Source: https://caselaw.findlaw.com/us-supreme-court/306/363.html
Timestamp: 2019-04-18 13:40:33+00:00

Document:
The Attorney General, and Mr. Norman D. Keller, of Washington, D.C., for the United States.
Mr. Hugh W. McCulloch, of Chicago, Ill., for respondent.
Mr. E. J. Dimock, of New York City, for petitioner.
Mr. Norman D. Keller, of Washington, D.C., for respondent.
The question is whether the entire value or only one-half the value of real property-purchased by a decedent with his own funds and held at his death by his wife and himself under a joint tenancy set up prior to 1916-may be included in the decedent's gross estate under the 1924 Revenue Act.
In 1909, real estate in Illinois was conveyed to W. Francis Jacobs, the decedent, and Elizabeth C. Jacobs, his wife, 'as joint tenants' and this joint tenancy continued until decedent's death; the wife never contributed any part of, or consideration for, the joint property; decedent died June 17, 1924 (after the effective date of the 1924 Revenue Act), and as survivor the wife became sole owner in fee of the whole of the joint property.
Respondent construes the 1924 Revenue Act as taxing-by its terms-only one-half the value of the joint property, and contends that inclusion of the property's entire value for estate tax purposes would as retroactive taxation violate the Due Process Clause of the Fifth Amendment, U.S.C.A. Const.
Second. Here, decedent paid the entire purchase price of the joint property with his own individual funds and, therefore, the 1924 statute required the inclusion of the full value of the joint property in his gross estate. Contending that the tax as so applied is retroactive, respondent insists that the Due Process Clause of the Fifth Amendment forbids such taxation. The reasoning is that a one-half interest in the joint property was transferred to, and vested in the wife in 1909; that the tax in question only applies to transfers; and that the one-half interest transferred to the wife in 1909 could not thereafter (1924) be taxed as a part of decedent's gross estate without retroactively applying the tax to the 1909 transfer.
It is urged that these decisions do not support the tax here upon the full value of the joint property, because [306 U.S. 363, 369] this tenancy was created prior to the estate tax law of 1916. Respondent relies upon differences in the nature of tenancies by the entirety and joint tenancies in order to remove the present case from the application of these prior adjudications. Since a joint tenant's interest in realty is severable and subject to sale, the argument is that upon the death of a co- tenant the survivor actually receives nothing more than the decedent's one- half interest and therefore no more can be subjected to a death duty. On the other hand, respondent explains the permissible taxation of the whole of a tenancy by the entirety by reference to the 'amiable fiction' 11 of the common law, under which ownership of a husband and wife in tenancy by the entirety is deemed a single individual unity and each owns all and every part of the property so held. By virtue of this feudal fiction of complete ownership in each of two persons, the surviving tenant by the entirety is conceived to be the recipient of all the property upon the death of the co-tenant, and therefore-it is said-all the property can be taxed.
While it is true that until the death of decedent here each joint tenant possessed the right to sever the joint tenancy, each was nevertheless subjected to the hazard of losing the complete estate to the other as survivor. Prior to decedent's death, his wife had no right to dispose of her interest by will, nor could it pass to her legal [306 U.S. 363, 371] heirs. She might survive and thereby obtain a complete fee to the property with attendant rights of possession and disposition by will or otherwise. Until the death of her co-tenant, the wife could have severed the joint tenancy and thus have escaped the application of the estate tax of which she complains. Upon the death of her co-tenant she for the first time became possessed of the sole right to sell the entire property without risk of loss which might have resulted from partition or separate sale of her interest while decedent lived. There was-at his death-a distinct shifting of economic interest,17 a decided change for the survivor's benefit. This termination of a joint tenancy marked by a change in the nature of ownership of property was designated by Congress as an appropriate occasion for the imposition of a tax. Neither the amount of the tax nor its application to the survivor's change of status and ownership, was in any manner dependent upon the date of the joint tenancy's creation, whether before, or after, 1916. It is immaterial that Congress chose to measure the amount of the tax by a percentage of the total value of the property, rather than by a part, or by a set sum for each such change. The wisdom both of the tax and of its measurement was for Congress to determine.
No. 482 involves provisions of the 1926 Revenue Act (44 Stat. 9) substantially identical to those of the 1924 Act considered above. Here, also, a joint tenancy (in personal property) was created by man and wife prior to 1916. However, not all of the joint property was contributed by the decedent, but a portion was contributed to the tenancy by the wife who survived. This property [306 U.S. 363, 372] which she transferred to the tenancy had in turn been previously given to her-without consideration-by decedent before the creation of the joint tenancy. At decedent's death in 1930, an estate tax was assessed and paid upon the full value of the joint property, including that part contributed by the survivor but ultimately traceable to the decedent.
The contention that the 1926 tax is unconstitutional under the Fifth Amendment because imposed upon the total value of the joint tenancy at decedent's death is without merit, for reasons stated in No. 391.
However, there is here the further argument that the courts below erred in construing the 1926 Act to require the inclusion in the gross estate of that part of the joint property (shares of stock) contributed to the joint tenancy by the survivor, but which had been paid for and given to her by decedent prior to the creation of the tenancy.
The surviving joint tenant in this case comes squarely within the governing statutory provision because she 'received' and 'acquired' all of the property contributed by her to the joint tenancy 'from the decedent for less than an adequate and full consideration in money or money's worth.' This language adopted by Congress clearly and unambiguously indicates the purpose to tax the entire value of a joint tenancy under circumstances shown by this record. We are without authority to add language to the statute directly contrary to such a clearly expressed purpose.
The judgment in No. 391 is reversed and that in No. 482 is affirmed.
Mr. Justice STONE took no part in the consideration or decision of these cases.
Mr. Justice McREYNOLDS, Mr. Justice BUTLER, and Mr. Justice ROBERTS think that the judgment in No. 391 should be affirmed and that in No. 482 should be reversed.
It has long been the settled doctrine of this court that Congress cannot retroactively tax, as testamentary, a transfer consummated in accordance with existing law before the adoption of a system of estate taxation, and where the parties, at the time of the transaction, had no notice of intent to tax it as a transfer in contemplation of death or to take effect in possession or enjoyment at or after death. 1 In order to avoid holding taxing acts [306 U.S. 363, 374] unconstitutional on this ground, the court has often construed them as applying prospectively only. 2 Reliance is placed by the government on decisions sustaining inclusion in the estate of one spouse of the entire value of an estate by the entireties. In the earlier cases wherein the exaction was upheld the act operated prospectively and affected only such an estate arising after passage of the statute,3 or the estate came into being after the adoption of a system of taxation which might well include such a transfer within its scope. 4 Subsequently the inclusion of the entire value in the taxable estate of one spouse was sustained where the tenancy by the entireties antedated the passage of the estate tax acts. 5 The decision was based upon the peculiar nature of a tenancy by the entireties as expounded in Tyler v. United States. A transfer tax measured by one-half the value of an estate in joint tenancy has been approved although the estate was created prior to the adoption of the system of estate taxes;6 but the court has never passed upon the validity of such a tax measured by the value of the entire joint estate. There are marked differences between a tenancy by the entireties and a joint tenancy in respect of the power of one tenant to destroy the joint estate, to transfer or encumber his interest and otherwise obtain the fruits of it. In order to prevent evasion Congress may include the value of the entire estate in the gross estate as a measure of the tax where the estate originates after [306 U.S. 363, 375] adoption of the law. 7 But it may not retroactively apply such measure to an estate created at a time when its creators had no reason to expect that such a tax would be laid in view of the settled rules of property.
[ Footnote 1 ] 7 Cir., 97 F.2d 784.
[ Footnote 3 ] Shwab v. Doyle, 258 U.S. 529, 535 , 42 S.Ct. 391, 392, 26 A.L.R. 1454; Knox v. McElligott, 258 U.S. 546, 549 , 42 S.Ct. 396, 397. Respondent relies upon language of the Knox case to support the contention that Sec. 302 of the 1924 Act is retroactive in its effect on joint tenancies such as the one here. However, the actual judgment of the Court in that case went no further than to hold that the terms of the 1916 Act there considered did not require the inclusion-in gross estates- of the value of property held in joint tenancies created prior to the enactment of that particular law.
[ Footnote 4 ] Gwinn v. Commissioner, 287 U.S. 224, 226 , 53 S.Ct. 157, 158; cf., Phillips v. Dime Trust & S.D. Co., 284 U.S. 160, 166 , 52 S. Ct. 46, 47.
[ Footnote 5 ] Cf., Reynolds v. United States, 292 U.C. 443, 449, 54 S.Ct. 800, 803; Cox v. Hart, 260 U.S. 427, 435 , 43 S.Ct. 154, 157.
[ Footnote 6 ] See, Knowlton v. Moore, 178 U.S. 41, 47 , 20 S.Ct. 747, 750; 1 Cooley, 'Taxation', 48, 4th Ed., Seligman, 'Essays in Taxation', Ch. V, 9th ed., 1921.
[ Footnote 7 ] Tyler v. United States, 281 U.S. 497, 503 , 504 S., 50 S.Ct. 356, 359, 69 A.L.R. 758.
[ Footnote 8 ] Third National Bank & Trust Co. v. White, D.C., 45 F.2d 911, affirmed 287 U.S. 577 , 53 S.Ct. 290; Helvering, Commissioner v. Bowers, 303 U.S. 618 , 58 S.Ct. 525.
[ Footnote 9 ] Foster v. Commissioner, 303 U.S. 618 , 58 S.Ct. 525.
[ Footnote 11 ] Cf., Tyler v. United States, supra, at page 503, 50 S.Ct. at page 359.
[ Footnote 12 ] A joint tenancy in Illinois-where the property involved here is located-is described by that State's highest Court (as in the common law) as follows: 'The properties of a joint estate are derived from its unity, which is fourfold: the unity of interest, the unity of title, the unity of time, and the unity of possession; or, in other words, joint tenants have one and the same interest, accruing by one and the same conveyance, commencing at one and the same time, and held by one and the same undivided possession.' Deslauriers v. Senesac, 331 Ill. 437, 440, 163 N.E. 327, 329, 62 A.L.R. 511. The 'learning in the books merely shows that in case of a conveyance to husband and wife, there is a fifth unity, to wit: that of person ....' Topping v. Sadler, 50õn.C. 357, 360, 5 Jones' Law 357. See note, 30 L.R.A. 305.
[ Footnote 13 ] Nicol v. Ames, 173 U.S. 509, 515 , 19 S.Ct. 522, 525.
[ Footnote 14 ] Id., page 516, 19 S.Ct. page 525.
[ Footnote 15 ] 1 Tiffany, 'Real Property', 1920, 194; see, Littleton's 'Tenures,' 291, Wambaugh, ed., 1903.
[ Footnote 16 ] Freeman, 'Cotenancy and Partition,' 2d ed., 12.
[ Footnote 17 ] Cf., Chase Nat. Bank v. United States, 278 U.S. 327, 338 , 49 S.Ct. 126, 128, 63 A.L.R. 388; Saltonstall v. Saltonstall, 276 U.S. 260, 271 , 48 S.Ct. 225, 227.
[ Footnote 18 ] 19 F.Supp. 56.
[ Footnote 19 ] 2 Cir., 99 F.2d 799.
[ Footnote 1 ] Nichols v. Coolidge, 274 U.S. 531 , 47 S.Ct. 710, 52 A.L.R. 1081; Helvering v. Helmholz, 296 U.S. 93, 97 , 56 S.Ct. 68, 69; White v. Poor, 296 U.S. 98, 102 , 56 S.Ct. 66, 67, 80.Ed. 80.
[ Footnote 2 ] Shwab v. Doyle, 258 U.S. 529 , 42 S.Ct. 391, 26 A.L.R. 1454; Knox v. McElligott, 258 U.S. 546 , 42 S.Ct. 396; Union Trust Co. v. Wardell, 258 U.S. 537 , 42 S.Ct. 393; Levy v. Wardell, 258 U.S. 542 , 42 S.Ct. 395; Lewellyn v. Frick, 268 U.S. 238 , 45 S.Ct. 487.
[ Footnote 3 ] Tyler v. United States, 281 U.S. 497 , 50õs.Ct. 356, 69 A.L.R. 758.
[ Footnote 4 ] Phillips v. Dime Trust & Safe Deposit Co., 284 U.S. 160 , 52 S.Ct. 46.
[ Footnote 5 ] Third National Bank & Trust Co. v. White, 287 U.S. 577 , 53 S.Ct. 290; Helvering v. Bowers, 303 U.S. 618 , 58 S.Ct. 525.
[ Footnote 6 ] Knox v. McElligott, supra; Gwinn v. Commissioner, 287 U.S. 224 , 53 S.Ct. 157; Cahn v. United States, 297 U.S. 691 , 56 S.Ct. 384.
[ Footnote 7 ] See Nichols v. Coolidge, supra, page 542, 47 S.Ct. page 713; Tyler v. United States, supra, page 505, 50õs.Ct. page 359; Helvering v. City Bank Farmers' Trust Co., 296 U.S. 85, 90 , 56 S.Ct. 70, 72.

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