Lang v. Commissioner of Internal Revenue, 595
| Decision Date | 10 April 1933 |
| Docket Number | No. 595,595 |
| Citation | 77 L.Ed. 1066,289 U.S. 109,53 S.Ct. 534 |
| Parties | LANG v. COMMISSIONER OF INTERNAL REVENUE |
| Court | U.S. Supreme Court |
Messrs. Washington Bowie, Jr., of Baltimore, Md., and J. R. Sherrod, of Washington, D.C., for petitioner.
The Attorney General and Mr. Whitney North Seymour, of Washington, D.C., for respondent.
In 1915, petitioner and her husband purchased certain real property at a cost of $13,000; title being vested in them as tenants by the entirety. Of this amount petitioner contributed $1,560 (12 per cent.), and her husband the remaining 88 per cent. The husband died in 1924, the property at that time having a market value of $40,000; and 88 per cent. of that amount was included in the value of the decedent's gross estate for the purposes of the federal estate tax. In 1925 the property was sold for the sum last named. Petitioner, in her income tax return for that year, computed the profit on the basis of the market value of the property at the time of her husband's death, with the exception of 12 per cent., representing the sum which she had contributed to the purchase price of $13,000. The Commissioner determined a deficiency, using the entire 1915 cost as the basis for computing the amount of profit realized. The Commissioner's ruling was affirmed by a decision of the Board of Tax Appeals (23 B.T.A. 854), and that in turn was affirmed by the court below. (C.C.A.) 61 F.(2d) 280.
The question to be determined, therefore, is whether cost of the property in 1915, or its market value at the time of decedent's death (with allowable deductions), is the proper basis for determining the gain from the sale in 1925.
The solution of the problem depends upon the meaning of the provision contained in section 204(a) of the Revenue Act of 1926, c. 27, 44 Stat. 9, 14, 26 USCA § 935(a)(5), which reads:
'The basis for determining the gain or loss from the sale or other disposition of property acquired after February 28, 1913, shall be the cost of such property; except that—* * *
An estate by the entirety is held by the husband and wife in single ownership, by a single title. They do not take by moieties, but both and each take the whole estate, that is to say, the entirety. The tenancy results from the common-law principle of marital unity; and is said to be sui generis. Upon the death of one of the tenants 'the survivor does not take as a new acquisition, but under the original limitation, his estate being simply freed from participation by the other. * * *' 1 Washburn, Real Property (6th Ed.) § 912. In the present case, therefore, when the husband died, the wife, in respect of this estate, did not succeed to anything. She simply continued, in virtue of the nature of the tenancy, to possess and own what she already had. Giving the words of the statute their natural and ordinary meaning, as must be done, it is obvious that nothing passed to her by bequest, devise, or inheritance.
The foregoing view is confirmed, if that be necessary, by a consideration of the language immediately following the quotation from paragraph (5), § 204(a), supra, namely: 'The provisions of this paragraph shall apply to the acquisition of such property interests as are specified in subdivision * * * (c) or (f) of section 1094(302) of this title.' Subdivision (c), § 302 (26 USCA § 1094(c), deals with transfers by the decedent made in contemplation of or intended to take effect in possession or enjoyment at or after his death; and subdivision (f), § 302 (26 USCA § 1094 (f) has reference to property passing under a general power of appointment, exercised by the decedent by will or deed in like contemplation or with like intention. Chapter 27, 44 Stat. 70, 71. The significant circumstance is that subdivision (e), § 302 (26 USCA § 1094(e), which relates to...
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