Source: https://supreme.justia.com/cases/federal/us/289/109/
Timestamp: 2019-04-22 04:31:36+00:00

Document:
"The basis for determining the gain or loss from the sale or other disposition of property acquired after February 28, 1913, shall be the cost of such property; except that --"
"(5) If the property was acquired by bequest, devise, or inheritance, the basis shall be the fair market value of such property at the time of such acquisition."
(1) That, upon the termination of an estate by the entirety through the death of one spouse, the survivor does not succeed to anything by "inheritance" within the meaning of this exception, but holds the estate under the original limitation, it being merely freed from participation by the other tenant. Tyler v. United States, 281 U. S. 497, distinguished. P. 289 U. S. 110.
(2) Therefore, upon a sale of the property by the survivor, the gain was properly determined on the basis of what the two tenants paid for the property when acquired, and not upon the basis of the part of that payment that was contributed by the survivor added to a part of the value of the property at the time of the other spouse's death proportionate to his contribution to the purchase. Id.
2. This construction is confirmed by the fact that the statute expressly declares the exception applicable to certain of the interests that are listed in § 302 as embraced in decedents estates, but significantly omits from the declaration the interest of a tenant by the entirety, although it also is listed in that section. P. 289 U. S. 111.
3. Unless there is a violation of the Constitution, Congress may select the subjects of taxation and tax them differently as it sees fit, and, if it does so in plain words, the courts are not at liberty to modify the Act by construction in order to avoid special hardship. P. 289 U. S. 113.
Certiorari, 288 U.S. 596, to review the affirmance of a decision of the Board of Tax Appeals, 23 B.T.A. 854, sustaining a deficiency assessment of income taxes.
In 1915, petitioner and her husband purchased certain real property at a cost of $13,000, title being vested in them as tenants by the entirety. Of this amount, petitioner contributed $1,560 (12 percent), and her husband the remaining 88 percent The husband died in 1924, the property at that time having a market value of $40,000, and 88 percent of that amount was included in the value of the decedent's gross estate for the purposes of the federal estate tax. In 1925, the property was sold for the sum last named. Petitioner, in her income tax return for that year, computed the profit on the basis of the market value of the property at the time of her husband's death, with the exception of 12 percent, representing the sum which she had contributed to the purchase price of $13,000. The Commissioner determined a deficiency, using the entire 1915 cost as the basis for computing the amount of profit realized. The Commissioner's ruling was affirmed by a decision of the Board of Tax Appeals (23 B.T.A. 854), and that, in turn, was affirmed by the court below. 61 F.2d 280.
The question to be determined, therefore, is whether cost of the property in 1915, or its market value at the time of decedent's death (with allowable deductions), is the proper basis for determining the gain from the sale in 1925.
"5. If the property was acquired by bequest, devise, or inheritance, the basis shall be the fair market value of such property at the time of such acquisition."
An estate by the entirety is held by the husband and wife in single ownership, by a single title. They do not take by moieties, but both and each take the whole estate -- that is to say, the entirety. The tenancy results from the common law principle of marital unity, and is said to be sui generis. Upon the death of one of the tenants "the survivor does not take as a new acquisition, but under the original limitation, his estate being simply freed from participation by the other. . . ." 1 Washburn, Real Property (6th Ed.) § 912. In the present case, therefore, when the husband died, the wife, in respect of this estate, did not succeed to anything. She simply continued, in virtue of the nature of the tenancy, to possess and own what she already had. Giving the words of the statute their natural and ordinary meaning, as must be done, it is obvious that nothing passed to her by bequest, devise, or inheritance.
"The provisions of this paragraph shall apply to the acquisition of such property interests as are specified in subdivision . . . (c) or (f) of § 1094(302) of this title."
by will or deed in like contemplation or with like intention. Chapter 27, 44 Stat. 70, 71. The significant circumstance is that subdivision (e), § 302, which relates to interests held as joint tenants by the decedent and any other person, or as tenants by the entirety by the decedent and spouse, is not included in the enumeration. The result is that the interest held by a joint tenant or tenants by the entirety is expressly included in determining the value of the gross estate for purposes of the estate tax, but not so included as a basis for determining gain or loss under § 204(a). The express inclusion of the subdivision in the former case and its omission in the latter persuasively suggests that Congress did not intent to include estates by the entirety under the phrase "by bequest, devise, or inheritance." If Congress did so intend, it is hard to understand why subdivision (e) of § 302 was not expressly adopted, as were (c) and (f). Compare 38 U. S. Jesse Hoyt, 13 Pet. 263, 38 U. S. 272-273.
from his equal right of participation in its possession, use, and disposition, which, while he lived, stood in the way of the wife's exclusive enjoyment of those rights which ordinarily flow from ownership, and this expansion of her power of control, and consequent enlargement of its value, furnished a sufficient occasion for the imposition of an excise tax, which Congress might denominate a death tax, or a transfer tax, or anything else it saw fit, although, in the absence of an expression of the legislative will, it properly could not thus be characterized. Tyler v. United States, supra at pp. 281 U. S. 502-503.
If the legislation here under review results in imposing an unfair burden upon the taxpayer, the remedy is with Congress, and not with the courts. Unless there is a violation of the Constitution, Congress may select the subjects of taxation and tax them differently as it sees fit, and, if it does so in plain words, as it has done here, the courts are not at liberty to modify the act by construction in order to avoid special hardship. Crooks v. Harrelson, 282 U. S. 55, 282 U. S. 61.

References: v. 
 § 302
sui generis
 § 912
 § 1094
 § 302
 § 204
 § 302
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