Opinion ID: 377919
Heading Depth: 1
Heading Rank: 3

Heading: Is the value of rice history acreage includable in decedent's estate?

Text: 19 The proper resolution of this appeal turns on whether rice history acreage is property within the contemplation of I.R.C. §§ 2031 & 2033, n. 1 supra. As we attempt to resolve this question, we necessarily must wrestle with the meaning of the label property. Documentation of the history and derivation of many interests which are today denominated property would require philosophers, professors of jurisprudence, and scholars of economics to call upon their full erudition and exegetic talents. The shelves of our jurisprudence are tomed with obituaries of species of property long ago tolled. Announcements of the nascence of other species which were unheard of and unspeculated upon centuries ago populate further volumes. 20 Although the varieties of property may not be infinite, any attempt to enumerate every species of property would beggar the mind and intellect of even the wisest of persons. Avoiding this Sisyphian endeavor, we embark on a Delphian one. As we begin, we must remind ourselves that property is an expansionist term. Its mooring is contemporary rather than historical. 21 The attempt to define property is an elusive task. There is no cosmic synoptic definiens that can encompass its range. The word is at times more cognizable than recognizable. It is not capable of anatomical or lexicographical definition or proof. It devolves upon the court to fill in the definitional vacuum with the substance of the economics of our time. 22 The Restatement of Property uses the word property to denote legal relations between persons with respect to a thing, see 1 Restatement of Property 3 (1936), but does not attempt to define which things constitute property. The Supreme Court has said that (t)he accurate delimitation of the concept 'property' would afford a theme especially apposite for amplificative philosophic disquisition. Gleason v. Thaw, 236 U.S. 558, 660, 35 S.Ct. 287, 288, 59 L.Ed. 717 (1915). Legal encyclopedias can provide us an interminable string of definitions suggested by various courts. See, e. g., 73 C.J.S. Property § 1 (1951). 23 Some kinds of property known to the English common law never made the transatlantic voyage to our shores. Other kinds have died out over the years, and new forms have taken their place. Blackstone once attempted to enumerate the varieties of incorporeal hereditaments, listing ten: advowsons, tithes, commons, ways, offices, dignities, franchises, corodies, annuities, and rents. 2 W. Blackstone, Commentaries  21. Even these ten could be further subdivided; the general term advowson, 13 for example, includes advowson appendant, advowson in gross, advowson presentative, advowson donative, advowson collactive, advowson of the moiety of the church, a moiety of advowson, and advowson of religious houses. Id. at 22; 1 Bouvier's Law Dictionary 157 (1914). 24 These types of property are no less foreign to contemporary American law than the statutorily-created interests known as producer rice allotments and rice history acreage would have been to Blackstone. Property evolves over time. It can be described as the bundle of rights 14 attached to things conferred by law or custom, or as everything of value which a person owns that is or may be the subject of sale or exchange. See 73 C.J.S. Property § 1 (1951). Both of these definitions contemplate the possibility that law or custom may create property rights where none were earlier thought to exist. 25 An example of this development can be seen in the right of publicity. Once thought to be a personal, non-assignable right emanating from the right of privacy, the right of publicity evolved into a legally-protected, transferable interest. See, e. g., Haelan Laboratories v. Topps Chewing Gum, 202 F.2d 866, 868 (2d Cir. 1953). Recently, courts have been faced with the next question relating to the right of publicity whether this right is devisable. Some courts have held that under some circumstances the right survives death and can be devised, see, e. g., Factors Etc., Inc. v. Pro Arts, Inc., 579 F.2d 215 (2d Cir. 1978); Hicks v. Casablanca Records, 464 F.Supp. 426 (S.D.N.Y.1978); others that the right terminates at death, see, e. g., Memphis Development Foundation v. Factors Etc., Inc., 616 F.2d 956 (6th Cir. 1980); see generally Flecher & Rubin, Privacy, Publicity, and the Portrayal of Real People by the Media, 88 Yale L.J. 1577 (1979). 26 In the right of publicity context, the courts have realized that the tag property expresses a legal conclusion rather than any independent meaning, see Haelan Laboratories, supra, 202 F.2d at 868, but have nevertheless labelled the right property. See Factors Etc., Inc. v. Pro Arts, Inc., supra, 579 F.2d at 221. An interest labelled property normally may possess certain characteristics: it can be transferred to others; it can be devised and inherited; it can descend to heirs at law; it can be levied upon to satisfy a judgment; it comes under the jurisdiction of a bankruptcy court in a bankruptcy proceeding; 15 it will be protected against invasion by the courts; it cannot be taken away without due process of law. 16 27 An interest may qualify as property for some purposes even though it lacks some of these attributes. For example, an individual can have a property right in his job, see, e. g., Perry v. Sinderman, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972), so that he cannot be fired without appropriate procedural safeguards; yet the job is not assignable, transferable, descendible, or devisable. The right to publicity is transferable during life, see Haelan Laboratories, supra, but may not be devisable. Compare Memphis Development Foundation, supra (right terminates at death), with Factors Etc., Inc. v. Pro Arts, Inc., supra (right may survive death). 28 Possible revocability is not a destroyer. Ifs, maybes, modifiers, and contingencies might negate the concept of property. But we must be certain that the analysis is a pragmatic one, not a theoretical one. So long as an interest is not chimerical, it should fall within the broad reach of the taxing statute. 29 The word property in the statute is not limited in its scope by concepts of property that existed when the estate tax was conceived. When property rights have come into existence since the statute's enactment, the generalized term must be expounded, and the terrain cartographed, by laborers in the fields of law and government. The economy and many of the elements of life today are different than they were even a generation or less ago. The Congress in its wisdom decided to use a general word like property rather than trying to envision what the ingenuity of man would evolve as something substantial. The tax gatherer is directed to seek out the esoterics of ownership and reap his share of an individual's harvest of bundles of rice upon his demise. 30 The precise question before us is whether rice acreage history is property for purposes of the estate tax laws. In deciding this question, we start with the basic principle that unless there is some special reason intrinsic to the particular provision (under consideration) . . ., the general word 'property' has a broad reach in tax law. DuPont de Nemours & Co. v. United States, 471 F.2d 1211, 1218, 200 Ct.Cl. 391 (1973). Appellee has presented us with a number of reasons which, it contends, suffice to exclude the value of Babb's rice history acreage from his gross estate. We address appellee's contentions in turn.
31 Appellee contends that on July 4, 1973, the date of Babb's death, Babb had no interest that could be transferred. Appellee is correct that the 1973 allotment was used up in that it had already been allocated to certain farms and was absorbed into the rice marketing quota for those farms. 17 However, appellee is not correct that the current allotment is the only thing the producer can deal with or use. Brief for Appellee at 7. 32 On July 4, 1973, Babb also possessed the rice history acreage of his prior production. It is true that this rice history acreage was of no further use in 1973, and, as appellee earnestly contends, that Babb had no enforceable right to any specific number of acres of producer rice allotment, or even to any future producer rice allotment at all, on the date of his death. It may even be true that, under the Department of Agriculture's regulations, Babb's rice acreage history could not have been transferred on July 4, 1973. 18 Nevertheless, Babb did possess rice history acreage, an incorporeal, intangible possession that may or may not have entitled him to receive other rights (specifically, producer rice allotments and farm marketing quotas) in the future. 33 Appellee relies heavily on Hudspeth v. United States, 519 F.2d 1055 (5th Cir. 1975) (per curiam), a case involving the deductibility of a decrease in taxpayer's cotton allotment acreage 19 as a business loss under section 165(a) of the Internal Revenue Code of 1954. Hudspeth held that variations in a taxpayer's cotton allotment acreage from year to year do not constitute closed transactions for tax purposes, so that no loss is deductible when a taxpayer's acreage is decreased. See id. at 1056. Noting that the cotton allotment scheme creates a reasonable expectancy that some cotton allotment will be assigned each year but that it neither contemplates, nor creates an enforceable right to, a constant acreage allotment from year to year, the court stated that from a pure property law standpoint, an allotment carries no vested rights to acreage allotments in future years. Id. Appellee relies heavily on this statement. 34 However, appellee fails to note the succeeding paragraph of the Hudspeth opinion, which clearly distinguishes current year crop allotments from production history. (T)he taxpayers lost no part of their property in 1971. They continued to own during all of 1971 the production history which would entitle their lands to cotton acreage allotments in future years . . . . Id. As we read Hudspeth, it supports the position of the United States by recognizing that crop allotment programs create two distinct types of interests: current year acreage allotments and production histories. The former interest creates no vested right which lasts beyond the current year; the latter, however, survives from year-to-year.
35 Appellee next contends that all Babb had when he died was an expectancy that he might receive future allotments if they were issued and if they were issued on the basis of history of production. Brief for Appellee at 16. We cannot accept this contention, because Babb did have a legally-enforceable right to receive future allotments if they were issued, if they were issued on the basis of history of production. If rice allotments based on history of production were issued in a year, and an owner of production history were refused his appropriate allotment, the owner of production history would be able to enforce his rights by a bill in equity. 20 Cf. Williamson, supra, 232 F.Supp. at 480 (tobacco allotments enforceable by bill in equity). 36 The grain of truth in appellee's statement is that an owner of production history has no enforceable right to a continuation of the allotment program or to any specific number of acres of allotment until the national acreage allotment and apportionment factors for a given year are established. Appellee contends that in this situation the value of the expectancy cannot be included in the value of the estate of its owner. It argues that an extensive line of cases dealing with payments made to a named beneficiary or to the estate of a decedent by his employer are controlling. 21 These cases are not relevant here. The leading case cited by appellee is Dimock v. Corwin, 19 F.Supp. 56 (E.D.N.Y.1937), aff'd on other grounds, 99 F.2d 799 (2d Cir. 1938), aff'd, 306 U.S. 363, 59 S.Ct. 551, 83 L.Ed. 763 (1939). As it states, in cases in which an expectancy of a payment to a named beneficiary upon one's death is sought to be included in a decedent's estate, the precise property of the decedent is asserted to (be) his right . . . 'to designate the beneficiary of his death benefit.'  Id. at 58. This right cannot be sold or assigned by decedent, see id. at 59, nor does the right pass to the decedent's heirs. The right is thus entirely unlike rice history acreage, which is, as we have noted, transferable, devisable, and descendible. 37 We find the analogy to the good will of a business to be more apt. No one can seriously doubt that good will is an asset whose value is includable in its owner's estate. See First National Bank of Memphis v. Henslee, 74 F.Supp. 106 (M.D.Tenn.1947); Estate of A. Bluestein, 15 T.C. 770, 786-88 (1950). Yet good will is an intangible asset which, like rice history acreage, has value only because it carries the expectancy of receiving future assets of more concrete value. Like rice history acreage good will is an asset whose value may evaporate overnight. 22 Like rice history acreage, good will can be sold or devised. Like rice history acreage, good will is ordinarily transferred along with other assets (in the case of good will, a business; in the case of rice acreage history, a rice farm). 23 38 Moreover, such expectancies as a right to compensation under a contingent fee contract, see Duffield v. United States, 136 F.Supp. 944 (E.D.Pa.1955), and a promise to return property to an estate if other property is insufficient to meet the estate's tax obligations, see Welch v. Hall, 134 F.2d 366 (1st Cir. 1943), have been held to be property includable in a decedent's estate. Rice history acreage is no less certain an interest than these. 24
39 Appellee also contends that the value of Babb's rice acreage history cannot be included in his estate because neither Babb nor his executor could control the transfer of the rice acreage history after Babb's death. The rice acreage history does not pass by will or by the laws of descent, appellee argues, but under the statute and regulations to those who continue his farming operations. See 7 U.S.C.A. § 1353(f)(1) (West 1973) (suspended); 7 C.F.R. § 730.76(b)(1) (1973) (repealed), supra n. 9. However, it is undeniable that Babb's farms, including his rice farming operations, could pass either by testamentary bequest or by descent, and that in fact they passed under his will. His rice acreage history passed, along with his rice operations, to the persons he desired to inherit both. 40 Appellee may be attempting to emphasize the fact that an attempted testamentary transfer of rice acreage history along with the farming operations will be ineffective unless the heirs or devisees furnish the county committee in writing . . . the names and addresses of the heirs or devisees and the extent each will continue the farming operations of the deceased. 7 C.F.R. § 730.76(b)(1) (1973) (repealed). We attach no estate tax significance to the fact that the heirs or devisees must file a piece of paper with the county committee to establish their rights. 41 We also fail to find convincing appellee's strained attempt to analogize rice history acreage to an interest created after death, like a cause of action for wrongful death, see Connecticut Bank & Trust Co. v. United States, 465 F.2d 760 (2d Cir. 1972), or to Social Security survivors' benefits, see Rev.Rul. 67-277, 1967-2 C.B. 322. We note the crucial distinction that neither a cause of action for wrongful death nor Social Security survivors' benefits can ever be transferred by a decedent prior to his death. Each of these interests is created only upon a decedent's death, whereas Babb possessed rice acreage history prior to his death.