Source: https://www.legalcrystal.com/case/97726/fernandez-vs-wiener
Timestamp: 2018-04-24 16:37:15
Document Index: 722552483

Matched Legal Cases: ['§ 811', '§ 402', '§ 8', '§ 827', '§ 811', '§ 811', '§ 811', '§ 404', 'art, 317']

Fernandez Vs Wiener - Citation 97726 - Court Judgment | LegalCrystal
Fernandez Vs. Wiener - Court Judgment
LegalCrystal Citation legalcrystal.com/97726
Case Number 326 U.S. 340
fernandez v. wiener - 326 u.s. 340 (1945) u.s. supreme court fernandez v. wiener, 326 u.s. 340 (1945) fernandez v. wiener no. 58 argued november 5, 1945 decided december 10, 1945 326 u.s. 340 appeal from the district court of the united states for the eastern district of louisiana syllabus 1. upon the termination of a louisiana marital community by the death of the husband, a federal estate tax, measured by the value of the entire community property, was levied pursuant to § 811(e)(2) of the internal revenue code as amended by § 402 of the revenue act of 1942. held: that the tax does not infringe any provision of the federal constitution. pp. 326 u. s. 342 , 326 u. s. 362 . (1) the.....
Fernandez v. Wiener - 326 U.S. 340 (1945)
U.S. Supreme Court Fernandez v. Wiener, 326 U.S. 340 (1945)
Held: that the tax does not infringe any provision of the Federal Constitution. Pp. 326 U. S. 342 , 326 U. S. 362 .
(1) The statute is a revenue measure enacted by Congress in the exercise of the federal power to lay and collect an excise. P. 326 U. S. 351 .
(2) The tax does not violate the due process clause of the Fifth Amendment. Pp. 326 U. S. 346 , 326 U. S. 357 .
(a) The power of Congress to impose death taxes is not limited to the taxation of transfers at death, but extends to the creation, exercise, acquisition, or relinquishment of any power or legal privilege which is incident to the ownership of property when any of these is occasioned by death. P. 326 U. S. 352 .
(b) Upon the termination of a Louisiana marital community by the death of either the husband or wife, there occurs, by virtue of state law, a redistribution of powers and restrictions upon power with respect to the entire community property which affords an appropriate occasion for the levy of an excise tax measured by the value of the entire community property, although, from the moment the community was established, the respective rights of the spouses in the community were in every sense "vested," and it was certain that the changes in legal and economic relationships to property which occasion the tax would occur. P. 326 U. S. 355 .
(c) The statute is not invalid as arbitrary and capricious, although it taxes transfers at death and also the shifting at death of particular incidents of property. P. 326 U. S. 358 .
(d) The statute is an excise tax upon the shifting at death of the incidents of property, regardless of their origin, and does not depend for its operation upon any presumption that the entire community property is owned or economically attributable to the spouse first to die. P. 326 U. S. 358 .
(3) The statute does not contravene the requirement of Article I, § 8 of the Constitution that "excises shall be uniform throughout the United States." P. 326 U. S. 359 .
(a) The uniformity commanded by the Constitution is geographical uniformity, not uniformity of intrinsic equality and operation. P. 326 U. S. 359 .
(b) The tax on community property interests is not lacking in geographical uniformity by reason of the fact that, in some States, such interests are not found. A taxing statute does not fall short of the prescribed uniformity because its operation and incidence may be affected by differences in state laws. P. 326 U. S. 359 .
(c) The statute is not lacking in uniformity, even though it applies to community property interests and not to interests in tenancies in common and limited partnerships. P. 326 U. S. 360 .
(4) The tax imposed by the statute, laid upon the shifting at death of some of the incidents of property, is not a direct tax which the Constitution requires to be apportioned. P. 326 U. S. 361 .
(5) The tax does not invade the powers reserved to the States by the Tenth Amendment. P. 326 U. S. 362 .
(a) The Tenth Amendment does not restrict the power delegated to the national government to lay an excise tax qua tax. P. 326 U. S. 362 .
(b) The incidental regulatory effect of the tax is embraced within the power to lay it. P. 326 U. S. 362 .
(c) It is not within the province of the courts to inquire into the unexpressed purposes or motives which may have moved Congress to exercise a power constitutionally conferred upon it. P. 326 U. S. 362 .
Held: that the tax, as so applied, is constitutional. Pp. 326 U. S. 362 -363.
The death of the insured, since it ended his control over the disposition of the proceeds and gave his wife the present enjoyment of them, may constitutionally be made the occasion for the imposition of an indirect tax measured by the proceeds themselves. P. 326 U. S. 363 .
for personal services actually rendered by the surviving spouse or derived originally from such compensation or from separate property of the surviving spouse. In no case shall such interest included in the gross estate of the decedent be less than the value of such part of the community property as was subject to the decedent's power of testamentary disposition. [ Footnote 1 ]"
The revenue laws make no provision for the distribution of the burden of the tax beyond providing that the tax shall be a lien on all of the property included in the decedent's gross estate. Section 827(a) I.R.C., 26 U.S.C. § 827(a). See Detroit Bank v. United States, 317 U. S. 329 , 317 U. S. 331 -333. Section 826(b) of the I.R.C. contemplates that the tax "be paid out of the [taxable] estate before its distribution," unless otherwise directed by decedent's will. Although the share of the surviving spouse is subject to the lien and the tax must be paid out of the estate
as a whole, the federal statute leaves it to the states to determine how the tax burden shall be distributed among those who share in the taxed estate. See Riggs v. Del Drago, 317 U. S. 95 .
See, e.g., Moffitt v. Kelly, 218 U. S. 400 ; Poe v. Seaborn, 282 U. S. 101 ; Bender v. Pfaff, 282 U. S. 127 ; Commissioner v. Harmon, 323 U. S. 44 . Counsel for appellees concede that the opinion in Bender v. Pfaff, supra, so far as it goes, correctly defines the several interests of the spouses in Louisiana community property. To that we now add a more detailed statement so far as it may be relevant to the decision of the present case.
By the law of Louisiana, every marital status subject to the laws of the state superinduces a partnership or community of the spouses with respect to property in the state acquired during the life of the community, unless there be at the time of the marriage a stipulation to the contrary. [ Footnote 2 ] All earnings and all property acquired by the husband or wife during the life of the community become community property, with certain limited exceptions not here involved, and which need not be detailed further than to say that the spouses can acquire some separate property during marriage. [ Footnote 3 ] It is said that all property acquired by the spouses during the marriage which falls into the community is "due to the joint or common efforts, labor, industry, economy, and sacrifices of the husband and wife," and that for this reason, the husband and wife each has at all times an equal present interest in an undivided half of the whole community. [ Footnote 4 ] The management of the community is entrusted to the exclusive control of the husband, [ Footnote 5 ] and he may deal with and dispose of community property with no liability to account to the wife so long
as the community continues. [ Footnote 6 ] The rule is, however, that the husband may not give away any of the immoveables, nor a quota of the moveables, nor may he fraudulently make any alienation of property "to injure (his) wife." [ Footnote 7 ]
So long as the community continues, the wife has no control over community property. She may not give it away, nor sell it, and, in general, may not bind it for the payment of her debts. [ Footnote 8 ] But, upon the termination of the community, [ Footnote 9 ] she, her heirs, or other designees receive in full possession and enjoyment one-half in value of the
total community assets subject to the payment of community debts. [ Footnote 10 ] This right so to receive one-half is indefeasible, and if she die first, her heirs or legatees take her half-share to the exclusion of the husband; if the husband die first, his half passes to his heirs or as he has directed, and the other half is the wife's. [ Footnote 11 ]
the federal estate tax laws to community property. H.Rep. No.2333, 77th Cong., 2d Sess., pp. 35 to 37, 160. [ Footnote 12 ]
enacted in the exercise of the federal power to lay and collect an excise. Congress has a wide latitude in the selection of objects of taxation, Brushaber v. Union Pacific R. Co., 240 U. S. 1 , 240 U. S. 12 ; Steward Machine Co. v. Davis, 301 U. S. 548 , 301 U. S. 581 , and, even under the equal protection clause of the Fourteenth Amendment, which was not included in the Fifth, the states may distinguish, for purposes of transfer taxes, between property which has borne its fair share of the tax burdens and similar or like property passing to the same class of beneficiaries which has not. Watson v. State Comptroller, 254 U. S. 122 . Hence, we are concerned only with the power of Congress to enact the tax.
It is true that the estate tax as originally devised and constitutionally supported was a tax upon transfers. Knowlton v. Moore, 178 U. S. 41 ; YMCA v. Davis, 264 U. S. 47 , 264 U. S. 50 . But the power of Congress to impose death taxes is not limited to the taxation of transfers at death. It extends to the creation, exercise, acquisition, or relinquishment of any power or legal privilege which is incident to the ownership of property, and, when any of these is occasioned by death, it may as readily be the subject of the federal tax as the transfer of the property at death. See Bromley v. McCaughn, 280 U. S. 124 , 280 U. S. 135 , et seq.
Congress may tax real estate or chattels if the tax is apportioned, and without apportionment it may tax an excise upon a particular use or enjoyment of property or the shifting from one to another of any power or privilege incidental to the ownership or enjoyment of property. Bromley v. McCaughn, supra; Burnet v. Wells, 289 U. S. 670 , 289 U. S. 678 ; cf. Nashville, C. & St.L. Ry. v. Wallace, 288 U. S. 249 , 288 U. S. 267 -268; Henneford v. Silas Mason Co., 300 U. S. 577 , 300 U. S. 582 . The power to tax the whole necessarily embraces the power to tax any of its incidents or the use or enjoyment of them. If the property itself may constitutionally
be taxed, obviously it is competent to tax the use of it, Hylton v. United States, 3 Dall. 171; Billings v. United States, 232 U. S. 261 , or the sale of it, Nicol v. Ames, 173 U. S. 509 ; Thomas v. United States, 192 U. S. 363 , or the gift of it, Bromley v. McCaughn, supra. It may tax the exercise, nonexercise, or relinquishment of a power of disposition of property where other important indicia of ownership are lacking. Saltonstall v. Saltonstall, 276 U. S. 260 ; Chase National Bank v. United States, 278 U. S. 327 ; Estate of Rogers v. Commissioner, 320 U. S. 410 ; cf. Graves v. Schmidlapp, 315 U. S. 657 with § 811(d)(f) of the Internal Revenue Code, 26 U.S.C. § 811(d)(f).
If the gift of property may be taxed, we cannot say that there is any want of constitutional power to tax the receipt of it, whether as the result of inheritance, Stebbins v. Riley, 268 U. S. 137 , or otherwise, whatever name may be given to the tax, and even though the right to receive it, as distinguished from its actual receipt and possession at a future date, antedated the statute. Receipt in possession and enjoyment is as much a taxable occasion within the reach of the federal taxing power as the enjoyment of any other incident of property. The taking of possession of inherited property is one of the most ancient subjects of taxation known to the law. Such taxes existed on the European Continent and in England prior to the adoption of our Constitution. [ Footnote 13 ]
held. We upheld a like tax when applied to tenancies by the entirety in Tyler v. United States, 281 U. S. 497 ; Third National Bank & Trust Co. v. White, 287 U.S. 577, and to property held in joint tenancy in United States v. Jacobs and Dimock v. Corwin (companion cases), 306 U. S. 363 .
Decision in these cases was not rested, as appellees argue, on the ground that the tax was imposed on a gift made by the husband, who had created the tenancy, viewed as a substitute for a testamentary transfer, or on any event which antedated the death of one of the joint owners. Instead, as we said in Whitney v. State Tax Commission, 309 U. S. 530 , 309 U. S. 539 ,
We pointed out in Tyler v. United States, supra, 281 U. S. 503 -504, that the use, possession, and enjoyment of the joint property which was joint before the death was thereby made exclusive in the survivor, and thus constituted a "definite accession to the property rights" of the survivor. These circumstances were thought sufficient to make valid the inclusion of the property in the gross estate which forms the primary basis for the measurement of the tax. And, in United States v. Jacobs supra, this Court sustained the tax, assailed on due process grounds, when applied to a joint tenancy created before the enactment of the taxing statute. We said, 306 U.S. at 306 U. S. 371 , that the subject of the tax was not the gift to the wife made by the husband's creation of the joint tenancy for himself and wife, but the change in possession and enjoyment of the entire property occasioned by the death of one of the joint tenants, and that the tax was appropriately measured by the value of the entire property.
Griswold v. Helvering, 290 U. S. 56 , 290 U. S. 58 . Compare Saltonstall v. Saltonstall, supra, 276 U. S. 271 .
Similarly, a tax upon the termination by death of a power to dispose of property, created before the enactment of the tax statute, does not offend due process, Reinecke v. Northern Trust Co., 278 U. S. 339 , nor does a tax upon the receipt of income which was earned and due before the enactment of the taxing statute. Brushaber v. Union Pacific R. Co., supra, 240 U. S. 20 ; Lynch v. Hornby, 247 U. S. 339 , 247 U. S. 343 ; Taft v. Bowers, 278 U. S. 470 , 278 U. S. 483 -484; Cooper v. United States, 280 U. S. 409 , 280 U. S. 411 . It is the receipt in possession or enjoyment of the proceeds of a right previously acquired and vested upon which the tax is laid. Such was deemed to be the taxable event under our earlier death taxes. Clapp v. Mason, 94 U. S. 589 ; Vanderbilt v. Eidman, 196 U. S. 480 . And see Moffitt v. Kelly, supra.
The principles which sustain the present tax against due process objections are precisely those which sustained the California tax, measured by the entire value of community property in Moffitt v. Kelly, supra. There, the Court recognized that the surviving wife took her share of the property on her husband's death not as an heir, but as an owner of an interest the right to which she acquired before the death and before the enactment of the taxing act. But the levy upon the entire value of the community was sustained not as a tax upon property or the transfer of it, but as a tax upon the "vesting of the wife's right of possession and enjoyment, arising upon the death of her husband," which the Court deemed an appropriate subject of taxation notwithstanding the contract, equal protection, and due process clauses of the Constitution. [ Footnote 14 ] So far as Coolidge v. Long, 282 U. S. 582 , is inconsistent with Moffitt v. Kelly, supra, and the contentions now urged by the Government, the application of the reasoning of the Coolidge case to the taxation of joint or community interests must be taken to have been limited by our decisions in Tyler v. United States, supra, and United States v. Jacobs, supra, and the cases following them.
taking the survivor's property to pay the tax on decedent's estate. As the tax is upon the surrender of old incidents of property by the decedent and the acquisition of new by the survivor, it is appropriately measured by the value of the property to which these incidents attach. The tax burden thus laid is not so unrelated to the privileges enjoyed by the taxpayers who are owners of the property affected that it can be said to be an arbitrary exercise of the taxing power. Milliken v. United States, 283 U. S. 15 ; Burnet v. Wells, supra, 289 U. S. 678 -679. Compare Saltonstall v. Saltonstall, supra. While it may generally be true, as appellees argue, that neither the husband nor wife gains any over-all financial advantage when the other dies, it suffices that the decedent loses and the survivor acquires, with respect to the property taxed, substantial rights of enjoyment and control which may be of value. Liability to the tax, in order to avoid constitutional objection, does not have to rest upon the enjoyment by the taxpayer of all the privileges and benefits of the most favored owner at a given time and place. Corliss v. Bowers, 281 U. S. 376 ; Reinecke v. Smith, 289 U. S. 172 ; cf. Burnet v. Guggenheim, 288 U. S. 280 .
The present statute, which was enacted in order to secure a more equitable distribution of the burden of federal death taxes, [ Footnote 15 ] is assailed because the tax is lacking in uniformity. But the uniformity in excise taxes exacted by the Constitution is geographical uniformity, not uniformity of intrinsic equality and operation. Knowlton v. Moore, supra, 178 U. S. 83 -109. The Constitution does not command that a tax "have an equal effect in each state," id., p. 178 U. S. 104 . It has long been settled that, within the meaning of the uniformity requirement, a "tax is uniform when it operates with the same force and effect in every place where the subject of it is found." Head Money Cases, 112 U. S. 580 , 112 U. S. 594 . See also LaBelle Iron Works v. United States, 256 U. S. 377 , 256 U. S. 392 -393; Bromley v. McCaughn, supra, 280 U. S. 138 ; Steward Machine Co. v. Davis, supra, 301 U. S. 583 .
The amendment taxing community property interests is applicable throughout the territory of the United States wherever such interests may be found. There is no lack of geographical uniformity because in some states they are not found. For a taxing statute does not fall short of the prescribed uniformity because its operation and incidence may be affected by differences in state laws. Phillips v. Commissioner, 283 U. S. 589 , 283 U. S. 602 ; Riggs v. Del Drago, supra, 317 U. S. 102 .
in the constitutional sense. Poe v. Seaborn, supra, 282 U. S. 117 -118.
There can be no doubt that the selection of such a class for taxation would not offend against the Fifth Amendment, or even the Fourteenth, merely because it did not attempt to reach casual arrangements resulting from individual agreements. Taxes must be laid by general rules. See State Railroad Tax Cases, 92 U. S. 575 , 92 U. S. 612 ; Head Money Cases, supra, 112 U. S. 595 ; LaBelle Iron Works v. United States, supra, 256 U. S. 392 ; Great Atlantic & Pacific Tea Co. v. Grosjean, 301 U. S. 412 , 301 U. S. 424 . Considerations of practical administrative convenience and cost in the administration of tax laws afford adequate grounds for imposing a tax on a well recognized and defined class, without attempting to extend it so as to embrace a penumbra of special and more or less casual interests which in each case may or
may not resemble the taxed class. Burnet v. Wells, supra, 289 U. S. 678 ; Carmichael v. Southern Coal & Coke Co., 301 U. S. 495 , 301 U. S. 511 ; New York Rapid Transit Co. v. New York, 303 U. S. 573 , 303 U. S. 582 -583; Madison Avenue Offices v. Browne, appeal dismissed, 326 U.S. 682. Such interests would be but isolated specimens of the attorney's art, and likely to resist efforts to identify them with the taxable subject.
Appellees' contention that the uniformity clause precludes such classification would, in effect, add to the constitutional restraints upon Congress an equal protection clause more restrictive than that of the Fourteenth Amendment, and is without judicial or historical support. This Court, in LaBelle Iron Works v. United States, supra, 256 U. S. 392 , et seq., recognized that the uniformity clause, beyond requiring geographical uniformity in the application of the particular tax laid by the taxing act, could not be taken to impose greater restrictions on Congress' power to tax than those which the equal protection clause places upon the states. We reaffirm what this Court has many times held -- that the constitutional command that "Excises shall be uniform throughout the United States" refers to geographical uniformity in the application of the particular excise which Congress has prescribed. We conclude that it adds nothing to restrictions which other clauses of the Constitution may impose upon the power of Congress to select and classify the subjects of taxation. It requires only that what Congress has properly selected for taxation must be identically taxed in every state where it is found.
An excise tax, which the Constitution requires to be uniform, laid upon the shifting at death of some of the incidents of property, could hardly be thought to be a direct tax which must be apportioned. See Bromley v. McCaughn, supra, 280 U. S. 138 . The contention that such a tax is direct because measured by the property whose incidents are shifted at death was rejected in Bromley v.
McCaughn, supra, and in Tyler v. United States, supra, 281 U. S. 501 , 281 U. S. 504 , and Phillips v. Dime Trust Co., 284 U. S. 160 , 284 U. S. 165 . A tax imposed upon the exercise of some of the numerous rights of property is clearly distinguishable from a direct tax, which falls upon the owner merely because he is owner, regardless of his use or disposition of the property.
Bromley v. McCaughn, supra, 280 U. S. 137 .
The Tenth Amendment does not operate as a limitation upon the powers, express or implied, delegated to the national government. United States v. Darby, 312 U. S. 100 , 312 U. S. 123 -124. The amendment has clearly placed no restriction upon the power delegated to the national government to lay an excise tax qua tax. Undoubtedly every tax which lays its burden on some and not others may have an incidental regulatory effect. But, since that is an inseparable concomitant of the power to tax, the incidental regulatory effect of the tax is embraced within the power to lay it. It has long been settled that an Act of Congress which, on its face, purports to be an exercise of the taxing power is not any the less so because the tax is burdensome, or tends to restrict or suppress the thing taxed. In such a case, it is not within the province of courts to inquire into the unexpressed purposes or motives which may have moved Congress to exercise a power constitutionally conferred upon it. Sonzinsky v. United States, 300 U. S. 506 , 300 U. S. 513 -514, and cases cited.
policies within his gross estate for purposes of estate taxation requires no extended discussion. There is no contention that the proceeds of the policies are not made taxable by the terms of § 811(g) of the Internal Revenue Act as amended by § 404 of the Revenue Act of 1942. [ Footnote 16 ] The amendment indicates on its face the purpose to bring the provisions for the taxation of the proceeds of insurance policies payable at death into harmony with the amendment taxing community interests, and the court below seems to have regarded, as do the parties here, the disposition of the questions affecting the tax on community interests as determinative of the validity of the tax on the proceeds of the policies. But it is sufficient for present purposes that the tax is laid upon the amount receivable by the wife as a beneficiary of the policies on the death of her husband, and that the husband possessed at his death an incident of ownership -- the power to change the beneficiaries.
For reasons which we have already fully developed in this opinion, the death of the insured, since it ended his control over the disposition of the proceeds and gave his wife the present enjoyment of them, may be constitutionally made the occasion for the imposition of an indirect tax measured by the proceeds themselves. Stebbins v. Riley, supra, 268 U. S. 141 ; Chase National Bank v. United States, supra.
Nielsen v. Johnson, 279 U. S. 47 , 279 U. S. 54 , et seq.; Gleason & Otis, "Inheritance Taxation" (4th ed.), p. 243 et seq. Feudal "relief" was a payment exacted of the heir for the privilege of admission to possession of the land of his ancestor. Digby, "History of the Law of Real Property" (5th ed.) p. 40.
The force of Moffitt v. Kelly, supra, as an authority controlling the taxation of community property in Louisiana where the wife's interest is vested before the death of the husband is not impaired by the fact that the California courts later held that the wife's interest in community property in that state is not so vested. Cf. United States v. Robbins, 269 U. S. 315 , with United States v. Malcolm, 282 U. S. 792 . The Moffitt case was decided upon the assumption that the wife's interest was "vested."
Much may be said for the community property theory that the accumulations of property during marriage are as much the product of the activities of the wife as those of the titular breadwinner. But I can see no constitutional reason why Congress may not credit them all to the husband for estate tax purposes. The character and extent or property interests under local law often determine the reach of federal tax statutes. Helvering v. Stuart, 317 U. S. 154 , 317 U. S. 161 -162, and cases cited. And see Cahn, Local Law in Federal Taxation, 52 Yale L.J. 799. Yet that is not always so. United States v. Pelzer, 312 U. S. 399 . Taxation is eminently a practical matter. Congress need not be circumscribed by whatever lines are drawn by local law. It may rely, as Tyler v. United States, 281 U. S. 497 , 281 U. S. 502 -503, held, on more realistic considerations and base classifications for estate tax purposes on economic actualities. It was held, to be sure, in Hoeper v. Tax Commission, 284 U. S. 206 , that a State could not assess against the husband an income tax computed on the combined total of his and his wife's income. But I can see no reason why that which is in fact an economic unit may not be treated as one in law. For, as Mr. Justice Holmes pointed out in his dissent, there is a community of interest "when two spouses live together and when usually each would get the benefit of the income of each without inquiry into the source." And he went on to say
"Taxation may consider not only command over, but actual enjoyment of, the property taxed." 284 U.S. at 284 U. S. 219 -220. Cf. Helvering v. Clifford, 309 U. S. 331 , 309 U. S. 335 -337.