Source: https://www.legalcrystal.com/case/96905/united-states-vs-jacobs
Timestamp: 2017-12-12 22:01:31
Document Index: 782597866

Matched Legal Cases: ['§ 301', '§ 301', '§ 302', '§ 302', '§ 302', '§ 302', 'art, 260', '§ 48']

United States Vs Jacobs - Citation 96905 - Court Judgment | LegalCrystal
United States Vs. Jacobs - Court Judgment
LegalCrystal Citation legalcrystal.com/96905
Case Number 306 U.S. 363
Respondent Jacobs
united states v. jacobs - 306 u.s. 363 (1939) u.s. supreme court united states v. jacobs, 306 u.s. 363 (1939) united states v. jacobs no. 391 argued february 2, 1939 decided february 27, 1939 * 306 u.s. 363 certiorari to the circuit court of appeals for the seventh circuit syllabus 1. under the revenue act of 1924, § 301, and substantially identical provisions of the revenue act of 1926, in determining the tax upon transfer of the net estate of a decedent, dying after the date of enactment, there is to be included in the gross estate the full value of property, real or personal, which was owned by the decedent and his wife as joint tenants at the time of his death but which was acquired with his funds, or was.....
United States v. Jacobs - 306 U.S. 363 (1939)
U.S. Supreme Court United States v. Jacobs, 306 U.S. 363 (1939)
Decided February 27, 1939 *
1. Under the Revenue Act of 1924, § 301, and substantially identical provisions of the Revenue Act of 1926, in determining the tax upon transfer of the net estate of a decedent, dying after the date of enactment, there is to be included in the gross estate the full value of property, real or personal, which was owned by the decedent and his wife as joint tenants at the time of his death but which was acquired with his funds, or was set up in part by his contribution and in part by a contribution from the wife of property which he had previously given her. Pp. 306 U. S. 364 , 306 U. S. 371 .
2. These provisions are applicable under the statute, and valid under the Fifth Amendment, notwithstanding that the joint tenancy was created before the approval of the Acts mentioned and before the enactment of the first estate tax law in 1916. P. 306 U. S. 366 .
3. The tax is not retroactive, being imposed upon the occasion of the change of ownership and beneficial rights at the death of one of the joint tenants. P. 306 U. S. 366 .
4. Despite the common law distinctions between joint tenancies and tenancies by the entirety, there are substantial similarities which justified Congress in treating them alike for estate tax purposes. P. 306 U. S. 370 .
5. The presumption that an Act of Congress is valid applies with added force to a revenue Act. P. 306 U. S. 370 .
The Commissioner included the full value of the property in decedent's gross estate for taxation under the 1924
Page 306 U. S. 365
Act. As executrix, respondent paid the tax, and sought recovery in the District Court, which held that the estate tax could be imposed only upon one-half of the joint property's total value. The Circuit Court of Appeals affirmed. [ Footnote 1 ]
First. It is clear that Congress intended, by § 302 of the 1924 Act, [ Footnote 2 ] to include in the gross estate of a decedent the full value at death of all property owned by him and any other in joint tenancy or by the entirety -- irrespective of the date of the tenancy's creation -- insofar as the property or consideration therefor is traceable to the decedent. Subdivision (h) of § 302 specifically provided that the provisions of § 302 relating to joint tenancies should
"apply to the transfers, trusts, estates, interests, rights, powers, and relinquishment of powers, as . . . described
Page 306 U. S. 366
therein whether made, created, arising, existing, exercised or relinquished before or after the enactment of this Act. "
(Italics supplied.) Section 302(h) was enacted in the 1924 Act after this Court, on May 1, 1922, had decided that the 1916 Act did not purport to impose an estate tax measured by the value of property held in joint tenancies created prior to the 1916 Act. [ Footnote 3 ] "The clear language of the 1924 statute repels the notion that it has no application to joint tenancies created prior to September 8, 1916." [ Footnote 4 ]
But the tax was not levied on the 1909 transfer, and was not retroactive. At decedent's death in 1924, ownership and beneficial rights in the property which had
Page 306 U. S. 367
existed in both tenants jointly changed into the single ownership of the survivor. This change in ownership, attributable to the special character of joint tenancies, was made the occasion for an excise, to be measured by the value of the property in which the change of ownership occurred. Had the tenancy not been created, this survivorship and change of ownership would not have taken place, but the tax does not operate retroactively merely because some of the facts or conditions upon which its application depends came into being prior to the enactment of the tax. [ Footnote 5 ]
Death duties or excises imposed upon the occasion of change in legal relationships to property brought about by death are ancient in origin. [ Footnote 6 ] Congress has the power to levy a tax upon the occasion of a joint tenant's acquiring the status of survivor at the death of a co-tenant. In holding that the full value of an estate by the entirety may constitutionally be included in a decedent's gross estate for estate tax purposes, this Court said:
"At . . . [the co-tenant's] death, however, and because of it, . . . [the survivor] for the first time, became
Page 306 U. S. 368
entitled to exclusive possession, use, and enjoyment; she ceased to hold the property subject to qualifications imposed by the law relating to tenancy by the entirety, and became entitled to hold and enjoy it absolutely as her own, and then, and then only, she acquired the power, not theretofore possessed, of disposing of the property by an exercise of her sole will. Thus, the death of one of the parties to the tenancy became the 'generating source' of important and definite accessions to the property rights of the other. These circumstances, together with the fact, the existence of which the statute requires, that no part of the property originally had belonged to the wife, are sufficient, in our opinion, to make valid the inclusion of the property in the gross estate which forms the primary base for the measurement of the tax. [ Footnote 7 ]"
Thereafter, it was further decided that the full value of the property passing to a survivor under a tenancy by the entirety created prior to the estate tax of 1916 could be included in the gross estate. [ Footnote 8 ] Congress -- it has been held -- may also constitutionally apply an estate tax to the whole of a joint tenancy created after the 1916 Act, [ Footnote 9 ] and to half of a joint tenancy created prior to the 1916 Act, where the decedent alone had furnished consideration for the joint property. [ Footnote 10 ]
It is urged that these decisions do not support the tax here upon the full value of the joint property, because
Page 306 U. S. 369
this tenancy was created prior to the estate tax law of 1916. Respondent relies upon differences in the nature of tenancies by the entirety and joint tenancies in order to remove the present case from the application of these prior adjudications. Since a joint tenant's interest in realty is severable and subject to sale, the argument is that, upon the death of a co-tenant, the survivor actually receives nothing more than the decedent's one-half interest, and therefore no more can be subjected to a death duty. On the other hand, respondent explains the permissible taxation of the whole of a tenancy by the entirety by reference to the "amiable fiction" [ Footnote 11 ] of the common law under which ownership of a husband and wife in tenancy by the entirety is deemed a single individual unity, and each owns all and every part of the property so held. By virtue of this feudal fiction of complete ownership in each of two persons, the surviving tenant by the entirety is conceived to be the recipient of all the property upon the death of the co-tenant, and therefore -- it is said -- all the property can be taxed.
The constitutionality of an exercise of the taxing power of Congress is not to be determined by such shadowy and intricate distinctions of common law property concepts and ancient fictions. [ Footnote 12 ] The Constitution grants
Page 306 U. S. 370
Congress the "Power To lay and collect Taxes, Duties, Imposts, and Excises, to pay the Debts and provide for the common Defence and general Welfare." No more essential or important power has been conferred upon the Congress, and the presumption that an Act of Congress is valid applies with added force and weight to a levy of public revenue. [ Footnote 13 ]
In addition, there is sufficient substantial similarity between joint tenancies and tenancies by the entirety to have moved Congress to treat them alike for purposes of taxation. Practical necessities -- and taxation is "eminently practical" [ Footnote 14 ] -- may well have led Congress to group different types of joint ownership together for taxation, rather than to afford different treatment to each varying shade of such ownership. A tenancy by the entirety "is essentially a joint tenancy, modified by the common law theory that husband and wife are one person." [ Footnote 15 ] Only a fiction stands between the two. Survivorship is the predominant and distinguishing feature of each. The
"grand incident of joint estate is the doctrine of survivorship, 'by which, when two or more persons are seized of a joint estate, . . . the entire tenancy upon the decease of any of them remains to the survivors, and at length to the last survivor, and he shall be entitled to the whole estate, whatever it may be.' [ Footnote 16 ]"
While it is true that, until the death of decedent here, each joint tenant possessed the right to sever the joint tenancy, each was nevertheless subjected to the hazard of losing the complete estate to the other as survivor. Prior to decedent's death, his wife had no right to dispose of her interest by will, nor could it pass to her legal
Page 306 U. S. 371
heirs. She might survive, and thereby obtain a complete fee to the property, with attendant rights of possession and disposition by will or otherwise. Until the death of her co-tenant, the wife could have severed the joint tenancy, and thus have escaped the application of the estate tax of which she complains. Upon the death of her co-tenant, she, for the first time, became possessed of the sole right to sell the entire property without risk of loss which might have resulted from partition or separate sale of her interest while decedent lived. There was -- at his death -- a distinct shifting of economic interest, [ Footnote 17 ] a decided change for the survivor's benefit. This termination of a joint tenancy marked by a change in the nature of ownership of property was designated by Congress as an appropriate occasion for the imposition of a tax. Neither the amount of the tax nor its application to the survivor's change of status and ownership, was in any manner dependent upon the date of the joint tenancy's creation, whether before or after 1916. It is immaterial that Congress chose to measure the amount of the tax by a percentage of the total value of the property, rather than by a part, or by a set sum for each such change. The wisdom both of the tax and of its measurement was for Congress to determine.
No. 482 involves provisions of the 1926 Revenue Act (44 Stat. 9) substantially identical to those of the 1924 Act considered above. Here, also, a joint tenancy (in personal property) was created by man and wife prior to 1916. However, not all of the joint property was contributed by the decedent, but a portion was contributed to the tenancy by the wife who survived. This property
Page 306 U. S. 372
which she transferred to the tenancy had, in turn, been previously given to her -- without consideration -- by decedent before the creation of the joint tenancy. At decedent's death in 1930, an estate tax was assessed and paid upon the full value of the joint property, including that part contributed by the survivor but ultimately traceable to the decedent.
The District Court held that the full value of the joint property was taxable, [ Footnote 18 ] and the Circuit Court of Appeals affirmed. [ Footnote 19 ]
"except such parts thereof as may be shown to have originally belonged to [the survivor]
Page 306 U. S. 373
and never after the passage of this Act to have been received or acquired by the latter from the decedent for less than an adequate and full consideration in money or money's worth."
Shwab v. Doyle, 258 U. S. 529 , 258 U. S. 535 ; Knox v. McElligott, 258 U. S. 546 , 258 U. S. 549 . Respondent relies upon language of the Knox case to support the contention that § 302 of the 1924 Act is retroactive in its effect on joint tenancies such as the one here. However, the actual judgment of the Court in that case went no further than to hold that the terms of the 1916 Act there considered did not require the inclusion -- in gross estates -- of the value of property held in joint tenancies created prior to the enactment of that particular law.
Gwinn v. Commissioner, 287 U. S. 224 , 287 U. S. 226 ; cf. Phillips v. Dime Trust & S.D. Co., 284 U. S. 160 , 284 U. S. 166 .
Cf. Reynolds v. United States, 292 U.C. 443, 292 U. S. 449 ; Cox v. Hart, 260 U. S. 427 , 260 U. S. 435 .
See Knowlton v. Moore, 178 U. S. 41 , 178 U. S. 47 ; 1 Cooley, "Taxation," § 48, 4th Ed., Seligman, "Essays in Taxation," Ch. V, 9th ed., 1921.
Tyler v. United States, 281 U. S. 497 , 281 U. S. 503 -504.
Gwinn v. Commissioner, supra; Griswold v. Helvering, 290 U. S. 56 , 290 U. S. 58 . In the Griswold case, this Court said:
Cf. Tyler v. United States, supra, at 281 U. S. 503 .
Nicol v. Ames, 173 U. S. 509 , 173 U. S. 515 .
Id., 173 U. S. 516 .
Cf. Chase Nat. Bank v. United States, 278 U. S. 327 , 278 U. S. 338 ; Saltonstall v. Saltonstall, 276 U. S. 260 , 276 U. S. 271 .
It has long been the settled doctrine of this Court that Congress cannot retroactively tax, as testamentary, a transfer consummated in accordance with existing law before the adoption of a system of estate taxation, and where the parties at the time of the transaction, had no notice of intent to tax it as a transfer in contemplation of death or to take effect in possession or enjoyment at or after death. [ Footnote 2/1 ] In order to avoid holding taxing acts
Page 306 U. S. 374
unconstitutional on this ground, the court has often construed them as applying prospectively only. [ Footnote 2/2 ] Reliance is placed by the government on decisions sustaining inclusion in the estate of one spouse of the entire value of an estate by the entireties. In the earlier cases wherein the exaction was upheld, the act operated prospectively, and affected only such an estate arising after passage of the statute, [ Footnote 2/3 ] or the estate came into being after the adoption of a system of taxation which might well include such a transfer within its scope. [ Footnote 2/4 ] Subsequently, the inclusion of the entire value in the taxable estate of one spouse was sustained where the tenancy by the entireties antedated the passage of the estate tax acts. [ Footnote 2/5 ] The decision was based upon the peculiar nature of a tenancy by the entireties as expounded in Tyler v. United States. A transfer tax measured by one-half the value of an estate in joint tenancy has been approved although the estate was created prior to the adoption of the system of estate taxes; [ Footnote 2/6 ] but the Court has never passed upon the validity of such a tax measured by the value of the entire joint estate. There are marked differences between a tenancy by the entireties and a joint tenancy in respect of the power of one tenant to destroy the joint estate, to transfer or encumber his interest, and otherwise obtain the fruits of it. In order to prevent evasion, Congress may include the value of the entire estate in the gross estate as a measure of the tax where the estate originates after
Page 306 U. S. 375
adoption of the law. [ Footnote 2/7 ] But it may not retroactively apply such measure to an estate created at a time when its creators had no reason to expect that such a tax would be laid in view of the settled rules of property.
Nichols v. Coolidge, 274 U. S. 531 ; Helvering v. Helmholz, 296 U. S. 93 , 296 U. S. 97 ; White v. Poor, 296 U. S. 98 , 296 U. S. 102 .
Shwab v. Doyle, 258 U. S. 529 ; Knox v. McElligott, 258 U. S. 546 ; Union Trust Co. v. Wardell, 258 U. S. 537 ; Levy v. Wardell, 258 U. S. 542 ; Lewellyn v. Frick, 268 U. S. 238 .
Tyler v. United States, 281 U. S. 497 .
Phillips v. Dime Trust & Safe Deposit Co., 284 U. S. 160 .
Knox v. McElligott, supra; Gwinn v. Commissioner, 287 U. S. 224 ; Cahn v. United States, 297 U.S. 691.
See Nichols v. Coolidge, supra, p. 274 U. S. 542 ; Tyler v. United States, supra, p. 281 U. S. 505 ; Helvering v. City Bank Farmers' Trust Co., 296 U. S. 85 , 296 U. S. 90 .