

considered in Klein v. United States, 283 U. S. 23 1 anf those under

review in Helvering v. St. Louis Union Trust Company, 296 U. 8

39, and Becker v. St. Louis Union Trust Company, 296 U. S. 48.

"The eofirts, the Board of Tax Appeals, and the Treasury hav

found no difficulty in observing the distinction in specific cases. |

believe it is one of «nbstance, not merely of tétmindlogy, and not

dependent on the niceties of N or recéndite doctrines of

: ancient property law.

But if I ani wrong in this, I still think the judgments i in Nos. 110

112, and 183 should be affirmed and that in 399 should be reversed.

The rule of interpretation adopted in the St: Louis Union Trust-

Company cases should now be followed for two reasons: First, that

rule was indicated by decisions of this court as the one applicable it

the circumstances here disclosed, as early as 1927; was progressively |

developed and applied by the Board of Tax Appeals, the lower fed-

.eral courts, and this court, up to the decision of McCormick v. Bur-

net, 283 U. S. 784, in 1931; and has since, been followed by those ti

~ biinals in not less than fifty cases. It ought not to be set aside

after such a history. | | Secondly. The rule was not contrary to aly

tteasury regpliaticn ; j was, indeed, in aceord with such regulations #.

there were on the subject; was subsequently. embodied in a .

cific regulation, and, with this background, Congress has three time

reenacted the law without amending 5 302 (e) in respect of ,the

matter here in issue. The settled doctrine, that reenactment of 8

ee tk kee eee ree

e «

| Helvering vs. Hollock of ol. 2

4 so Gba Pte uneins rendete wach construction

a part of the statute itself, should not bé ignored but observed.

1. The Revenue Act of 1926 lays a tax upon the transfer of the

net estate of a decedent. That estate is embrace the

value of all his property, real or personal, or intangible

les certain Geductions), at the time of his death! As the Treas-

ury Department stated in its earliest regulations : The statute also

includes only property rights existing in the decedent in his life.

time and passing to his estate. In all the treasury regulations,

from the earliest to the one now in force, applicable to the rete,

vant sections of the successive Revenue Acts defining the gro,

state of a decedent the Tredsury has used: this language:“ 5

“The value of a vested remainder should be included in the

gross estate. Nothing should be included, however, on account of

acontingent remainder where [in the case] the contingency does not

happen in the lifetime of the decedent, and: the interest n,

lepses at his death.“ ‘(Italics supplied.) :

The next sentence: Nor should anything be included on account .

Emin e

the corresponding article of all subsequent regulations.

If by the will of his gran is given a life estate, with

remainder to another, his executor™is not bound to return any-

thing on account of the life estate because, in respect of it, nothing

passes on A’s death: The estate simply ceases. The Treasury: has

never contended the contrary. ‘If, however, A’s grandmother gave

a life estate to B, and the remainder fo A, A has something which,”

t his death, will pass to someone élsé under his. will; er under tue

intestate laws: The statute plainly taxes the value of the. interest

yer all aa

i grandmother, by her will, ‘gave interests in succes-

ive all these perrons the property should pass to him, & would

e a chance to receive and enjoy the property. H he did s0

teive it, it would pass as part of his estate. If -he died_before

he other beneficiaries named by his grandmother his death would

eprive him of that chance. The chense wend —

"ideas, 300-008, 44 Stat. 60-72.

2 Regulations 87, Art. 12 (1917). —.

8 Regulations 37, Art. 12; Regulations 68, Art. 11; Regulations 68, Art. 11;

Wwalations 89, Art. 11, : 5 ö

1 8

4 ‘ ‘

5 75 e

\ 8

„5 erences re 65

8 ae i Helvering ve. Hallock of al.

one else. _ Np tak would be laid on the ee dee Fine

tingent interest or chance, because the chance cannot, at his death

pass by his ‘will; or the intestate laws, to another. I do not unde

stand the Government has ever denied ‘this..

_ Subsection (e) of 5 302 lays down no different rule ‘respecting

similar interests ereated by irrevocable, deed or agreement of th

decedent.” The subsection directs that there shall be included’ in th

gross estate the value, at the time of the decedent’s death, of u

interest i in property of which the decedent has at any time made

transfer intended to take effect in possession or enjoyment at «

after his death’’ (excluding sales for adequate consideration).

A transfer can only take effect, within the meaning of the sts:

ute „by the shifting of possession or enjoyment from the deceden

to living persons. The fact that the terms of the gift bring abou

some other effect at the decedent’s death is immaterial. The fa

that something may happen in respect of the beneficial en joymen

of the property conditioned upon the decedent's death is irrelerm

so long as that something. i is not the shifting of possession or bene

ficial enjoyment from the decedent. This is made clear by Reinect

v. Northern Trust Co., 278 U. S. 339, 347.

if A makes a present irrevocable ‘transfer i in ok conditions

that he shall receive the income for life and, at his death, the pri

cipal shall go to B, B is at once legally invested with the principal

A’s life estate ceases at his death. Nothing then passes. There i

no tax imposed by the statute because there is no transfor any se

than there would be in the case of a similar life estate given At

his grandmother. (This is May v. Heiner, 281 U. S. 238.) If, «

the other hand, A ereates an estate for years or for life in B, 1

_ taining the remaining beneficial interest in the property for bin

self, and. whether by the terms of the grant, or by the terms ¢

Ax will, or under the intestate law, that remainder passes to some

one else at his death, such passage renders the transfer taxable

(This is Klein v. United States, supra.) If what A does is to tram

fer his property irrevocably, with provision that it shall be @

joyed successively by various persons for life and then go abe

lutely to a named person, but that if he, A, shall outlive ts

person, the property shall ‘come back to him, and A dies in t

lifetime, of the person in question, A has merely lost the cham

that tic beneficial ownership of the property may revert to bin

That chance cannot pass under his will or under the intestate laws

Trust Company, supra.)

2 These governing prineiples were indicated an easly as 1927

were thereafter developed, in application to qe cases, ina

cohsistent line-of authorities.

under which the income was payable to the transferor’s husband

for his life after his death, to the transferor during her life,

with remainder to her 3 was not subject to tax as à trans-

fer intended to take effeet in ion or enjoyment at or after

death. This court said (p. 243) > .

. . At the death of Mrs. in no interest in the property

thereto had been definitely fixed by the trust deed. The interest

therein which she possessed immediately prior to her death was

obliterated by that event. (Italics supplied. ).

It will be noted that this is the equivalent. of the Treasury’ . state-

nent, supra, that such an interest lapses at death. 3

. That decision is indistinguishable in pfinciple from the Bt. Louis

there said serves to distinguish the Klein case.

McCormick v. Burnet followed “May v. Heiner. The court

~eneficiaries should die in the lifetime of the grantor, made the

gifts transfers intended to take effect in possession or enjoyment

at or after the grantor’ s death. In the Circuit Court of Appeals

the Commissioner urged that the provision for payment of the trust

estate to the settlor in case she survived all the beneficiaries ren-

dered the transfer taxable. That court dealt at length with the

d upon the authority of May v. Heiner. -

upon the authority of May v. Heiner and McCormick v. Burnet.

Finally, the McCormick case was followed in Bingham v. United

States, 296 U. S. 211.

‘sBhukert e. Allen, 278 U. 8. 645.

Helvering vs. Hallock ot al. W

ens ö

the shifting of any interest from him, no tax is imposed. (This is

McCormick v. Burnet, supra, and Helvering v. Bt. Louis —

In May, v. Heiner, supra, it was: held that a transfer in trust

held under the trust deed. passed from her to the living; title

Union Trust Company cases and the instant cases; and what was |

there held that neither a reservation by the grantor of a life estate

with remainders over, nor a provision for a reverter in case all the

Point and sustained his view. (43 F. (2d) 277, 279.) The Com-

missioner made the same contention in this court, but it was over-

came the two St. iv! Ctentedines wide: Goutal

_, Oommissioner v. Brooks, 87 F. (2a) 1000; — Commissioner, 90

. e Baten od

Sinee the opinion of the court appears to treat the St. Leute

as the origin of the principle. there announced, it is important u

emphasize the fact that the rule had been settled by this court »

“early ‘as 1930; and to note other decisions rendered prior to the

St. Lowis cases. In seven, intervening between May v. Heiner und

the St. Louis cases, the Board of Tax Appeals reached the same

conclusion as that announced in the 81. Louis cases. The Board's

action was affirmed in four of them.“ Four other decisions by Cin

cuit Courts of Appeal were to the same effeet.“ Im practically all, re

liance was placed upon Shukert v. Allen, Reinecke v. Norther

Trust Company, May v. Heiner, and McCormick v. Burnet, or some

ok them. Thus, when the question came before this couft dain i

the St. Louis cases, there was a substantial body of authority follow.

ing and applying the Heiner and McCormick cases,

Since the St. Louis cases were re the prineiple on which

they went has been repeatedly applied by the Board of Tax Ap

peals and the courts. The Board! followed the cases in no les

than seventeen instances.“

The record is the same. gb courts. The St. Louis cases:

have been followed in fourteen cases. In some of these the Ger.

ernment has sought review in this eourt but in none, except thos

now presented, has it asked the court to overrule those decisions.

e Wheeler o. Commissioner, 20 B. T. A. 695; Duke d Commissioner, A

B. T. A. 1104; Peabody v. . A. 787; Dunham v. Com

mission2:, 26 B. T. A. 286; Taylor v. Commissioner, 27 B. T. A. 220; Wallace

8 v. Commissioner, 27 B. T. A. 902; Bonney v. l A. 4.

6 Commissioner v. Duke, 62 F. (2d) 1057 (affirmed by Sear — y divided

court, 290 U. . 861); Commissioner v. Wallace, 71 P. Yea) 7

. sioner v. Dunhkau; 78 F. (2d) 752; Commissioner o. Bonney, 75 F. 4200 100

? Commissioner v. Austin, 73 F. (Ed) 758; Tait v. Safe & Trust Co,

74 F. (2d) 851; Tait v. Safe Deposit & Trust Co., 78 F. (ad) 534; Hel

v. Heimbols, 75 F. (2d) 246. T have der: able to find only one case de

oontra: Commissioner v. Schwarz, 74 F. (2d) 712. a

4 Commissioner, 33 B. T. A. 671; Guaranty Trust Compan 22751

miesioner, 33 B. T. A. 1225; Kneeland v. Commissioner, 34 B. Te A 7

Kienbuseh v. Commissioner, 84 B: T. A. 1248; Schneider Commissioner,

B. T. A. 1838; Van Sitklen v. Commissioner, 35 B. T A. 306; Patterson +

Commissioner, 36 B. T. A. 407; Rushmore uv. Commissioner, 36 R. T. A. 4%

1 v. 1 36 B. T. = wu brary v. * —

2 K ·˙ „

1 Ss ©.

—

Dane de m A e 417; “Myers v. a

15 F. Supp. 488; Chese National Bank v. Uni States, 28 F. Su

Ag sgl eas

8 *

é Ge *

. | Helosring u Hallock ot al * 6

1 hry eer ys an instance a ae eee tars de

isis should govern, this is it. from the obvious hardship

wolved in treating the taxpayers in the present cases differently

rom many others whose cases have ¢ been decided or closed in ac- ards

ordance with the settied rule, are the weichtier eensider -

ions that the judgments now rendered disappoint the just e—

ectations of those who have acted in reliance upon the uniform if

mstruction of the statute by this and all other federal tribunals;

nd that, to upset these precedents now, must necessarily shake the

ynfidence of the bar and the public in the Stability of the rulings

the courts make it impossible for. inferior tribunals to ad-

idicate contfoversies, in reliance on the decisions of this court.

o nullify more than fifty decisions, five of them by this went, 2 *

me of which have stood for a decade, in order to change a mere

le of statutory construction, seems to me an altogether unwise

d unjustified exertion of power. As I shall pgint out, there is

) necessity for such action because it has been, a still is open to

ongress to change the rule by amendment of the ‘Statute, jf it

ems such action necessary in the public, interest. : |

3. 5301 of the Revenne Ast of 1928 Imposes a tax upon the-

lue of the net estate of a decedent. § 302 provides ‘the method .

r determining the value of the gross estate. Subsections (o) (d)

) (t) and (g) require inclusion in the gross estate of interests

uch otherwise might be held not to form a part of the decedent’s |

late or not to pass from (him to others at his death. These sub-

tions sweep such interests into the gross estate in order to fore-

ll tax avoidance. § 302(c) was the successor of analogous sec- .

ns in earlier acts and the predecessor of similar sections in later 5

. The subsection. has been amended in successive Revenue

ts. As a result of the Treasury’s experience in the enforcement

the law, Congress has from time to time thought it necessary to

dend the scope of the subsection in the interest of more efficient

122 Hassett, 90 F. (24) 64 Caled States v Nichols, 92 F. (24)

3 Commissioner, 94 Commissioner v. G 100 F.

57 Ooms a ea, 24) 1; Commissioner o. Kaplan,

Revenue Act of 1916, § 202(b), 39 Stat. 756, 777; Revenue Act of 1918,

ge), 40 Stat. 1067, 1097; Act ‘of (c); 63 ds

1 Act of pa a 525 Wed Reve ue Code

1939, F. 68 Stat., Part 44 121..

* iS

ee oa _ Heluering vs Hallock cat)

administration. in constitutional limits . sa’

matter. of legislative policy for Congress alone. 11 —

It is familiar practice for Congress to amend a statute ¢ojobviate |

a construction given it by the courts. The legislative history ot

J 302 (e) demonstrates that Congress has elected not to make such

an amendment to meet the construction _ ‘upon it by this

“eourt in the St, Louis cases. 3

May v. Heiner was decided in 1930. The 8 was disse

fied” with the decision and in three dater eases attacked the

ruling, amongst them, MeCormick. v. Burnet. The court. an-

nounced its judgments in these cases on March 2, 1931, ee

May v. Heiner. On the following day Congress adopted ai

resolution amending § 302 (e) to tax Keay er with reservatior 90.

a life estate to the grantor, but, in da ing, it omitted to dei,

with a contingent interest reserved to the grantor or the possibility

of reverter remaining in him, involved in both Heiner and McCor-

mick. See Hassett v. Welch,, 303 U. S. 303, 308-9. The omission is. .

significant. ..

It may be argued that in the haste of preparing end “pessing.

‘the-amendment the point was overlooked. But the joint resolution

was reenacted by § 803 of tha Revenue Act of 1932, 12 without any

alteration to cover the point. The Revenue Act of 1934" amended —

- §302(d) of the Revenue Act of 1926 fetid not change § 302 (e)

as it then stood. . 2 és

The day the St. Louis cases were decided, this court announced

its opinion in White v. Poor, 296 U. S. 98, construing § 302(d) of

the Act of 1926. In order to make the section apply to such’ 2

situation as was disclosed in that case’ the Congress, on June 22,

1936, by the Act of 1936,16 amended. it to preclude the construction

the court had ‘given it. Again Congress. let § 30e) stand 6

before and as construed in the St. Louis cases. Three revenue 2 acts

have since been adopted. is in none of which has the wording of

-§302(c) been altered. If there is any life in the doctrine often am

. 296 U. 8. 88. )

12 47 Stat. 169, 279. N

18 48 Stat. 680, 752. ö

14 House Report on H. R 12793.

15 49 Stat. 1648, 1744. :

e Revenue Act of 1937, 50 Stat. 813; Revenve Act of 1988, 52 Stat. 447;

Code, 53 Stat. Part 1, p. 1.

* 5

* *

: or

* —

0 .

;

e that reenactment of a statute as uniformly construed by

o courts is an adoption Congltess of the construction given it.

sis legislative history to be conclusive that the statute, as it

ow stands, means what this court has said it m

Little Weight ean be given to the argunient of the bewenden

ut the Treasury has not applied to Congress for alteration of the

Helvering vs. Hallock et 4 6

ction because of the difficulty of wording a satisfactory amend -.

ent. A. moment 's reflection will show that it would be easy to

hrase ‘such an amendment. Whatever the reason for the failure

yamend § 302 (e), whether hesitancy, on the part of the Treasury

) recommend such ation, or the satisfaction of Congress with tee.

mstruction put upon the section by t this court,or mere inadvert-

ice, the fact remains that the section has been reenacted again and

ait with he courts’ corjgtruction plain for all to red.

4. As shown by the mattér above quoted from the Treasury

egulations’ affecting the estate tax," a contingent interest is not

be included in the taxable estate, In the light of this construc- .

„n Kate tax provisions were reeriacted or amended in 1921, 1924,

26, 1928, 1931, 1932, 1934, 1935, 1936 and 1937.

At the bar eo sel for the Government stated that it had always

en the view of he Treasury that the article in question applied

ily to §302(a) and had no application to § 302 (e). But we are

concerned with what the Treasury thought about fhe matter.

*. regulations were issued to guide taxpayers in complying with

e Act. Section 302 is an entirety. Subsections (a) and (e) were

ot intended to contradict each other, but the latter was to supple-

ent the former. The gross estate was to be computed according

the section as a whole. -It is hard to understand how the tax-

yer was expected to discriminate between a contingent interest

‘a decedent under the will of his grandmother and a similar in-

under an absolute deed executed by him inter vivos. If the

did not pass from the decedent at death neither did the other.

the decisions in the St. Lowis cases, the Treasury rendered.

regulations even more explicit. In Regulations 80 (Revised),

ted October 26, 1937, a new a 17 was inserted which |

rt}

Kb a transfer intended to take effect

—— One” includes a transfer

If theretofore doubt could have been entertained, it then mal

have vanished, And with this regulatfon in force, Congress tee

acted § 302 (e) as so interpreted. | i i Xk

statute which the Treasury, by its regulations, has interpreted l

a given sense is an embodiment of the interpretation in the laws

reenacted 1 Surely the principle cannot be avoided, as the Ge 1

ment argues, because the Treasury felt bound 80 to inte

5902 (e) by reason of this court’s decisions, That -fact 50

make application of the principle the more urgent.

Mr. Justice McReyno.ps: joins in ‘this opinion.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.