335 U.S. 632 (1949), 3, Spiegel's Estate v. Commissioner of Internal Revenue.
|Docket Nº:||Nos. 3 and 5.|
|Citation:||335 U.S. 632, 69 S.Ct. 337, 93 L.Ed. 288|
|Party Name:||SPIEGEL'S ESTATE et al., Petitioners, v. COMMISSIONER of INTERNAL REVENUE. COMMISSIONER of INTERNAL REVENUE, Petitioner, v. CHURCH'S ESTATE et al.|
|Case Date:||January 17, 1949|
|Court:||United States Supreme Court|
[69 S.Ct. 337] On Writ of Certiorari to the United States Court of Appeals for the Seventh Circuit.
On Writ of Certiorari to the United States Court of Appeals for the Third Circuit.
Concurring and dissenting opinions.
Mr. Justice REED, concurring in No. 3, Spiegel v. Commissioner, and dissenting in No. 5, Commissioner v. Church.
As these tax decisions may have an influence on subsequent decisions beyond the limited area of the issues decided, I have thought it advisable to state my position for whatever light it may throw. I agree with the judgment
directed by the Court in Spiegel v. Commissioner and with so much of the opinion as rests solely upon the controlling effect of the possibility of reverter under the law of Illinois. As I disagree with Church v. Commissioner, decided today, I cannot accept so much of the opinion in the Spiegel case, 335 U.S. 701, 69 S.Ct. 301, as seems to put reliance upon the fact that the settlor as trustee retains any 'possession or enjoyment' [69 S.Ct. 338] of the trust, other than a possibility of reverter. I am opposed to the view expressed in the dissent written by Mr. Justice Burton that the settlor's intent rather than the effect of his acts is the touchstone to determine the taxability of his property for estate tax purposes.
So far as Commissioner v. Church is concerned, I do not believe that May v. Heiner, 281 U.S. 238, 50 S.Ct. 286, 74 L.Ed. 826, 67 A.L.R. 1244, should be overruled. The Joint Resolution of March 3, 1931, therefore, stands as the determinative factor in reaching a conclusion as to the taxability of the Church estate. Hassett v. Welch, 303 U.S. 303, 58 S.Ct. 559, 82 L.Ed. 858, decided that the Resolution was not retroactive. Consequently, the Church estate is not subject to an estate tax because of the reservation of a life estate.
We are asked to accept an overruling of May v. Heiner, supra, and also, I think, of Reinecke v. Northern Trust Co., 278 U.S. 339, 49 S.Ct. 123, 73 L.Ed. 410, 66 A.L.R. 397, not to mention the incidental fall of Hassett v. Welch, supra, on the one side, or, on the other hand, to limit the rule as to the possibility of reverter in Helvering v. Hallock, 309 U.S. 106, 60 S.Ct. 444, 84 L.Ed. 604, 125 A.L.R. 1368, and the numerous cases that follow its teaching, to reverters expressly reserved in the documents. Legislation indicates a purpose to promote gifts as a desirable means for early distribution of property benefits. In reliance upon a long settled course of legislative and judicial construction, donors have made property arrangements that should not now be upset summarily with no stronger reasons for doing so than that former courts
and the Congress did not interpret the legislation in the same way as this Court now does. Judicial efforts to mold tax policy by isolated decisions make a national tax system difficult to develop, administer or observe. For more than thirty years Congress has legislated upon this problem and this Court has interpreted the enactments so that now what seems to me a reasonably fair interpretation of tax liability under § 811(c) of the Internal Revenue Code, 26 U.S.C.A. § 811(c), as now written, has been worked out. Relying upon the desirability of stare decisis under the decisions concerning § 811(c), I would leave such changes as may seem desirable to the Congress, where general authority for that purpose rests.
(1) A provision including in a decedent's estate the value at time of death of interest in any transfer by trust 'in contemplation of or intended to take effect in possession or enjoyment at or after his death' has been in the federal estate tax law since the Income Tax Act of 1916. 1 It will be noted that the phrase relating to a transfer 'in contemplation of or intended to take effect in possession or enjoyment at or [69 S.Ct. 339] after his [settlor's] death' has not changed. It was construed by this Court, at first, to apply to those circumstances where something passed
from the 'possession, enjoyment or control of the donor at his death.' Reinecke v. Northern Trust Co., 278 U.S. 339, 348, 49 S.Ct. 123, 126, 73 L.Ed. 410, 66 A.L.R. 397. 'Of course it was not argued that every vested interest that manifestly would take effect in actual enjoyment after the grantor's death was within the statute.' Shukert v. Allen, 273 U.S. 545, 547, 47 S.Ct. 461, 71 L.Ed. 764, 49 A.L.R. 855. When, after the execution of a trust, the settlor 'held no right in the trust estate which in any sense was the subject of testamentary disposition,' this Court was of the opinion that the gift was not intended to take effect in possession or enjoyment at the donor's death. Helvering v. St. Louis Union
Trust Co., 296 U.S. 39, 43, 56 S.Ct. 74, 76, 80 L.Ed. 29, 100 A.L.R. 1239; Helvering v. City Bank Farmers Trust Co., 296 U.S. 85, 88, 56 S.Ct. 70, 72, 80 L.Ed. 62; Burnet v. Northern Trust Co., 283 U.S. 782, 51 S.Ct. 342, 75 L.Ed. 1412; Morsman v. Burnet, 283 U.S. 783, 51 S.Ct. 343, 75 L.Ed. 1412; McCormick v. Burnet, 283 U.S. 784, 51 S.Ct. 343, 75 L.Ed. 1413; May v. Heiner, 281 U.S. 238, 50 S.Ct. 286, 74 L.Ed. 826, 67 A.L.R. 1244. A reserved power of appointment or change is, in a sense, a testamentary power over the corpus. Reinecke v. Northern Trust Co., supra, 278 U.S. at page 345, 49 S.Ct. 123, 124, 73 L.Ed. 410, 66 A.L.R. 397; Porter v. Commissioner, 288 U.S. 436, 53 S.Ct. 451, 77 L.Ed. 880.
Klein v. United States, 283 U.S. 231, 51 S.Ct. 398, 399, 75 L.Ed. 996, brought doubt into the above conception of the meaning of the phrase in question. That trust was to A for life and on condition that A survive the donor to A in fee simple. It was the death of the donor that 'brought the larger estate into being * * * and effected its transmission from the dead to the living,' this Court said in upholding the tax on the trust property. This was construed by four members of the Court to mean that the donor's death 'operating upon his gift inter vivos not complete until his death, is the event which calls the statute into operation.' Mr. Justice Stone, dissenting in the later case of Helvering v. St. Louis Trust Co., supra, 296 U.S. at page 46, 56 S.Ct. at page 77, 80 L.Ed. 29, 100 A.L.R. 1239. The two positions, one that only power in the settlor at the time of death to cause the property to be transferred from him to another by will or by descent or to select beneficiaries through appointment brought the property formerly transferred within the reach of the words 'intended to take effect in possession or enjoyment at or after his death,' the Reinecke concept, and the other than, in addition, every possibility of reversion of the transferred interest to the settlor must be barred by the trust instrument, the dissenter's ground in Helvering v. St. Louis Trust Co., supra, were fully discussed in the majority and dissenting opinions in Helvering v. Hallock, 309 U.S. 106, 60 S.Ct. 444, 84 L.Ed. 604, 125 A.L.R. 1368. 2 The latter
position was accepted as the sound interpretation by us and I adhere to that view for the reasons stated in the [69 S.Ct. 340] Court's opinion in Helvering v. Hallock. Cf. Eisenstein, Estate Taxes and the Higher Learning of the Supreme Court, 3 Tax Law Rev. 395. That interpretation has gained strength from the fact that Congress has not repudidated it as inconsistent with the legislative purpose and by other judgments by this Court applying the principles of the Hallock case in accordance with this statement. Fidelity-Philadelphia Trust Co. v. Rothensies, 324 U.S. 108, 65 S.Ct. 508, 89 L.Ed. 783, 159 A.L.R. 227; Commissioner v. Field's Estate, 324 U.S. 113, 65 S.Ct. 511, 89 L.Ed. 786, 159 A.L.R. 230. Possession or enjoyment of property as heretofore applied has meant from the standpoint of the taxability of the transferor's estate, at least, that the death of the transferor perfects the right of the transferee and cuts off any possibility of reverter to the transferor left by the instruments of transfer. If the transferor
reacquired the property by inheritance or by purchase, other factors would enter. Before the Joint Resolution even the reservation of a life estate was insufficient to preserve possession or enjoyment in the transferor as nothing passed at his death. When words such as 'possession or enjoyment' used in a section of a revenue statute with their many possible shades and ambiguities of meaning have been given definition through the course of legislation and litigation, a change by courts should be avoided. 3 By the Resolution such a reservation or that of power of appointment was also made the source of an estate tax.
Prior cases have involved trust instruments where the settlor specifically reserved remainders, reverters or contingent powers of appointment. In these cases the value at death of the entire corpus of the trusts was taxed. This was because in each case there was a contingency through which completed gifts of the entire corpus to the beneficiaries might fail before the death of the settlor with the result that the settlor would again control the transfer of the corpus. 4 In such circumstances, I take it as settled that the property is taxable on the event of the settlor's death under §§ 810 and 811(c). Cf. Fidelity-Philadelphia Trust Co. v. Rothensies, 324 U.S. at page 111, 65 S.Ct. at page 510, 89 L.Ed. 783, 159 A.L.R. 227 [69 S.Ct. 341] .
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