Old Colony Trust Co. v. Malley
| Decision Date | 17 May 1927 |
| Docket Number | No. 2107.,2107. |
| Citation | 19 F.2d 346 |
| Parties | OLD COLONY TRUST CO. et al. v. MALLEY et al. |
| Court | U.S. Court of Appeals — First Circuit |
F. W. Grinnell, of Boston, Mass. (O. W. Taylor, of Boston, Mass., on the brief), for plaintiffs in error.
Marcus Morton, Jr., Asst. U. S. Atty., of Boston, Mass. (Frederick H. Tarr, U. S. Atty., of Gloucester, Mass., on the brief), for defendants in error.
Herbert Noble and Scott Scammell, both of Boston, Mass., amici curiæ.
Before BINGHAM, JOHNSON, and ANDERSON, Circuit Judges.
The executors under the will of Sidney W. Winslow, who died on June 18, 1917, brought this suit at law to recover a portion ($58,238.12) of an inheritance tax claimed to have been illegally exacted from their estate. The tax was levied under the Act of September 8, 1916, 39 Stat. 777, as amended (by increasing the rates) by Act of March 3, 1917, 39 Stat. 1002 (Comp. St. §§ 6336½b, 6336½bb). Sections 201 and 203, so far as they need now be stated, are as follows:
The applicable regulation promulgated by the Treasury Department under date of May, 1917, is as follows:
Plaintiffs attack this regulation as inconsistent with the statute; also as "unconstitutional" — a claim so obviously unsound as to call for no discussion.
The Commissioner determined the net value of the Winslow estate to be $4,837,860.63, and computed the tax at $489,613.61, by applying the appropriate percentages to the blocks as stated in section 201, but without deducting the tax, in order to determine the amount of the tax. Plaintiffs' learned counsel, in an elaborate argument, urge that this method is erroneous; they contend that the act imposes successive taxes, equal to percentages of the separate blocks of the net estate, each of which, exclusive of the tax, constitutes a separate unit of measure.
In the exact words of counsel for plaintiffs:
"The question presented involves the interpretation of that act, to ascertain whether the amount of the tax itself, imposed by the act, should be included in the `measure of that tax.'"
We agree with plaintiffs' counsel that this problem of statutory construction must be determined under the familiar rule that, in taxing statutes, doubt about the construction must be resolved against the government and in favor of the taxpayer. Gould v. Gould, 245 U. S. 151, 153, 38 S. Ct. 53, 62 L. Ed. 211; United States v. Merriam, 263 U. S. 179, 187, 188, 44 S. Ct. 69, 68 L. Ed. 240, 29 A. L. R. 1547.
But we are not able to adopt the view that there is any reasonable doubt about the construction of this statute. Weight must be given to the contemporaneous construction of the department charged with the enforcement of the statute. Malley v. Walter Baker & Co. (C. C. A.) 281 F. 41, 46, and cases cited; Baltzell v. Mitchell (C. C. A.) 3 F.(2d) 428, 430, and cases cited. We think that the Treasury Department put the obvious and the only natural interpretation upon the language used.
The act contemplates a tax, — i. e., a single tax, and upon a net estate, not upon various estates. The fact that the tax is "equal to the following percentages of the value of the net estate" does not transmute one tax into many taxes, and one net estate into several net estates. The words "equal to the following percentages of the value of the net estate" mean exactly the same as the words "equal to the sum of the following percentages of the value of the net estate," in section 401 of the act of 1918, 40 Stat. 1096 (Comp. St. § 6336¾b); not, as plaintiffs urge, a different basis for the tax. There is one tax on one net estate, under both acts.
The gist of the plaintiff's contention is that, under section 203, the tax and no part thereof can be used as the measure or base of the tax; that "net estate" means the exact amount available for transfer to beneficiaries, from which it follows that there must be as many real "net estates" as there are separate blocks. But only by an algebraic formula — an intent to use which is "not lightly to be imputed to legislators," Edwards v. Slocum, 264 U. S. 61, 63, 44 S. Ct. 293, 68 L. Ed. 564; 287 F. 651, 654 — can the tax thus grounded be computed.
The fallacy of the elaborate schedules and diagrams in plaintiffs' brief may most easily be demonstrated by assuming the simplest form of a taxable estate — one of $50,000, net; that is, after deducting the undisputed items covered by section 203 — and a tax thereon of 1 per cent. Manifestly the Commissioner would figure the tax as $500, 1 per cent. of $50,000. But this would leave a "net estate," plaintiffs urge, of only $49,500; so that the tax of $500 is, pro tanto, measured by the tax. To meet their objection, a formula something like the illustration set forth in the margin is necessary, or at any rate convenient.1
Plaintiffs compute the tax on the Winslow estate as follows:
Blocks of Amount Statutory Rate of `Transfer of'
Net Estate. of Tax. Language. Tax. Net Estate
$4,406,485.14 $431,375.49 $4,406,485.14
1st 50,000.00 750.00 `equal to' 1½% of 50,000.00
2d 100,000.00 3,000.00 `equal to' 3 % of 100,000.00
3d 100,000.00 4,500.00 `equal to' 4½% of 100,000.00
4th 200,000.00 12,000.00 `equal to' 6 % of 200,000.00
5th 550,000.00 41,250.00 `equal to' 7½% of 550,000.00
6th 1,000,000.00 90,000.00 `equal to' 9 % of 1,000,000.00
7th 1,000,000.00 105,000.00 `equal to' 10½% of 1,000,000.00
8th 1,000,000.00 120,000.00 `equal to' 12 % of 1,000,000.00
9th 406,485.14 54,875.49 `equal to' 13½% of 406,485.14
This method disregards the controlling principle of their argument — that the tax on each block should be deducted in computing the tax on that particular block. The tax, as they compute it, is reckoned, flat ($750), on the first block of $50,000, and thus includes the tax as part of the measure of the tax. So as to the other blocks. The deduction of the tax on earlier blocks, at lower rates, does not really apply plaintiffs' theory, as they argue it.
We have taken pains to compute the tax in real accordance with plaintiffs' theory. It follows:
Blocks of
Net Estate. Rate. Tax
1st $50,000.00 1½% $738.92
2d 100,000.00 3 % 2,912.62
3d 100,000.00 4½% 4,306.22
4th 200,000.00 6 % 11,320.75
5th 550,000.00 7½% 38,372.09
6th 1,000,000.00 9 % 82,568.81
7th 1,000,000.00 10½% 95,022.62
8th 1,000,000.00 12 % 107,142.85
9th 837,860.63 13½% 99,657.43
_____________ __________
Net
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