Gottlieb v. White

• Decision Date: 14 March 1934
• Docket Number: No. 2876.,2876.
• Citation: 69 F.2d 792
• Parties: GOTTLIEB v. WHITE, Collector.
• Court: U.S. Court of Appeals — First Circuit

69 F.2d 792 (1934)

GOTTLIEB v. WHITE, Collector.

No. 2876.

Circuit Court of Appeals, First Circuit.

March 14, 1934.

Samuel Gottlieb and Israel Gorovitz, both of Boston, Mass., for appellant.

Helen R. Carloss, Sp. Asst. to Atty. Gen. (Sewall Key, J. Louis Monarch, and Lester L. Gibson, Sp. Assts. to Atty. Gen., and Francis J. W. Ford, U. S. Atty., and J. Duke Smith, Sp. Asst. to U. S. Atty., both of Boston, Mass., on the brief), for appellee.

Before WILSON and MORTON, Circuit Judges, and PETERS, District Judge.

MORTON, Circuit Judge.

This is an action to recover federal inheritance taxes collected under the Revenue Act of 1924, §§ 301 and 302 (26 USCA §§ 1092 note, 1093, 1094 note). The plaintiff's contention is that the tax was illegally exacted because section 302 was unconstitutional. The defendant demurred to the declaration; the District Judge sustained the demurrer (1 F. Supp. 905); and the plaintiffs appealed. The statute in question was amended by the Revenue Act of 1926 (26 USCA §§ 1092, 1093, 1094); and the question before us involves only taxes under law no longer in force. The plaintiff's declaration, which is admittedly sufficient both in form and in substance to raise the question, is summarized in the opinion of the District Judge, supra.

The statute reads as follows (26 USCA § 1094 note):

"Sec. 302. 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 —

"(a) To the extent of the interest therein of the decedent at the time of his death which after his death is subject to the payment of the charges against his estate and the expenses of its administration italics supplied and is subject to distribution as part of his estate. * * *" 43 Stat. 304.

The difficulty with this statute is created by the provision restricting the application of the tax to property of the decedent's estate which was "subject to * * * the expenses of its administration." Whether the real estate of a decedent is subject to such expenses is a matter of state law. In twelve states of the Union it is not. In Crooks v. Harrelson, 282 U. S. 55, 51 S. Ct. 49, 75 L. Ed. 156, it was decided that to such real estate the tax did not apply. The plaintiff's contention is that the statute imposed a tax which was not "uniform throughout the United States" and was therefore in violation of article 1, § 8, of the Constitution, and which was also so arbitrary, discriminatory, and legally unfair as to violate the Fifth Amendment. These constitutional provisions read as follows:

Article 1, section 8. "The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States." (Italics supplied.)

Amendments article V. "No person shall * * * be deprived of life, liberty, or property, without due process of law; * * * nor shall private property be taken for public use, without just compensation." (Italics supplied.)

That the statute presents real difficulty in its constitutional aspects can hardly be denied. The government contended in Crooks v. Harrelson, supra, that to construe the statute as it was finally construed by that decision, would be to make it of very doubtful constitutionality. This view, which was then pressed upon the court with much force and ability for the government, is now pressed upon us by the plaintiffs.

The tax in question is not upon property; it is an excise upon the right to transmit property by will or by descent. Interests in real estate, and in other property if there be such, which do not come within the statute, are not taxed. The place of domicile of the deceased owner is immaterial. First Trust Co. v. Allen, 60 F.(2d) 812 (C. C. A. 8). On the face of the statute there is no lack of geographical uniformity. It applies to all estates and to all property within its descriptive term. As has been often said, however, taxation is a practical matter and tax statutes are to be judged by their practical results. Nicol v. Ames, 173 U. S. 509, 19 S. Ct. 522, 43 L. Ed. 786; Nichols v. Coolidge, 274 U. S. 531, 47 S. Ct. 710, 71 L. Ed. 1184, 52 A. L. R. 1081. The practical effect of the statute before us was to tax the devolution of real estate owned in fee by a decedent, in about thirty-six states, and not to tax it in the remaining states. This result was reached by incorporating state law into a federal statute to define the subject-matter taxed, a very unusual...