Baur v. Commissioner of Internal Revenue, 8595.

• Decision Date: 21 September 1944
• Docket Number: No. 8595.,8595.
• Citation: 145 F.2d 338
• Parties: BAUR v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Third Circuit

145 F.2d 338 (1944)

BAUR v. COMMISSIONER OF INTERNAL REVENUE.

No. 8595.

Circuit Court of Appeals, Third Circuit.

Argued June 23, 1944.

Decided September 21, 1944.

Rehearing Denied November 16, 1944.

Thorpe Nesbit, of Philadelphia, Pa. (Hugh Satterlee, of New York City, on the brief), for petitioner.

Helen Goodner, of Washington, D. C. (Samuel O. Clark, Jr., Asst. Atty. Gen., and Sewall Key and J. Louis Monarch, Sp. Assts. to Atty. Gen., on the brief), for respondent.

Before BRATTON and JONES, Circuit Judges, and KIRKPATRICK, District Judge.

JONES, Circuit Judge.

The questions raised by the pending petition for review are (1) whether the donee of a gift of untaxable amount is personally liable, to the extent of the value of the gift, for an unpaid tax on a gift to another donee made by the same donor in the same calendar year and (2) whether such liability, if it exists, may be enforced against the donee, as a transferee, after the statute of limitations has run against the donor's liability, in the absence of proof that the donor was insolvent or that the gratuitous transfers made the donor insolvent.

The questions relate to the Revenue Act of 1932, 47 Stat. 169, c. 209, 26 U.S.C.A. Int.Rev.Acts, page 585 et seq. The facts, under which they arise, were stipulated and, so far as they are presently material, are as follows:

In 1937 Emma M. Baur made three gifts, in securities, of a value of $5,000 each. One gift was to her daughter, the petitioner, personally, the second to another daughter personally and the third to the petitioner as trustee under a deed of trust, executed in 1935, for the benefit of a minor daughter. In the donor's gift tax return for the year in question she reported the three gifts, claimed a $5,000 exclusion with respect to each and showed no net gifts subject to tax. The period within which a tax could be assessed against the donor on account of her gifts in 1937 expired by virtue of the statute of limitations on March 12, 1941, without any such liability on the part of the donor having been determined. However, within a year thereafter, viz., on March 12, 1942, the Commissioner sent the petitioner a notice by registered mail informing her of a deficiency in the donor's gift tax for the year 1937 because of the disallowance of the $5,000 exclusion for the gift in trust which the Commissioner held to be a gift of a future interest. See Sec. 504 (b) of the Act. The petitioner now concedes that the Commissioner's determination of the taxability of the gift in trust was correct. The Commissioner's notice was addressed to the petitioner as donee and transferee of Emma M. Baur, donor, and determined a deficiency against the petitioner for the later ascertained gift tax due by the donor for the year 1937 which remained unpaid. On the taxpayer's petition for a redetermination of the deficiency the Tax Court sustained the Commissioner both as to the petitioner's liability for the tax and the manner of enforcing it.

In presently material part, Sec. 510 of the statute provides that, —

"The tax imposed by this title shall be a lien upon all gifts made during the calendar year, for ten years from the time the gifts are made. If the tax is not paid when due, the donee of any gift shall be personally liable for such tax to the extent of the value of such gift. * * *" (Emphasis supplied.)

The words of the provision above quoted are so plain as not to leave any room for doubt that it was the congressional intent, thereby to render a donee personally liable (to the extent of the value of his gift) for the gift tax due by the donor regardless of the fact that the gift to the particular donee did not contribute to the imposition of any tax. In short, it is the evident legislative intent that property passing from an owner to a voluntary recipient by way of donation shall be liable for any taxes due by the donor on account of his gratuitous distributions within the calendar year. We can see no escape from this conclusion. Patently, the tax imposed upon the donor by the Act is made a lien upon all gifts (not just the gifts subject to tax) made during a calendar year; and, if the tax so imposed is not paid when due, the donee of any gift (again not just gifts subject to tax) is made personally liable for the tax due by the donor to the extent of the value of such donee's gift. The latter is the only limitation in amount which the statute places upon a donee's liability for gift tax due by his donor.

It has often been said with respect to statutory enactments that a court is not at liberty to construe what needs no construction or to resort to reports of congressional committees for the meaning of language which is neither ambiguous nor doubtful. E. g. Helvering v. City Bank Farmers Trust Co., Trustee, 296 U.S. 85, 89, 56 S.Ct. 70, 80 L.Ed. 62. In such circumstances, it is a court's primary duty to apply the legislative intent in accordance with the clear and unmistakable terms of the statute. So doing in the instant case, it follows that the petitioner, as a donee, was liable, to the extent of the value of her gift, for the gift tax due by the donor for the year 1937. Admittedly, that tax was not paid by the donor when due. As the value of the gift to the petitioner exceeded the amount of the unpaid gift tax due by the donor, the Tax Court was...