Source: https://www.chanrobles.com/usa/us_supremecourt/312/393/case.php
Timestamp: 2020-08-12 17:50:17
Document Index: 691254275

Matched Legal Cases: ['§ 504', '§ 1111', '§ 2', '§ 701', '§ 504', '§ 504', '§ 501', '§ 504']

The petition for certiorari presents the single question whether, under § 504(b) of the Revenue Act of 1932, 47 chanrobles.com-red
On December 30, 1935, the taxpayer executed a trust indenture by which she transferred, in trust, property of a value of approximately $145,000 for a term ending in 1957, unless sooner terminated by the trustees, for the benefit of her seven children, with gifts over of the share of each child in event of the death of that child before the expiration of the trust. The taxpayer, in her gift tax return for 1935, excluded from the taxable amount of her gifts the sum of $5,000 for each child, or a total of $35,000. The commissioner allowed only a single deduction of $5,000 in lieu of the seven $5,000 deductions claimed by the taxpayer, and assessed a deficiency accordingly. The Board of Tax Appeals, treating the trust as the donee, rather than the individual beneficiaries, sustained the commissioner's assessment. The Court of Appeals for the Fifth Circuit reversed. 111 F.2d 229. We granted certiorari, 311 U.S. 638, to resolve a conflict chanrobles.com-red
The statutory definition of "person" in § 1111(a)(1) is of little aid in answering this question. The definition is made generally applicable to all of the sections of the revenue act, and was carried forward from earlier acts which contained on gift tax provisions. See § 2(a)(1) of the 1926 Revenue Act, 44 Stat. 9, and § 701(a)(1) of the 1928 Revenue Act, 45 Stat. 878. The section means no more than that the word "person" in any section of the act in which it occurs may be taken as meaning "trust," rather than "individual," as the context may require. But § 504(b), allowing the deduction in the case of each gift to any person when applied to gifts in trust for designated beneficiaries, may be read as referring either to a gift to the trust or a gift to each individual beneficiary. Hence, we must read the section, in its setting of the gift tax provisions chanrobles.com-red
But, for present purposes, it is of more importance that, in common understanding and in the common use of language, a gift is made to him upon whom the donor bestows the benefit of his donation. One does not speak of making a gift to a trust, rather than to his children who are its beneficiaries. The reports of the committees of Congress used words in their natural sense, and in the sense in which we must take it they were intended to be used in § 504(b) when, in discussing § 501, they spoke of the beneficiary of a gift upon trust as the person to whom the gift is made. Similarly they spoke of gifts effected by transfer of money or property to another as consideration for the payment of money or other property to a third person as a gift to the third person. H.Rept. No. 708, 72d Cong., 1st Sess., pp. 27-28; S.Rept. No. 665, 72d Cong., 1st Sess., pp. 39-40. It is of some significance also that the denial by § 504(b) of the exemption in the case of gifts of "future interests" has little scope for practical operation unless the gifts to which the exemption applies chanrobles.com-red
In the face of an exemption thus made broadly applicable to all gifts to all donees, and in the absence of some indication of an intention to discriminate between gifts made directly to the donees and those made indirectly to the beneficiaries of a trust, we can hardly assume a purpose to favor one class of donees over the other, or find such a purpose in the words of the statutory definition of "person," which may indicate either the trust or each individual beneficiary of the trust as the person to whom the gift is made. Further, such an assumption would open the way to avoid the $5,000 limitation upon the allowed exemption by resort to the simple expedient of the creation by a single donor of any number of trusts of $5,000 each for the benefit of a single beneficiary. * A chanrobles.com-red