Tyler v. United States United States v. Provident Trust Co of Pennsylvania v. Girard Trust Co

Decision Date19 May 1930
Docket NumberNos. 428,546,547,s. 428
PartiesTYLER et al. v. UNITED STATES. UNITED STATES v. PROVIDENT TRUST CO. OF PENNSYLVANIA et al. Lucas, Commissioner of Internal Revenue, v. GIRARD TRUST CO. et al
CourtU.S. Supreme Court

Messrs. Frank S. Bright and H. Stanley Hinrichs, both of Washington, D. C., for petitioners Tyler.

Mr. Claude R. Branch, of Providence, R. I., for the United States and petitioner Lucas.

Mr. John S. Sinclair, of Philadelphia, pa., for respondents Trust Companies and others.

Mr. Justice SUTHERLAND delivered the opinion of the Court.

These cases present the question whether property owned by husband and wife as tenants by the entirety may be included, without contravening the Constitution in the gross estate of the decedent spouse for the purpose of computing the tax 'upon the transfer of the net estate' imposed by the Revenue Acts of 1916, c. 463, 39 Stat. 756, 777, 778, and of 1921, c. 136, 42 Stat. 227, 277, 278.

In No. 428 which arose under the act of 1916, the decedent had been a resident of Maryland. At the time of his death, he and his wife owned, as tenants by the entirety, shares of stock in a West Virginia corporation doing business in Maryland. The decedent had been the sole owner of the stock and created the tenancy by a conveyance executed in 1917. The stock was included in the gross estate of the decedent at its value at the time of his death. The total tax assessed was paid, and the administrators brought suit to recover the portion of the amount so paid attributable to the stock, together with interest. The trial court gave judgment against the government, 28 F.(2d) 887, which was reversed by the Court of Appeals. 33 F.(2d) 724.

In No. 546, which arose under the act of 1921, the decedent and his wife, residents of Pennsylvania, held title to certain ground rent and to certain real estate in that state which had been conveyed to them as tenants by the entirety. The property had been acquired with the husband's separate funds, and no part of the purchase price was furnished by the wife. The decedent died in 1923, leaving his wife as sole beneficiary under his will. The administrators filed an estate tax return which did not include the property interests above described. The Commissioner of Internal Revenue added this property to the gross estate and assessed a deficiency of taxes on that account. The Board of Tax Appeals held there was no deficiency. Appeal of Provident Trust Co., 5 B. T. A. 1004. Suit thereupon was instituted by the Commissioner in a federal District Court. That court held that the section of the act which author- ized the inclusion of the property was unconstitutional, and gave judgment against the government. This judgment the Court of Appeals affirmed. United States v. Provident Trust Co. of Pennsylvania, 35 F. (2d) 339.

In No. 547, which also arose under the act of 1921, the decedent owned real estate in Pennsylvania, of which state she was a resident. In 1923 the property was conveyed to a third person, who, in turn, reconveyed it to the decedent and her husband as 'tenants by the entireties.' After the death of the decedent, the Commissioner, for the purpose of computing the estate tax, included in her gross estate the value of the real estate so held. On appeal, the Board of Tax Appeals held this inclusion to be erroneous. Girard Trust Co. v. Commissioner of Internal Revenue, 10 B. T. A. 1100. The Commissioner filed a petition for review with the Court of Appeals, and that court affirmed the action of the Board upon the authority of No. 546, which had just been decided. Commissioner of Internal Revenue v. Girard Trust Co., 35 F.(2d) 343.

In each case the estate was created after the passage of the applicable act, and none of the property constituting it had, prior to its creation, ever belonged to the surviving spouse.

The relevant provisions of the two acts are the same, and it will be sufficient to quote from the act of 1916.

'Sec. 201. That a tax (hereinafter in this title referred to as a tax), equal to the following percentages of the value of the net estate, to be determined as provided in section two hundred and three, is hereby imposed upon the transfer of the net estate of every decedent dying after the passage of this Act, whether a resident or nonresident of the United States: * * *

'Sec. 202. That the value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated: * * * '(c) To the extent of the interest therein held jointly or as tenants in (by) the entirety by the decedent and any other person, or deposited in banks or other institutions in their joint names and payable to either or the survivor, except such part thereof as may be shown to have originally belonged to such other person and never to have belonged to the decedent.'

The applicable provision of section 202(c) is explicit, and the intent of Congress thereby to impose the challenged tax is not open to doubt. The sole question is in respect of its constitutional validity. The attack is upon two grounds: (1) That, so far as the tax is based upon the inclusion of the value of the interest in the estate held by the decedent and spouse as tenants by the entirety, it is an unapportioned direct tax and violates article 1, § 2, cl. 3, and section 9, cl. 4, of the Constitution; (2) that such a tax amounts to a deprivation of property without due process of law in violation of the Fifth Amendment.

The decisions of the courts of Maryland and Pennsylvania follow the common law, and are in accord in respect of the character and incidents of tenancy by the entirety. In legal contemplation, the tenants constitute a unit; neither can dispose of any part of the estate without the consent of the other; and the whole continues in the survivor. In Maryland, such a tenancy may exist in personal property as well as in real estate. These decisions establish a state rule of property, by which, of course, this court is bound. Warburton v. White, 176 U. S. 484, 496, 20 S. Ct. 404, 44 L. Ed. 555.

1. The contention that, by including in the gross estate the value of property held by husband and wife as tenants by the entirety, the tax pro tanto becomes a direct tax-that is, a tax on property-and therefore invalid without apportionment, proceeds upon the ground that no right in such property is transferred by death, but the survivor retains only what he already had. Section 201 imposes the tax 'upon the transfer of the net estate'; and if that section stood alone, the inclusion of such property in the gross estate of the decedent probably could not be justified by the terms of the statute. But section 202 definitely includes the property and brings it within the reach of the words imposing the tax; so that a basis for the constitutional challenge is present. Prior decisions of this court do not solve the problem thus presented, though what was said in ...

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