Source: https://www.legalcrystal.com/case/96665/taft-vs-commissioner
Timestamp: 2016-10-25 03:53:07
Document Index: 67588776

Matched Legal Cases: ['§ 303', '§ 303', '§ 303', '§ 303', '§ 303', '§ 303', '§ 303', 'Art. 36', 'Art. 36', 'Art. 36', '§ 302']

Taft Vs Commissioner - Citation 96665 - Court Judgment | LegalCrystal
Save as PDF Add a Tag Add a Note Semantics Visualize Taft Vs. Commissioner - Court Judgment	LegalCrystal Citationlegalcrystal.com/96665CourtUS Supreme CourtDecided OnMay-16-1938Case Number304 U.S. 351AppellantTaftRespondentCommissionerExcerpt:.....payable under the promises, as being claims contracted "for an adequate and full consideration in money or money's worth," § 303(a)(1), or as "transfers," to or for the use of the promisee corporations,
§ 303(a)(3). pp.
304 u. s. 355
2. the legislative and administrative history of § 303(a)(1) of the revenue act of 1926, shows that a promise by a decedent to pay money to a charitable or educational institution, where the only consideration was a stipulated application of the amount received, does not constitute a claim against the estate contracted for an adequate and full consideration in money or money's worth, notwithstanding the fact that, under local law, the promise is enforceable. p.
Taft v. Commissioner - 304 U.S. 351 (1938)
1. A decedent in her lifetime promised educational institutions to establish an endowment fund and to pay salaries of orchestral musicians and a director of art. The promises were accepted and acted upon, and, under the state law, were binding upon her estate.
that, in valuing the estate for taxation under the Revenue Act of 1926, the executor was not entitled to deduct the amounts payable under the promises, as being claims contracted "for an adequate and full consideration in money or money's worth," § 303(a)(1), or as "transfers," to or for the use of the promisee corporations,
3. A binding promise by a decedent to pay money to a charitable or educational institution, not attended by any allocation of funds in decedent's lifetime, is not a "transfer" within the meaning of § 303(a)(3), Revenue Act of 1926, and payment by the executor does not make it such by relation. P.
4. Only such transfers
as are testamentary in character are deductible under subsection (3),
304 U. S. 358
The question presented is whether the petitioner, as executor, may deduct from the gross estate amounts payable pursuant to the decedent's binding promises as claims against the estate incurred
and for an adequate and full consideration in money or money's worth within the meaning of section 303(a)(1), or as transfers to charitable or educational institutions under section 303(a)(3) of the
Revenue Act of 1926, 44 Stat. 72. [
] The deductions were of amounts owing at the decedent's death upon the following contractual obligations.
The total claimed as deductible on account of these obligations was $2,015,420. Under the law of Ohio, the decedent's promises were and are legally binding and enforceable against her estate. The Commissioner ruled, and the Board [
] and the court below [
] have held, that the estate's obligations in question, though contracted
were not incurred for an adequate and full consideration in money or money's worth as required by clause (1), and payments of the sums promised are not transfers to or for the use of any corporation organized and operating exclusively for charitable or education purposes within the meaning of clause (3) of § 303(a) of the Act. We granted certiorari because of an alleged conflict of decision. [
to hold. The Revenue Act of 1916 permitted the deduction of the amount of claims against the estate "allowed by the laws of the jurisdiction . . . under which the estate is being administered." [
] The Acts of 1918 and 1921 contain like provisions. [
] Under these Acts, the claims in question would have been deductible as enforceable by state law irrespective of the nature of the consideration. [
] The Act of 1924 altered existing law and authorized the deduction of claims against an estate only to the extent that they were "incurred or contracted
and for a fair consideration in money or money's worth." [
] Congress had reason to think that the phrase "fair consideration" would be held to comprehend an instance of a promise which was honest, reasonable, and free from suspicion whether or not the consideration for it was, strictly speaking, adequate. [
] The words "adequate and full consideration" were substituted by § 303(a)(1) of the Revenue Act of 1926. There must have been some reason for these successive changes. It seems evident that the purpose was to narrow the class of deductible claims, and we are not at liberty to ignore this purpose.
The regulations of the Treasury promulgated under the Act of 1924 and the first edition applicable to that of 1926, paraphrased the statutory language. [
] The 1929 edition of Regulation 70, Art. 36, provides in part:
received therefor by the decedent. [
Since 1929, the regulations have excluded deductions such as those in issue here. Meantime, the estate tax provisions have been amended four times and the section under which the regulations were promulgated has been amended twice. We must assume that Congress was familiar with the construction put upon the section by the Treasury and was satisfied with it. The Board of Tax Appeals [
] and the courts, [
] with the exception of the Circuit Court of Appeals for the Third Circuit, [
] have held that a promise to pay money to a charitable or educational institution, where the only consideration was a stipulated application of the amount received, does not constitute a claim against the estate contracted for an adequate and full consideration in money or money's worth, notwithstanding the fact that, under local law the promise is enforceable. In this view we agree.
The only transfers required to be included in the gross estate are those made in contemplation of death or to take effect in possession or enjoyment at or after death. [
] In other words, only such transfers as are testamentary in character are to be included in the gross estate, and it follows that only those of that character are deductible under subsection (3). Those here in question were clearly not such. There is no claim that the agreements were made in contemplation of death or to take effect in possession or enjoyment at or after death.
"(1) Such amounts for funeral expenses, administration expenses, claims against the estate, unpaid mortgages upon, or any indebtedness in respect to, property . . . to the extent that such claims, mortgages, or indebtedness were incurred or contracted
and for an adequate and full consideration in money or money's worth, . . ."
See Turner v. Commissioner,
85 F.2d 919;
Commissioner v. Bryn Mawr Trust Co.,
87 F.2d 607;
60 F.2d 673;
Bretzfelder v. Commissioner,
86 F.2d 713;
Lockwood v. McGowan,
86 F.2d 1005.
Atkins v. Commissioner,
30 F.2d 761.
See Ferguson v. Dickson,
300 F. 961, 964.
Regulations 80, 1934 Ed., Art. 36; Regulations 80, 1937 Ed., Art. 36.
Glaser v. Commissioner,
69 F.2d 254;
Carney v. Benz,
90 F.2d 747, 749, 113 A.L.R. 365;
13 F.Supp. 966,
Turner v. Commissioner, 85 F.2d 919,
87 F.2d 607, 609.
§ 302(c), 44 Stat. 70.
"(c) To the extent of any interest therein of which the decedent has at any time made a transfer, . . . in contemplation of or intended to take effect in possession or enjoyment at or after his death, except in case of a
sale for an adequate and full consideration in money or money's worth."
subsection (d), 44 Stat. 71.