Milliken v. United States

Citation51 S.Ct. 324,75 L.Ed. 809,283 U.S. 15
Decision Date02 March 1931
Docket NumberNo. 87,87
PartiesMILLIKEN et al. v. UNITED STATES
CourtUnited States Supreme Court

Mr. D. A. Embury, of New York City, for petitioner.

[Syllabus from pages 15-17 intentionally omitted] The Attorney General and Mr. Chas. B. Rugg, Asst. Atty. Gen., for the United States.

Mr. Justice STONE delivered the opinion of the Court.

In this case certiorari was granted, 282 U. S. 817, 51 S. Ct. 20, 75 L. Ed. —, October 13, 1930, to review a judgment of the Court of Claims denying to petitioners recovery of a tax alleged to have been illegally exacted under the decedents' estates provisions of the Revenue Act of 1918. 38 F.(2d) 381; Act of February 24, 1919, c. 18, 40 Stat. 1057, 1096, 1097, 1149, 1150.

In December, 1916, while the Revenue Act of that year was in force (Act of Sept. 8, 1916, c. 463, 39 Stat. 756, 777), petitioners' decedent gave to his children certain shares of corporate stock. The donor died March 5, 1920 after the effective date of the 1918 act. The Commissioner included the shares of stock in the decedent's estate as a gift made in contemplation of death, section 402(c) of the 1918 act, and assessed and collected the tax now in suit, which was computed on the basis of the value of the stock at the time of decedent's death, and at the rats i n the 1918 act, which were higher than those fixed by the corresponding provisions of the act of 1916.

Section 401 of the 1918 act imposed taxes at specified rates upon transfers of estates by decedents. Under section 403, the taxable estate was the 'gross estate' less enumerated deductions. Section 402 provided for the inclusion in the gross estate of the value of property '(c) To the extent of any interest therein of which the decedent has at any time made a transfer, or with respect to which he has at any time created a trust, in contemplation of or intended to take effect in possession or enjoyment at or after his death (whether such transfer or trust is made or created before or after the passage of this act). * * *' The Revenue Act of 1916, §§ 201, 202(b), which had contained similar provisions for the taxing of decedents' estates, including gifts in contemplation of death, but at lower rates, was repealed, with provisos not now material, by section 1400 of the 1918 act.

The finding of the Commissioner that the present gift was in contemplation of death is not questioned by petitioners, and is controlling here, since it is not challenged by any facts appearing of record. Niles Bement Pond Co. v. United States, 281 U. S. 357, 361, 50 S. Ct. 251, 74 L. Ed. 901; Burnet v. Sanford & Brooks Co., 282 U. S. 359, 51 S. Ct. 150, 75 L. Ed. 383, decided January 5, 1931. Although antedating the enactment of section 402, the gift is embraced within its provisions, which are in terms applicable to gifts in contemplation of death made before the passage of the act.

Petitioners' argument that section 402 does not apply is not supported by their citations of Reinecke v. Northern Trust Co., 278 U. S. 339, 49 S. Ct. 123, 73 L. Ed. 410, 66 A. L. R. 397, and May v. Heiner, 281 U. S. 238, 50 S. Ct. 286, 74 L. Ed. 826, 62 A. L. R. 1244. In those cases the gifts inter vivos were not 'in contemplation of death,' and the only relevant question was one of construction, whether some of them were of the class intended by Congress to be taxable under section 402(c) as transfers 'intended to take effect in possession or enjoyment at or after death.' It was held that they were not. But those gifts were not of the class now involved, gifts in contemplation of death, made before the passage of the act, which are expressly named by section 402(c) as subject to its provisions.

This court has not passed directly on the constitutionality of the federal taxation of gifts made in contemplation of death. But taxation of transfers at death has been upheld, Knowlton v. Moore, 178 U. S. 41, 20 S. Ct. 747, 44 L. Ed. 969, as has, more recently, the taxation of gifts inter vivos, Bromley v. McCaughn, 280 U. S. 124, 50 S. Ct. 46, 74 L. Ed. 226; and we hold, as this court has several times intimated, that the inclusion of this type of gifts in a single class with decedents' estate to secure equality of taxation, and prevent evasion of estate taxes, is a permissible classification of an appropriate subject of taxation. See Nichols v. Coolidge, 274 U. S. 531, 542, 47 S. Ct. 710, 71 L. Ed. 1184, 52 A. L. R. 1081; Tyler v. United States, 281 U. S. 497, 505, 50 S. Ct. 356, 74 L. Ed. 991, 69 A. L. R. 758; Corliss v. Bowers, 281 U. S. 376, 378, 50 S. Ct. 336, 74 L. Ed. 916; Taft v. Bowers, 278 U. S. 470, 482, 49 S. Ct. 199, 73 L. Ed. 460, 64 A. L. R. 362; cf. Schlesinger v. Wisconsin, 270 U. S. 230, 239, 46 S. Ct. 260, 70 L. Ed. 557, 43 A. L. R. 1224.

The objection to the tax, chiefly urged in brief and argument, is that the taxing statute, as applied, is a denial of due process of law because retroactive. It is said that the statute is invalid not alone because it reaches a gift made before its enactment, but because it measures the tax by rates not in force when the gift was made, applied to the value of the property not when given, but at the uncertain later time of the death of the donor.

This court has held the taxation of gifts made, and completely vested beyond recall, before the passage of any statute taxing them,to be so palpably arbitrary and un- reasonable as to infringe the due process clause. Nichols v. Coolidge, supra; Untermyer v. Anderson, 276 U. S. 440, 48 S. Ct. 353, 72 L. Ed. 645; Coolidge v. Long, 282 U. S. 582, 51 S. Ct. 306, 75 L. Ed. 562, decided Feb. 24, 1931.1 In Nichols v. Coolidge, it was held that section 402 of the 1918 act could not constitutionally be applied to a gift inter vivos, not in contemplation of death, and made long before the adoption of any congressional legislation imposing an estate tax or taxing gifts to take effect in possession or enjoyment at or after death. In Untermyer v. Anderson, supra, it was held that the retroactive provision of the novel gift tax of the Revenue Act of 1924 was invalid as applied to gifts antedating the act. In both the point was stressed, as the basis of decision, that the nature and amount of the tax burden imposed could not have been understood and foreseen by the taxpayer at the time of the particular voluntary act which was made the occasion of the tax. See Nichols v. Coolidge, supra, page 542 of 274 U. S., 47 S. Ct. 710; Untermyer v. Anderson, supra, page 445 of 276 U. S., 48 S. Ct. 353. Upon similar grounds, in Coolidge v. Long, supra, a state tax on successions was held invalid as applied to the gift to the donor's children involved in Nichols v. Coolidge, supra, because deemed to be a tax on a succession to a gift completely vested before the enactment of the taxing act or of any other law taxing successions by lineal descendants of the donor.

But a tax is not necessarily and certainly arbitrary and therefore invalid because retroactively applied, and taxing acts having retroactive features have been upheld in view of the particular circumstances disclosed and considered by the court. See Stockdale v. Atlantic Insurance Co., 20 Wall. 323, 331, 22 L. Ed. 348; Railroad Co. v. Rose, 95 U. S. 78, 80, 24 L. Ed. 376; Western Union Railroad Co. v. United States, 101 U. S. 543, 549, 25 L. Ed. 1068; Flint v. Stone Tracy Co., 220 U. S. 107, 31 S. Ct. 342, 55 L. Ed. 389, Ann. Cas. 1912B, 1312; Billings v. United States, 232 U. S. 261, 282, 34 S. Ct. 421, 58 L. Ed. 596; Brushaber v. Union Pacific R. R. Co. 240 U. S. 1, 20, 36 S. Ct. 236, 60 L. Ed. 493, L. R. A. 1917D, 414, Ann. Cas. 1917B, 713; Lynch v. Hornby, 247 U. S. 339, 343, 38 S. Ct. 543, 62 L. Ed. 1149; Hecht v. Malley, 265 U. S. 144, 164, 44 S. Ct. 462, 68 L. Ed. 949; Cooper v. United States, 280 U. S. 409, 50 S. Ct. 164, 74 L. Ed. 516. See Taft v. Bowers, supra; United States v. Heinszen, 206 U. S. 370, 27 S. Ct. 742, 51 L. Ed. 1098, 11 Ann. Cas. 688; Graham v. Goodcell, 282 U. S. 409, 51 S. Ct. 186, 75 L. Ed. 415, decided January 26, 1931.

Hence, in challenging the present tax it does not suffice to say that the gift antedated the statute. It is necessary to consider the nature of the tax and of the decedent's gift. When the gift was made, it was subject to the provisions of the 1916 Revenue Act. By it, Congress had adopted the well-understood system of taxation of transfers of property at death, already in force in forty-two states. Report No. 793, Senate Committee on Finance; Report No. 922, House Committee on Ways and Means; both on H. R. No. 16763, Sixty-Fourth Congress. A characteristic feature of the system was that incorporated in sections 202(b) of the 1916 act and 402(c) of the 1918 act, both of which imposed a tax on gifts made in contemplation of death, computed at the same value and rate as though the property given had been a part of the donor's estate passing at death.2

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