Document: 476 U.S. 558 106 S.Ct. 2071 90 L.Ed.2d 538 UNITED STATES, et al., Appellants,v.Alvin HEMME al. No. 84-1944. Argued March 5, 1986. Decided June 3, Syllabus Prior to 1977, the Internal Revenue Code's gift tax permitted taxpayer a lifetime exemption of $30,000 be deducted from amounts otherwise taxable, which could claimed, in whole or part, at any time during taxpayer's lifetime. 26 U.S.C. § 2521 (1970 ed.). The estate afforded specific $60,000 determining amount subject tax. 2052 Tax Reform Act 1976 (new Act), was enacted on October 4, 1976, and became effective January 1, created so-called "unified credit" (deductible directly tax) that apply either toward life after death. §§ 2010(a), 2505(a). for gifts estates were eliminated, beginning with taxpayers dying December 31, given date, phase-in schedule established new unified credit. also contained transitional rule (applicable who, before had used up some all their exemption) providing credit "shall reduced by an equal 20% aggregate allowed as under section [prior its repeal] respect made decedent September 8, 1976." 2010(c). On 28, certain gifts, he later filed federal return declared no due claimed his entire However, died just over two years later, required law include "in contemplation death," presumptively included within three decedent's 2035 After including estate, then $34,000 Act. Service (IRS) ruled Act's 2010(c) must gift-tax lifetime, $6,000. paid assessed deficiency $6,000 ultimately refund suit appellees (the trustee "revocable living trust" transferees property). District Court held application enactment, so arbitrary capricious violate Due Process Clause Fifth Amendment. Held: 1. There is merit appellees' argument, focused word "allowed" 2010(c), Congress did not intend applied IRS it here, because when having been death "disallowed"—a claim being unless benefited paying less than would have paid. Longstanding interpretation laws does support such argument. Nor mere inclusion gross tantamount disallowance exemption. Moreover, receive benefit exemption, since avoided taxes. here consistent statute's language purpose. Pp. 564-567. 2. erred finding transgressed Amendment retroactively affected final disposition enactment. Untermyer v. Anderson, 276 440, 48 353, 72 L.Ed. 645 (1928), distinguished. nature circumstances laid considered can said retroactive oppressive transgress constitutional limitation. Here, view applicable statutory provisions prior Act, particularly requirement ed.) death, worse off they without enactment even assuming that, asserted, confluence them pay same transaction twice, Constitution offended clearly expressed intention occasion result. 567-572. Reversed. MARSHALL, J., delivered opinion unanimous Court. Albert G. Lauber, Jr., Washington, D.C., appellants. Edward F. Sutkowski, Peoria, Ill., appellees. Justice MARSHALL 1 Appellees, identified Charles W. Hirschi Hirschi's property, seek taxes, ground Government's rule, bridge old regimes taxation estates, violates both statute Constitution. 2 * imposed, calculated, collected separately. tax, imposed donors each taxable. This "specific exemption" Ibid. too, provided relief modest estates. In entitled deduct $60,000. 3 considering reform determined several changes necessary ease burden taxes means. See H.R.Rep. 94-1380, p. 11 (1976), U.S.Code Cong. & Admin.News 2897. One change transform what deductions into credits lower brackets much those higher brackets.1 Id., 15. addition, decided merge separate exemptions single credit, believing system favored who afford make substantial transfers, while disadvantaging needed maintain access assets until 16. Accordingly, (Act) erased many distinctions treatment between transfers effect treating inheritance taxable gift. It credit," date. A 1978, culminating $47,000 decedents 1981 thereafter. 2010(b), 2505(b) (1976 4 transformation left unresolved escape gifts. Without further action Congress, gained regime theoretically still scheme, though latter intended substitute $90,000 worth exemptions. notice scheme great incentive quickly go effect, deliberately seeking windfall double Estate Gawne Commissioner, 80 T.C. 478, 483 (1983). Recognizing these possibilities, House Ways Means Committee reported out bill if portion 1932, available already claimed. H.R. 14844, 94th Cong., 2d Sess., 2505(c) reprinted pp. 94, 131 (1976). While legislative history explain derivation figure, apparently believed represent roughly proportion equivalence values taking account average rates. 5 proposed amended Conference Committee. conferees limited class covered date approved measure, but H.R.Conf.Rep. 94-1515, 607-608 evidently concerned possibility benefits general preventing intentional accretion benefits. R. Stephens, Maxfield, S. Lind, Federal Gift Taxation ¶ 3.02, 3-4, n. 9 (4th ed. 1978); J. McCord, Reform: Analysis, Explanation Commentary 2.13, (1977). containing this passed Houses 16, President signed 1976. issue case us. II 6 parties stipulated facts. period designated period, totaling $45,000 five persons. Two days declaring due. first $15,000 consisted $3,000 each, exempt virtue annual exclusion per donee. 2503(b) To render remaining elected entire, By thus claiming maximum him, hoped reap repeal. Had lived longer, might come closer realizing hopes. 7 But, poignant confirmation Benjamin Franklin's adage, escaped neither nor Just died, demise. full $34,000. (IRS), however, concluded assessment $6,000, deficiency. unsuccessful administrative refund, lawsuit followed. 8 Southern Illinois gift, Because has court reasoned controlled Nation's violating process. 445, S.Ct., 354. found "so unconstitutional." App. Juris. Statement 6a. noted probable jurisdiction appeal, 474 814, 55, 88 45 (1985), we now reverse judgment III Appellees proffer principal arguments below. First, case. Second, contend employment offends Although embarked immediately upon claim, shall undertake analysis first. provides follows: 10 "The allowable subsection (a) [the credit] 20 percent (as repeal 1976) focus "allowed." They reason making "disallowed"; improper, argue, diminished Under view, 12 little way support. occasion, 1943, consider argument very similar propounded Virginian Hotel Corp. Helvering, 319 523, 63 1260, 87 1561 (1943), "that 'allowed,' unlike 'allowable,' connotes receipt benefit." 526, 1262. provision there reduction basis property depreciation "to extent allowed." years, but, other question sufficient produce overall losses, owed years. Consequently, argued deductions, although "allowed," resulted benefit. disagreed: 13 "[W]e find suggestion distinguished confined result 'Allowed' grant. our machinery formal allowances income. Deductions stand Commissioner takes steps challenge them." 526-527, 1262-1263. 14 case, only uses ultimate advantage are meaning For more allowance income-tax discussed Hotel. true "the record reflect allowed," Brief 17, inaction suggests allowance, rather disallowance, claim. Kilgroe United States, 664 F.2d 1168, 1170 (CA10 1981); Blackhawk-Perry 182 319, 321 (CA8 1950); P. Dougherty Co. 159 269, 271 (CA4 1946); Repplier Coal 140 554, (CA3 1944). 15 2035, instead operation makes comment propriety Thus, cannot conclude donor 16 term familiar denizen Code. See, e.g., 1016(a)(20), (25). sections appears unqualified, others, embellished "tax benefit" qualification urge here. example, situations "basis" "for . resulting taxes." 1016(a)(9), (14), (16). failed qualify will presume impart unstated do so. 17 More importantly, He option deciding, whether prefer avoid granted opportunity, knowing disadvantageous relating calculate probability live altogether. During election use eventual decisions deprived him bestow position. reduce therefore, purpose statute. IV 18 We address led unconstitutional "effectively imposes penalty Mr. exemption," 33, "unreasonably harsh oppressive," violation Clause. 31. suggest subjected taxation, process, see id., 32. 19 transgresses capricious. Relying heavily "retroactive" legislation, insofar affects statute, unreasonable. Untermyer, construed 1924, year calendar 1924. far bona fide anticipation fully consummated 2, invalid process clause Amendment." objection absence notice; endorsed conclusion, ibid., reached Blodgett Holden, 275 142, 147, 105, 106, 206 (1927), where plurality "wholly unreasonable one good faith slightest premonition consequence, absolute should thereafter charge doing." supra, 354, explicitly recognized distinction genuine death; controlling involved levy tax; authority value assessing constitutionality subsequent amendments bring about laws, creation wholly States Darusmont, 449 292, 299, 101 549, 553, 66 513 (1981) (per curiam ). Indeed, clear retrospective necessarily fatal revenue law. Milliken 283 15, 51 324, 75 809 (1931), upheld early "gift death" 1918, draw 1920 1916, equities especially favorable taxpayer, stock appreciated substantially following occasioned amount. Nevertheless, validity depended, feature, notion taxing part new, known chance increased chose amounted testamentary 24, 327. 21 Following approach taken cases, "consider limitation." Welch Henry, 305 134, 59 121, 126, 83 (1938). relevant whether, notice, gives different legal conduct undertaken Our task, accordingly, determine key resolution back affect 22 Section donor's deemed establish otherwise. 2035(b) order forestall temptation deathbed evading supra. Even never passed, requirements 2035. inquiry, intervening passage 23 exemption; When required, $30,000. His against owed. With $34,000, minus 24 operative comparison, then, $60,000, law, subtracted, As above, reasonably provide estates.2 Mindful $60,000—only two-thirds exemption—we surprised discover something available. quite fairly previously taken, exchange taxpayer.3 Taking Congress' equation, deduce reach conclusion comparing position, another person die similarly situated criteria. 25 Other confirm suffered long contains feature requiring embrace previously. expectation particular yet created. Especially allotted greater aspect inequitable. concede $655.16 passed. dispositive, circumstance Milliken. circumstances, difficulty concluding answer, represents fair deprive anything assert right. protest twice. reducing effectively liable Yet above taxed oppressively unfortunate enough "There doubt power decedent, purposes death." Heiner Donnan, 285 312, 52 358, 360, 76 772 (1932). need decide results did, Patton Brady, 184 608, 621, 493, 497, 46 713 (1902). intended, gather estate; equally whenever period. ambiguity construe way. Hellmich Hellman, 233, 238, 244, 246, 544 (1928). V 27 inconsistent 28 deduction reduces paid, dollar dollar, whereas liability indirectly estate. 3.01 1978). determination entirely reasonable standpoint increase savings 34% marginal rate consequently estate's yielded $20,400. Using enjoyed $28,000. Of course, numerical comparison fruitful exempted simple mathematics comparable sense exemptions, expect 52% 20%. varying rates, acted settled figure.

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