Rosenblum v. Anglim
| Decision Date | 31 March 1942 |
| Docket Number | No. 21895-S.,21895-S. |
| Citation | 43 F. Supp. 889 |
| Parties | ROSENBLUM v. ANGLIM, Collector of Internal Revenue. |
| Court | U.S. District Court — Northern District of California |
Samuel M. Samter and Richard S. Goldman, both of San Francisco, Cal., for plaintiff.
Frank J. Hennessy, U. S. Atty., and Esther B. Phillips, Asst. U. S. Atty., both of San Francisco, Cal., for defendant.
The question for decision is whether money belonging to a nonresident alien, who was not engaged in business in the United States at the time of his death, was deposited here with a person engaged in the banking business, thus exempting it from estate taxes under the Internal Revenue Act.1
The facts are undisputed. Max Rosenblum, a German citizen, came to the United States on a visitor's visa about ten months before his death. His home and place of business for many years had been in San Salvador, and he was not engaged in business in the United States at the time of his death. He died in California, on August 3, 1936, leaving property, part of which was in San Salvador and part in the United States.
In June of 1931 decedent had deposited a sum in excess of $112,000 with D. Hecht & Co., of San Francisco, an importing and exporting firm owned by Daniel Hecht, a cousin of decedent, and thereafter sent this firm money from time to time. He made withdrawals by drafts, which were honored by the firm. His capital was at his disposal "either wholly or in part at any time," and he received interest on the deposits. The firm rendered semi-annual accounts showing deposits and withdrawals and also charges for a number of small personal items purchased for decedent. Decedent kept a record of this account in a book showing his accounts with regularly established banking institutions in California.
It is admitted that D. Hecht & Co. was not licensed to do a banking business, and there is no showing that it handled similar accounts for other persons.
Plaintiff listed an item of $157,848.85 in the estate tax return, describing it as having been "deposited with D. Hecht & Co. as a person carrying on the banking business of the decedent who was not engaged in business in the United States at the time of his death," and claimed that it was therefore exempt. The Collector of Internal Revenue assessed a tax of $17,626.49 on this amount; the tax was paid, and within the proper time a claim for refund was filed and rejected.
Plaintiff contends that it was not the intent of Congress to require the deposit to be made in a licensed bank, and that if "the banking business" is not limited to persons licensed to engage in that business, it naturally follows that the words "any person carrying on the banking business" are to be given the construction "any person carrying on the banking business for decedent." In other words, plaintiff urges that the question is not the nature of the business carried on by D. Hecht & Co., but is the nature of the dealings of decedent with that company.
The only basis for plaintiff's statement that the words "for decedent" must necessarily be added to the phrase "any person carrying on the banking business" appears to be a misconception of the word Congress intended to be modified by the phrase "by or for decedent."
When all the pertinent language of the Act: "Any moneys deposited with any person carrying on the banking business, by or for a nonresident * * *," is read together, it is clear that the words "by or for a nonresident" modify the word "deposited" and not the words "any person carrying on the banking business." No other construction is possible, because of the use of the word "by". Plaintiff could not maintain the construction "any person carrying on the banking business by a nonresident." Not only would this be ungrammatical, but the Act contains the requirement that the non-resident be not engaged in business in the United States at the time of his death.
Plaintiff states in his reply brief that the bill for the Act, as originally proposed in Congress in 1921, read in part: "and any moneys deposited in any bank, banking institution or trust company in the United States, by or for a non-resident decedent"; that at the legislative committee hearing the words "in any bank, banking institution or trust company" were stricken out, and the words "with any person carrying on the banking business" were substituted. Plaintiff also quotes language interpreting the bill which is made a part of House Resolution No. 8245: "Section 403 would exempt * * * any money deposited in the United States by or for a non-resident decedent." In the bill as originally proposed the words "by or for a non-resident decedent" cannot relate to any word but "deposited", and the substitution was surely not intended to change the entire construction of the sentence.
The language of a taxing statute will be given its usual and ordinary meaning, and cannot be strained beyond the breaking point in the interest of taxpayers. Merriman v. Commissioner, 1 Cir., 55 F.2d 879.
The question therefore resolves itself to whether D. Hecht & Co., on the basis of the firm's transactions with Mr. Rosenblum, was carrying on the banking business.
No cases have been found directly determining the scope of the words "any person carrying on the banking business" as used in the Act. There is dictum in Todd v. United States, Ct.Cl., 46 F.2d 589, indicating that the court considered that a firm which bought and sold securities in New York, borrowed money, paid interest, and took deposits from some of its clients on which it permitted them to draw checks, was not engaged in the banking business within the meaning of the 1924 Revenue Act. The basis of the court's decision was that the estate tax was proper because the money in question was loaned to individual members of the firm and not deposited with them. However, the court commented on the fact that the firm did not hold itself out to the public as a bank or banking institution and had not complied with New York banking laws.
The phrases "carry on business" and "the banking business" have on many occasions been construed by the courts. Cooper Manufacturing Co. v. Ferguson, 113 U. S. 727, 735, 5 S.Ct. 739, 28 L.Ed. 1137. In Ammons v. Brunswick, etc., Co., 8 Cir., 141 F. 570, 575, an action where the validity of a summons depended on whether the defendant corporation had done business in Indian Territory, the court adopted Webster's definition of "business", The court comments, "All these definitions imply, if not express, the idea of some permanency or durability; something more than a single temporary or spasmodic undertaking."
In Allen v. Commonwealth, 188 Mass. 59, 74 N.E. 287, 288, 69 L.R.A. 599, the court says; "The word `business' is of large significance, and `denotes the employment or occupation in which a person is engaged to procure a living.'"
It was said in Lewellyn v. Pittsburgh, B. & L. E. R. Co., 3 Cir., 222 F. 177, 185, that This language is cited with approval in Hutchings v. Burnet, 61 App.D.C. 109, 58 F.2d 514, 515.
In State of Kansas ex rel. Boynton v. Hayes, 10 Cir., 62 F.2d 597, the court said that the substance of the banking business is having a place of business where deposits are received and paid out on...
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