Source: http://supreme.nolo.com/us/340/106/case.html
Timestamp: 2019-08-20 22:25:23
Document Index: 69361239

Matched Legal Cases: ['§ 1002', '§ 1002', '§ 805', '§ 812', '§ 812', '§ 503', '§ 1002']

HARRIS V. COMMISSIONER, 340 U. S. 106 - Volume 340 - 1950 - Full Text - US Supreme Court Center - USSC Cases - Nolo
US Supreme Court Center > Volume 340 > HARRIS V. COMMISSIONER, 340 U. S. 106 (1950) > Full Text
The Commissioner's determination of a gift tax deficiency for 1943 was expunged by the Tax Court. 10 T.C. 741. The Court of Appeals reversed. 178 F.2d 861. This Court granted certiorari, limited to questions 2 and 3 presented by the petition. 339 U.S. 917. Reversed, p. 340 U. S. 113.
The federal estate tax and the federal gift tax, as held in a line of cases ending with Commissioner v. Wemyss, 324 U. S. 303, and Merrill v. Fahs, 324 U. S. 308, are construed in pari materia, since the purpose of the gift tax is to complement the estate tax by preventing tax-free depletion of the transferor's estate during his lifetime. Both the gift tax [Footnote 1] and the estate tax [Footnote 2] exclude transfers
But the parties did not simply undertake a voluntary contractual division of their property interests. They were faced with the fact that Nevada law not only authorized, but instructed, the divorce court to decree a just and equitable disposition of both the community and the separate property of the parties. [Footnote 6] The agreement recited that it was executed in order to effect a settlement of the respective property rights of the parties "in the event a divorce
We, however, think that the gift tax statute is concerned with the source of rights, not with the manner in which rights, at some distant time, may be enforced. Remedies for enforcement will vary from state to state. It is "the transfer" of the property with which the gift tax statute is concerned, [Footnote 7] not the sanctions which the law supplies to enforce transfers. If "the transfer" of marital rights in property is effected by the parties, it is pursuant to a "promise or agreement" in the meaning of the statute. If "the transfer" is effected by court decree, no "promise or agreement" of the parties is the operative fact. In no realistic sense is a court decree a
We are now advised that, since submission of the case on October 16, 1950, petitioner has died, and that it will
Section 503 of the Revenue Act of 1932 imposes a gift tax on property "transferred for less than an adequate and full consideration in money or money's worth." 47 Stat. 247, now. I.R.C. § 1002, 26 U.S.C. § 1002. In Merrill v. Fahs, 324 U. S. 308, the Court held that an antenuptial settlement is subject to this tax. [Footnote 2/1] Believing, as I do, that the disposition of the case before us largely depends on the weight given to the considerations which there prevailed, recapitulation of them is appropriate. The Court there based its result on the conclusion that a transfer of property pursuant to an antenuptial settlement was not made in exchange for "an adequate and full consideration in money or money's worth." This conclusion was reinforced by reading into the gift tax provision the gloss of the interrelated estate tax of the same year that the relinquishment of "marital rights . . .
The same year that it enacted the gift tax, Congress amended the estate tax by adding to the provision that "adequate and full consideration" was prerequisite to deduction of "claims against the estate" the phrase, "when founded upon a promise or agreement." Revenue Act of 1932, § 805, 47 Stat. 280, now I.R.C. § 812(b), 26 U.S.C. § 812(b). Legislative history demonstrates that this amendment was intended not to change the law, but to make clear that the requirement of consideration did not prevent "deduction of liabilities imposed by law or arising out of torts." H.R.Rep. No. 708, 72d Cong., 1st Sess. 48;
Application of that principle would require the Court to hold that § 503 of the Revenue Act of 1932, I.R.C. § 1002, imposes a tax on "the amount by which the value of the property [transferred exceeds] the value of the consideration" received only when the transfer is "founded upon a promise or agreement." The taxpayer does not contest applicability of the principle, and, in the view we take of the case, it may be assumed. [Footnote 2/2] Taxpayer contends (1) that the transfers in the situation now before us were or must be deemed to have been for an "adequate and full consideration in money or money's worth," and (2) that the Commissioner imposed a liability which
The fact that the undertakings defined by this agreement would come into force only on the occurrence of a condition, to-wit, the entering of a decree of divorce, is apparently regarded as decisive of taxability. But does this make any real difference? The terms of that decree might be different from the terms of the agreement, but, "nevertheless, the covenants in this agreement shall survive any decree of divorce which may be entered." If the divorce court had disapproved the agreement and had not decreed the transfer of any property of the wife to her husband, it is difficult to see how transfers which she made, solely because of the compulsion of the agreement, would be effected by court decree, and, for that reason, not subject to tax. The condition on which an agreement comes into force does not supplant the agreement, any more than a deed in escrow ceases to be a deed when it comes out of escrow. In the Wemyss and Merrill cases, would the gifts have been any the less founded upon an agreement if, as a condition to the antenuptial arrangements in those cases,
the consent of the parents of the fiancee had been made a condition of the marriage? Nor can excluding the transfers here involved from the gift tax be made tenable by resting decision on the narrower ground that, to the extent the divorce decree "approved" the agreement or embodied its provisions so as to make them enforceable by contempt, the transfers were not "founded upon" the agreement within the meaning of the statute. [Footnote 2/3] If the taxpayer had been sued by her husband for the sums she was obligated to transfer to him, could he not have brought the suit on the contract? [Footnote 2/4] Even though a promise for
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