Source: https://supreme.justia.com/cases/federal/us/308/313/
Timestamp: 2019-04-26 01:49:54+00:00

Document:
of the securities handled by the company was ever physically present in that State.
Held, that the sale of the bonds, the purchase of the notes, and their transfer to the trustee constituted an integrated and indivisible transaction effecting a transfer of intangibles in contemplation of death, and that, whatever the nature of the Federal Reserve notes -- whether tangible or intangible property -- tax upon this transfer by the State of Oregon would not contravene the due process clause of the Fourteenth Amendment. Curry v. McCanless, 307 U. S. 357. P. 308 U. S. 317.
161 Ore. 1; 86 P.2d 424; 87 P.2d 766, reversed.
Certiorari, post, p. 531, to review a judgment which reversed in part an order of the Circuit Court of Oregon in probate, determining an inheritance tax.
MR. JUSTICE DOUGLAS delivered the opinion of the Court.
agency arrangement in Illinois to procure a sum which, together with cash balances in his checking account with the trust company, would equal $450,000, and to purchase therewith, as his agent, federal reserve notes of the face amount of $450,000. Between August 8, 1935 and August 12, 1935, the Illinois trust company complied with decedent's directions, [Footnote 1] and, prior to August 15, 1935, it purchased $450,000 of federal reserve notes and held them in Illinois as agent for decedent for a few days.
because of the importance of the constitutional question involved and of an alleged probable conflict with the principles underlying such decisions as Curry v. McCanless, 307 U. S. 357.
We disagree with the conclusion of the Supreme Court of Oregon. Oregon, having jurisdiction to tax by reason of the statute, was not deprived of it by the Federal Constitution.
they have meaning and significance only in relation to the third step, a conclusion made especially evident by the close sequence of events. Hence, it is no answer to say that, because the first two steps were not irrevocable, but could be recalled, the third step was not a necessary on in the series. For that is as immaterial as is the revocability of any donor's plan to make a gift in contemplation of death at any moment prior to its consummation. Admittedly decedent had such a purpose on the transfer of the notes. To hold that such purpose was not present on the sale of the intangibles would be to isolate one part of the total transaction and to give it significance and meaning utterly inconsistent with the fact that the intangibles were sold for the purpose of acquiring the notes, which, in turn, were to be placed under an irrevocable trust. Therefore we need not consider the nature of federal reserve notes, for in that posture of the case, their taxability as such and in isolation from the whole transaction is not in issue.
Hence, to hold that there is a constitutional barrier to the tax sought to be imposed would be to make a fetish of form. It would make the principles of the decisions of this Court on the constitutional power to tax devoid of any reason or function apart from a ritual of tax avoidance. Cf. Minnesota Tea Co. v. Helvering, 302 U. S. 609; Shotwell v. Moore, 129 U. S. 590. Questions of due process are not to be treated "narrowly or pedantically, in slavery to forms or phrases." Burnet v. Wells, 289 U. S. 670, 289 U. S. 677-678.
Accordingly, the transfer was taxable on the authority of Curry v. McCanless, supra, and related cases. For constitutionally, the property was "within the jurisdiction of the state" of Oregon, since that jurisdiction is dependent not on the physical location of the property in the state,but on control over the owner.
The judgment of the Supreme Court of Oregon is reversed, and the cause is remanded to that court for further proceedings not inconsistent with this opinion.
MR. JUSTICE McREYNOLDS is of the opinion that the judgment below should be affirmed.
On the sale of bonds in the open market, the trust company realized for decedent's account $176,062.01. On August 12, 1935, decedent borrowed from the trust company on a demand note $183,937.99. On that date, decedent had a balance in his checking account with the trust company in excess of $90,000. With the funds so obtained, the trust company purchased the $450,000 of federal reserve notes mentioned. Between August 12, 1935, and August 29, 1935, the trust company, on directions of decedent, sold in the open market additional bonds held by it in the agency account, and, as proceeds of those sales were received by it, it paid off the demand note. That note was entirely paid on August 29, 1935.
None of the property thus acquired by the trustee was ever owned by decedent; the trustee did not purchase or acquire any of the bonds or other assets which at any time constituted a part of the property held by the trustee as agent for decedent under the earlier arrangement.
"All property within the jurisdiction of the state, and any interest therein, whether belonging to the inhabitants of this state or not, and whether tangible or intangible, which shall pass or vest . . . by deed, grant, bargain, sale or gift, or as an advancement or division of his or her estate made in contemplation of the death of the grantor, . . . to any person or persons, . . . in trust or otherwise, . . . shall be and is subject to tax at the rate hereinafter specified in section 10-603, to be paid to the treasurer of the state for the use of the state. . . ."
In re Hayes' Estate, 86 P.2d 424, 87 P.2d 766. It seems clear that the Oregon Supreme Court reached this result by reliance on the Fourteenth Amendment and the decisions of this Court thereunder. We do not have, therefore, a case where the state court was merely construing its statute, nor a case where it is not clear whether or not it was doing more than that. Cf. State Tax Commission v. Van Cott, 306 U. S. 511.
This is in accord with the treatment by the Supreme Court of Oregon of "Dr. Hayes' plan," a "plan" which it felt compelled to divide into separate steps by reason of the principles of decisions of this Court dealing with business situs under the Fourteenth Amendment. Cf. Patterson v. Alabama, 294 U. S. 600.
I concur in the judgment of reversal on the ground that nothing in the Constitution prevents taxation by Oregon of a gift by its citizen of federal reserve notes located elsewhere.
While I do not question that, in the circumstances of this case, a state could, if so advised, constitutionally tax its citizen for action taken for no other purpose than the evasion of its taxing statutes, no such question is, I think, presented by the record. Discussion of it seems at most to be academic, and not to relieve us of the duty of deciding the only federal question which could by any possibility be said to be raised by the record -- namely, whether the Constitution precludes taxation of the gift of the banknotes merely because of the physical fact that they are located without the state.
that the statute, by its own terms, did not extend to the taxation of the gift of the notes because they were located outside the state, it held that the Fourteenth Amendment, because of that physical fact, withholds from the state jurisdiction over the property which the taxing statute asserts.
Petitioner asks us to determine whether that holding is correct. He is entitled to have an answer. We do not rightly avoid giving the answer by saying that, by some statute other than that under review, the state could constitutionally tax its citizen for his action in avoiding the tax by making the gift in a form of property which is, by hypothesis, beyond the taxing power. If the state has, by its statute, undertaken to lay a tax on gifts of banknotes outside the state without more -- and we are without jurisdiction if it has not -- no purpose is served by saying to the state that it could have reached the same result by another route which, under its laws, does not appear to be open to it.
As I am of opinion that there is nothing in the Constitution to compel a state to treat federal reserve notes, for tax purposes, as chattels were treated in Frick v. Pennsylvania, 268 U. S. 473, and as no reason has been advanced, even in Blodgett v. Silberman, 277 U. S. 1, 277 U. S. 18, for a different view, cf. Baldwin v. Missouri, 281 U. S. 586, 281 U. S. 591, the judgment should, I think, be reversed upon that ground, rather than upon a theory of permissible legislation, of which apparently Oregon's tax laws do not avail.
MR. JUSTICE FRANKFURTER agrees with my views as to Oregon's power to tax these federal reserve notes, but is of opinion that the record sustains the ground taken in the Court's opinion.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.