May v. Heiner

• Decision Date: 14 April 1930
• Docket Number: No. 311,311
• Citation: 67 A.L.R. 1244,281 U.S. 238,74 L.Ed. 826,50 S.Ct. 286
• Parties: MAY et al. v. HEINER, Collector of Internal Revenue
• Court: U.S. Supreme Court

281 U.S. 238

50 S.Ct. 286

74 L.Ed. 826

MAY et al.

v HEINER, Collector of Internal Revenue.

No. 311.

Argued March 7, 1930.

Decided April 14, 1930.

Mr. Charles H. Sachs, of Pittsburgh, Pa., for petitioners.

The Attorney General and Mr. G. A. Youngquist, Asst. Atty. Gen., for respondent.

[Argument of Counsel from pages 239-241 intentionally omitted] Mr. Justice McREYNOLDS delivered the opinion of the Court.

By a written instrument dated October 1, 1917, Pauline May, wife of Barney May, 'transferred, set over and assigned' to him and others, as trustees (with power to change the investments), certain described securities-bonds, notes, corporate stocks, and money-in trust, to collect the income therefrom, and after discharging taxes, expenses, etc., to pay the balance 'to Barney May during his lifetime, and after his decease, to Pauline May during her lifetime, and after her decease, all the property in said Trust, in whatever form or shape it may be, shall, after the expenses of the Trust have been deducted or paid, be distributed equally among' her four children, their distributees, or appointees.

Mrs. May died March 25, 1920. Thereafter the Commissioner of Internal Revenue, purporting to proceed under authority of the Revenue Act of 1918, tit. 4, 40 Stat. 1057, 1096, 1097, demanded that her executors pay additional taxes reckoned upon the value of the property held under the above-described trust instrument. Having paid the required sum, the executors-petitioners here-asked that it be refunded. By order of February 20, 1924, the Commissioner denied their request. In support of this action he said:

'This trust was included in decedent's gross estate on final audit and review on the ground that it was intended to take effect in possession or enjoyment at or after death. In this case the principal of the trust fund could not take effect in possession until the death of the decedent. According to the provisions of the trust agreement, if the decedent's husband died before her, the income was to be paid to her until her death. The gift of the principal, therefore, could not take effect during the decedent's lifetime. This case comes literally within the terms of the statute, and it has been held by a number of courts in different States that such a transfer as this is taxable, these cases being decided under statutes using the same language as is contained in the Federal Estate Tax Law.'

Seeking to enforce their claim the executors sued the collector in the District Court, Western District of Pennsylvania; judgment in his favor was affirmed by the Circuit Court of Appeals. The matter is here upon certiorari.

The record fails clearly to disclose whether or no Mrs. May survived her husband. Apparently she did not. But this is not of special importance, since the refund should have been allowed in either event.

The transfer of October 1, 1917, was not made in contemplation of death within the legal significance of those words. 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.

Section 401, Revenue Act of 1918 (40 Stat. 1096), lays a charge 'upon the transfer of the net estate of every decedent dying after the...