Source: https://supreme.justia.com/cases/federal/us/236/106/
Timestamp: 2019-04-26 04:30:52+00:00

Document:
The tax imposed by the War Revenue Act of 1898 was purely a succession tax. It was not laid upon the entire estate, but was a charge upon the transmission of personal property from a deceased owner to legatees or distributees.
Personal property does not pass directly from a decedent to legatees or distributees, but goes primarily to the executor or administrator who passes to them the residue after settlement of the estate.
Until in due course of the administration of an estate it has been ascertained that a surplus remains, it cannot be said that the legatees or distributees are certainly entitled to receive or enjoy any part of the property, and so held as to an estate of one dying prior to July 1, 1902, that, until such fact was ascertained the interests of legatees and distributees were not absolute, but were contingent within the meaning of § 29 of the War Revenue Act of 1898 and of § 3 of the Refunding Act of June 27, 1902. Vanderbilt v. Eidman, 196 U. S. 480; Hertz v. Woodman, 218 U. S. 205, distinguished.
The facts, which involve the construction of the War Revenue Act of 1898 and the subsequent Acts relating thereto, and their application to inheritances, are stated in the opinion.
resident of Allegheny County, Pennsylvania, died intestate June 28, 1902, leaving personal property of considerable value, and being survived by two daughters as her only next of kin. July 14, 1902, an administrator was appointed and the property was committed to his charge for the purposes of administration. Under the local law, the debts of the intestate and the expenses of administration were to be paid out of the property, and what remained was to be distributed in equal shares between the two daughters, but distribution could not be made for several months after the appointment of the administrator. In regular course, the debts and expenses were ascertained and paid, and this left for distribution property of the value of $219,341.74. The Collector of Internal Revenue then collected from the administrator, without protest from him, a succession tax of $3,290.12 upon the distributive shares of the daughters, and the tax was covered into the Treasury. About seven months after paying the tax, the administrator sought, in the mode prescribed, to have it refunded under § 3 of the Act of June 27, 1902, 32 Stat. 406, c. 1160, but the Secretary of the Treasury denied the application. The administrator then brought this suit, and the Court of Claims gave judgment in his favor. 49 Ct.Cl. 408. A reversal of the judgment is sought by the United States.
repealed April 12, 1902, but the repeal was not to take effect until July 1, 1902, and was not to prevent the collection of any tax imposed prior to that date. 32 Stat. 96, c. 500, §§ 7, 8, 11.
"That in all cases where an executor, administrator, or trustee shall have paid, or shall hereafter pay, any tax upon any legacy or distributive share of personal property under the provisions of the act approved June thirteenth, eighteen hundred and ninety-eight, entitled, 'An Act to Provide Ways and Means to Meet War Expenditures, and for Other Purposes,' and amendments thereof, the Secretary of the Treasury be, and he is hereby, authorized and directed to refund, out of any money in the Treasury not otherwise appropriated, upon proper application being made to the Commissioner of Internal Revenue, under such rules and regulations as may be prescribed, so much of said tax as may have been collected on contingent beneficial interests which shall not have become vested prior to July first, nineteen hundred and two. And no tax shall hereafter be assessed or imposed under said Act approved June thirteenth, eighteen hundred and ninety-eight, upon or in respect of any contingent beneficial interest which shall not become absolutely vested in possession or enjoyment prior to said July first, nineteen hundred and two."
the taxes which are directed in the first sentence to be refunded, because they had been wrongfully collected on contingent beneficial interests which had not become vested prior to July 1, 1902, were taxes levied on such beneficial interests as had not become vested in possession or enjoyment prior to the date named within the intendment of the subsequent sentence. In other words, the statute provided for the refunding of taxes collected under the circumstances stated, and at the same time forbade like collections in the future."
This view was repeated in United States v. Fidelity Trust Co., 222 U. S. 158.
The decisive question, therefore, in the present case is whether the beneficial interests of the daughters, upon which the tax was collected, had become absolutely vested in possession or enjoyment prior to July 1, 1902, or were at that time contingent. If they had become so vested, the effort to recover the tax must fail; but, if they were contingent, the tax must be refunded. Recognizing that this is so, counsel for the United States insists that the distributive interests to which the daughters succeeded became vested in the full sense of the statute the moment the intestate died, which was three days before July 1, 1902. The court below rejected this contention and held that those interests did not become so vested until the daughters were entitled to receive their respective shares in the property remaining after the debts and expenses were paid, which was not until several months after July 1, 1902.
that came into the hands of the executor or administrator, but upon "any legacies or distributive shares" in his charge "arising from" such estate, and passing to others by will or intestate laws.
"In view of the express provisions of the statute as to possession or enjoyment and beneficial interest and clear value, and of the absence of any express language exhibiting an intention to tax a mere technically vested interest in a case where the right to possession or enjoyment was subordinated to an uncertain contingency, it would, we think, be doing violence to the statute to construe it as taxing such an interest before the period when possession or enjoyment had attached."
sense indicated before July 1, 1902, that being the time when the tax was discontinued.
Applying this statute to the facts before stated, we see no escape from the conclusion that the tax in question must be refunded. It was collected upon distributive shares which neither were nor could have been absolutely vested in possession or enjoyment prior to July 1, 1902. The intestate's death had occurred only three days before, no administrator had been appointed, the debts and expenses had not been ascertained, what, if anything, would remain after their payment was uncertain, and the time had not come when the daughters were entitled to a distribution.
"Does the fact that the testator dies within one year immediately prior to the taking effect of the repealing act of April 12, 1902, relieve from taxation legacies otherwise taxable under §§ 29 and 30 of the Act of June 13, 1898, as amended by the Act of March 2, 1901?"
contention of the government, but this must be read in the light of the question presented for decision, and be taken as restrained accordingly. Besides, the opinion approvingly refers (p. 218 U. S. 219) to Vanderbilt v. Eidman, supra, as having "conclusively decided" that the tax "does not attach to legacies or distributive shares until the right of succession becomes an absolute right of immediate possession or enjoyment." Here, as we have said, there was no right of immediate possession or enjoyment at the time designated in the refunding statute.

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