324 U.S. 308 (1945), 126, Merrill v. Fahs

Docket Nº:No. 126
Citation:324 U.S. 308, 65 S.Ct. 655, 89 L.Ed. 963
Party Name:Merrill v. Fahs
Case Date:March 05, 1945
Court:United States Supreme Court

Page 308

324 U.S. 308 (1945)

65 S.Ct. 655, 89 L.Ed. 963




No. 126

United States Supreme Court

March 5, 1945

Argued January 9, 1945




1. By § 503 of the Revenue Act of 1932, transfers of property are relieved from the gift tax to the extent that they are made for an "adequate and full consideration." Held, in the case of a transfer of property pursuant to an antenuptial agreement, that the relinquishment of marital rights cannot to any extent constitute "adequate and full consideration." P. 312.

2. Provisions of the federal gift and estate tax statutes are to be construed harmoniously and, where obvious reasons do not compel divergent treatment, identical phrases concerning the same subject matter are to be given identical construction. P. 313.

142 F.2d 651 affirmed.

Certiorari, 323 U.S. 66, to review the reversal of a judgment of the District Court for the taxpayer, 51 F.Supp. 120, in a suit for a refund of gift taxes.

Page 309

FRANKFURTER, J., lead opinion

MR. JUSTICE FRANKFURTER delivered the opinion of the Court.

This is a companion case to Commissioner v. Wemyss, ante, p. 303.

[65 S.Ct. 656] On March 7, 1939, taxpayer, the petitioner, made an antenuptial agreement with Kinta Desmare. Taxpayer, a resident of Florida, had been twice married and had three children and two grandchildren. He was a man of large resources, with cash and securities worth more than $5,000,000, and Florida real estate valued at $135,000. Miss Desmare's assets were negligible. By the arrangement entered into the day before their marriage, taxpayer agreed to set up within ninety days after marriage an irrevocable trust for $300,000, the provisions of which were to conform to Miss Desmare's wishes. The taxpayer was also to provide in his will for two additional trusts, one, likewise in the amount of $300,000, to contain the same limitations as the inter vivos trust, and the other, also in the amount of $300,000, for the benefit of their surviving children. In return, Miss Desmare released all rights that she might acquire as wife or widow in taxpayer's property, both real and personal, excepting the right to maintenance and support. The inducements for this agreement were stated to be the contemplated marriage, desire to make fair requital for the release of marital rights, freedom for the taxpayer to make appropriate provisions for his children and other dependents, the uncertainty surrounding his financial future and marital tranquillity. That such an antenuptial agreement is enforceable in Florida is not disputed, North v. Ringling, 149 Fla. 739, 7 So.2d 476, nor that Florida gives a wife an inchoate interest in all the husband's property, contingent during his life but absolute upon death. Florida Statutes 1941, § 731.34; Smith v. Hines, 10 Fla. 258; Henderson v. Usher, 125 Fla. 709, 170 So. 846. The parties married, and the agreement was fully carried out.

Page 310

On their gift tax return for 1939, both reported the creation of the trust, but claimed that no tax was due. The Commissioner, however, determined a deficiency of $99,000 in taxpayer's return in relation to the transfer of the $300,000. Upon the Commissioner's rejection of the taxpayer's claim for refund of the assessment paid by him, the present suit against the Collector was filed. The District Court sustained the taxpayer, 51 F.Supp. 120, but was reversed by the Circuit Court of Appeals for the Fifth Circuit, one judge dissenting. 142 F.2d 651. We granted certiorari in connection with Commissioner v. Wemyss, supra, and heard the two cases together. 323 U.S. 686.

This case, unlike the Wemyss case, does not come here by way of the Tax Court. No aid can therefore be drawn from a prior determination by the tribunal specially entrusted with tax adjudications. (See Griswold, The Need for a Court of Tax Appeals (1944), 57 Harv.L.Rev...

To continue reading