Document: 387 U.S. 456 87 S.Ct. 1776 18 L.Ed.2d 886 COMMISSIONER OF INTERNAL REVENUE, Petitioner,v.ESTATE of Herman J. BOSCH, Deceased. The SECOND NATIONAL BANK NEW HAVEN, Petitioner, v. UNITED STATES. Nos. 673, 240. Argued March 22, 1967. Decided June 5, No. 673: Jack S. Levin, Washington, D.C., for petitioner. John W. Burke, New York City, respondent. 240: Curtiss K. Thompson, Haven, Conn., Mr. Justice CLARK delivered the opinion Court. 1 These two federal estate tax cases present a common issue our determination: Whether court or agency in controversy is conclusively bound by state trial adjudication property rights characterization interests when United States not made party to such proceeding. 2 In Commissioner Internal Revenue Estate Bosch, 363 F.2d 1009, Court Appeals Second Circuit held that since had 'authoritatively determined' parties, it was required delve into correctness decree. 240, National Bank Executor States, 351 489, another panel same 'decrees Connecticut Probate * under no circumstances can be construed as binding' on subsequent litigation involving revenue laws. these conflict principle not, which disputed here, there does exist widespread among circuits1 over question and we granted certiorari resolve it. 385 966, 968, 499, 512, 17 432. He hold where liability turns upon character interest transferred decedent law, authorities are determination court. I. 3 (a) Bosch. 4 1930, decedent, resident York, created revocable trust which, amended 1931, provided income from corpus paid his wife during her lifetime. instrument also gave general power appointment, default half go heirs remaining those wife. 1951 executed an purporting release appointment convert special power. Upon decedent's death 1957, respondent, paying taxes, claimed marital deduction value widow's trust. determined, however, did qualify § 2056(b)(5)2 1954 Code levied deficiency. Respondent then filed petition redetermination Tax ultimate outcome hinged whether Mrs. Bosch invalid—as she be—in case would have enjoyed at husband's therefore maritalde duction. While proceeding pending, respondent Supreme settlement trustee's account; sought validity law. Court, with Commissioner's consent, abstained making its decision pending action. found nullity; accepted judgment being 'authoritative exposition law involved,' 43 T.C. 120, 124, permitted deduction. On appeal, divided affirmed. It '(t)he 'bound by' tribunal, but tribunal has authoritatively determined action.' F.2d, 1013. concluded 'New judgment, rendered jurisdiction parties subject matter, settled only purposes application relevant provisions law.' Id., 1014. declared qualified We do agree reverse. 5 Petitioner this executor will one Brewster, who died September 1958. will, together codicil thereto, admitted probate District Hamden, Connecticut. 1958 directed payment 'out my just debts funeral expenses any taxes may legally assessed *.' further 'provisions statute requiring apportionment proration beneficiaries transferees property, them, shall without effect estate.' certain bequests left residue trust; one-third given life, other two-thirds benefit grandchildren were living time death. July 1958, pertinent part testamentary her. This maritl 1954, 2056(b)(5). return 1959, computed before taxes. deducted, along deductions involved total basis balance. disallowed deficiency based denial allowance reduction trust, charged full prior After receipt notice, petitioner determine, paid. Notice all interested Director Revenue. guardian ad litem minor verified report stating legal objection set out executor. Neither adult nor appeared approved application, negate ordered entire prorated against grandchildren's trusts. interpretation allowed widow some $3,600,000 clear tax. Commissioner, subsequently ruling erroneous binding him, he deficiency, brought suit refund. petitioner's motion summary Government genuine material fact, i.e., proceedings been adversary nature. conclusive construing applying laws.' 222 F.Supp. 446, 457. went standard applied courts, 'clear unambiguous direction proration,' applied. 454. reversed, holding 'would seem come residual despite contrary testator specifically wished avoid proration.' 491. agreed that, event, State II. 6 240 raises additional point incorrect clearly negated statute. limit grant certiorari, affirm discussion point. presents solely '(w)e ordinarily accept local disturb here.' Ragan Merchants Transfer Co., 337 530, 534, 69 1233, 1235, 93 L.Ed. 1520 (1949); General Box Co. 159, 165, 76 728, 732, 100 1055 (1956); Tungus Skovgaard, 358 588, 596, 79 503, 508, 524 (1959). pass resolution problem remanded purpose. III. 7 what must decree matter decided determinative consequences long burdened Bar courts. addressed itself nearly third century.3 Freuler Helvering, 291 35, 54 308, 78 634 (1934), declining find collusion between record presented there, personam party, '(o)bviously res judicata, could furnish invocation faith credit clause At 43, 311. Freuler's wake, least three positions emerged circuits. first holds 8 '* if fairly independent so resulting their Gallagher Smith, 223 218, 225. 9 opposite view expressed Faulkerson's 301 231. seems approach Erie R. Tompkins, 304 64, 58 817, 82 1188 (1938), consider after examination highest State. urges intermediate position adopted; suggests result Pierpont C.I.R., 336 277. Also see dissent Friendly, J., 673. 10 look differently. First, either here neither supra; collateral estoppel apply. hardly denied both purpose directly affecting liability. Next, remembered taxing Congress enacted passing. Therefore, it, legislative history surrounding Senate Finance Committee recommending enactment used very guarded language referring here. said 'proper regard,' finality, 'should interpretations will' courts entered 'in bona fide proceeding.' S.Rep. 1013, Pt. 2, 80th Cong., 2d Sess., 4. cannot say authors directive intended decrees computation Congress. If determinations actions, certainly so—which do. contrary, believe strictly Not indicate regard' accorded placed specific limitations 2056(b), (c), (d). restrictive great care exercised drawing Act definite concern elimination loopholes escape hatches might jeopardize revenue. isin keeping long-established policy Congress, Rules Decision Act, 28 U.S.C. 1652. There absence requirements Constitution Acts 'laws several states regarded rules civil actions they apply.' judicial decisions state' within section. Cohen Beneficial Loan Corp., 541, 1221, 1528 King Order Commercial Travelers, 333 153, 68 488, 92 608 (1948). Moreover, even diversity while 'lower courts' should 'attributed weight (is) controlling *' spoken supra, 160—161, 492. And West American Tel. & 311 223, 61 179, 85 139 (1940), 'an appellate datum ascertaining disregarded unless convinced persuasive data decide otherwise.' 237, 183 (Emphasis supplied.) Thus, conditions, authority ruling. follows then, involved, underlying fortiori controlling. rule announced followed. reasons, viz., substantive State's best own apply giving rulings respect, be, effect, sitting Bernhardt Polygraphic 350 198, 273, 199 (1956). 11 much uncertainty 'non-adversary' fair taxpayer protect well. 12 affirmed 673 reversed inconsistent opinion. ordered. 13 Judgment remanded. 14 DOUGLAS, dissenting. 15 As says, 'bound' decrees. sense judicata. simply whether, absent fraud collusion, ignore taxation depends rest 16 Since 1938 1188, unbroken line legislation, decisions, administrative practice, See, e.g., Cities Service Oil Dunlap, 308 208, 60 201, 84 196; America, 199. Those cases; them never suggested because entre d Indeed, obligated follow lower showing than Fidelity Union Trust Field, 169, 176, 109; A.T. T. 139; Six Companies California Joint Highway District, 180, 186, 114; Stoner Life Ins. 464, 336, 284. true 608, appeals pleas But unique. relied district court; 'Court Common Pleas (did) appear importance compence (the State's) system taken authoritative expositions 'law" (id., 161, 492); 'the difficulty locating (was) practical significance' (ibid.); handed down rejecting reasoning espousing Appeals, illustrating perils interpreting definitive expression (state law)' (333 U.S., 162, 493); rejected pleas, strongly supported stressed 'to promulgating need abide courts.' Ibid. Even cases, incumbent take turned 634, trustee included distributed life amounts representing depreciation corpus. include constituting asserted appeal Board accounting court, requesting approval. entitled distribution corpus, repay amount improperly them. litigation, ignored ground 'no orders relate national Freuler, Cir., 62 733, 735. order governing 219 1921. say: 19 'Moreover, probate) until overruled, establishes respecting estate. none less declaration statute, earlier decisions. adjudicated What adjudges distributable is, think, considered section 1921.' 45, 312. 20 came up again Blair 300 U.S.5, 57 330, 81 465. beneficiary effectively assigned spendthrift therefore, assignments invalid taxable beneficiary. trustees action valid. claim liable income. argument noting that: 21 'The By nature extent beneficiary, assign whole part, determined. questions final. matters instance, necessary beyond obvious assignees, pursuance particular assignments. Nor charge collusive inoperative. seek instructions having supervision That entertained reviewed reached deliberate conclusion. To derogate conclusion commanded, far wholly unwarranted exercise jurisdiction. 22 'In face open argue 'was, (state) trust.' character, barred voluntary alienation interest. precisely contrary.' 9—10, 332. 23 I adhere v, supra. indication followed 24 idea respected reflects premise instances impossible (see, Darlington 302 693; Braverman Gerson, Conclusiveness Decrees Federal Litigation, L.Rev. 545, 570—572 (1962)), many desire reasons. 25 unfair congressional depend benefits aspect emphasized attempted right applied; apply—the decreased increased. Or determines tat X house. dies, wrong owned house, gross though heirs. unjust results. 26 A consent decree, purport law; merely stamp parties' contractual settlement. defer obtained collusion. where, considerations, conclusion, give such. 27 HARLAN, whom FORTAS joins, central conclusiveness proceeding, stem consequences. doubly important: difficult intensely problem, involves basic proper relationship context systems. For reasons follow, am constrained cases. 29 useful summarize factual arose. 30 Bank, residuary widow, balance separate trusts nine grandchildren. plainly terms 2056(b)(5) 1954; instance thus hence Under Connecticut's tax-proration Conn.Gen.Stat.Rev. 12-401, bequest exempt tax, reason deduction, reduced portion Accordingly, applicable bear burden instead fall correspondingly 31 terms, 'testator otherwise directs.' Article provided, apparent ambiguity, (estate) Nonetheless, executor, contended applicable, and, 30-day letter,1 Connecticut, apportioned Revenue, but, accord Service's consistent reference proceedings, Mim. 6134, Apr. 3, 1947, 1947 CCH Fed.Tax Rep. 6137, appearance behalf. 32 Apart executor's grandchildren; acknowledged place entirely wards' trusts, nevertheless objection' application. filing written opinion, disclaimer ambiguous, applicable. thereupon system,2 applicability 446; 489. 33 1930 inter vivos favor wife, 1951, advantage Powers Appointment 65 Stat. 91, purportedly converted appointment. 2056 (b)(5), 34 signed still petitioned release. assent, temporarily suspended each parties—the trustee, infant possible beneficiary—contended nullity. adopted unanimous view. exposition' 120. 1009. 35 general, essentially quite narrow one. definitions standards provided; compare Burnet Harmel, 287 103, 110, 53 74, 77, 77 199; Heiner Mellon, 271, 279, 926, 930, 1337; Lyeth Hoey, 305 188, 194, 59 155, 158, 83 119; imposed defined delimited consists expectation presence accurately accordance prevailing rules. how determined; more conditions taxpayer's subsequenty 36 properly observes, resolved principles judicata estoppel, generally Cromwell County Sac, 94 351, 352-353, 195; have, laws, history, provide adequate guide solution problem; direct lengthy imprecise equivocal.3 scarcely revealing; are, Judge Friendly remarked below, 'cryptic' 'rather dated.' 1015. 37 course, plain 1652, situation ascertain States. doubted judgments gives force 1188; purpose, founded citizenship arising laws States.4 mean, every has, example, held, most affording 'neutral' forum, statements law;5 apart series 1940 Term,6 consistently determining judgment's statement law.7 surely issue. 38 Similarly, why formula now employed determine essentially, recent derived—is necessarily modification situations systems too delicate important single standard. See Hill, Doctrine Bankruptcy, 66 Harv.L.Rev. 1013; Note, Competence Courts Formulate Decision, 1084. Compare, Morgan 309 78, 80-81, 424-426, 585; Cardozo, Taxes Radiating Potencies Decisions, 51 Yale L.J. 783. inadequacy particularly patent unlike derived, confronted already passed. 39 although erie doctrine offer guidance appropriate demand 40 Given inconclusiveness sources, essential various fundamentally stake. suffices factors. side ultimately wellsprings doctrine. First scrupulous adherence reflected statutes promote uniformity administration Uniformity turn, assure regard areas discretion administration, addition, prevent incongruity stems dissimilar treatment similar situations. Finally, unquestionably better positioned measure laws; lowest possesses tangible close familiarity meaning 41 obligations spring exigencies statutes. attributed degree, product genuinely occasions taxpayers readily obtain favorable, inaccurate, unsuspecting One envision hazard, assume lack competence disinterestedness judges; needed complex crowded calendar, presentation busy judge viewpoint. consequence occurrence explication reasoned issues cort s. 42 suppose contribute materially unfairly treated obliged act, taxation, governed accurate Certainly nothing accuracy compelled judgments.8 IV. foregoing factors might, thought variety disparate resolutions present. emphasis principally thereby unfairness individual differently accept, exceptional circumstances, viewpoint identified Third 218; apparently today Brother DOUGLAS. Conversely, hazards fisc dubious require examine themselves, content This, understand majority today. 44 satisfactorily reconciles involved. former create excessive risks evaded through acquisition inadequately brought, reality, truly conflicting rather predicate gaining foreseeable advantages, considered. well differ form participate pleasure, establish 45 second position, hand, intervention frequently demand; re-examine deem appropriate, disregard previous identical widely destructive 46 treasury here; satisfied consideration materials, ask, opportunity relitigate involve consequences; requires issus whatever reason, adjudication. assumed make, made, if, untainted fraud, interests. 47 state-adjudicated consequences, attribute level procedural system, resulted indicia undertake define particularity assessment; illustrate pertinent. principal distinguishing characteristic view, number represented actual adversity financial instituted defeating federl taking significant, determinative. taxpayer, refund, overturn presumption, Welch 290 111, 115, 8, 9, 212, correctly establishing issues, viewpoints presented. Proceedings guilty would, little court's 48 recognize, lacks precision contrasting yardsticks Yet faithfully demands competing involved.9 V. 49 following manner. 'it unnecessary' make finding 'nonadversary,' "under circumstances" binding. 494. vacate remand cause views herein 50 terminates taxation. reverse FORTAS, 52 join dissenting add few comments. HARLAN states, interests, final competent assuming substance arrived careful normally touchstone 'adversary' alone satisfactory. think concept helpfully embellished Raum case, 123-124. following: jurisdiction, fully parties; precedential throughout State; aware participate; 'rendered 'deliberate conclusion', (5) p. (57 465)'; potentially offsetting respect litigant's taxes; future rights, thus, stated, 'provided label past events Illustrative circuits are: 218 (C.A.3d 1955); 231 (C.A.7th Cir.), cert. denied, 371 887, 182, 121 (1962); Pierpont's 277 (C.A.4th 1964), 380 908, 890, 795 (1965). Section 2056(b)(5), provides: '(5) surviving spouse.—In passing spouse interest, appoint (exercisable spouse, either, exercisable others), person portion, spouse— '(A) thereof shall, subsection (a), '(B) paragraph (1) (A), spouse. 'This thereof, events.' (b) 465 (1937), dealt presently us $1,333,194.35, plus contended, attributable approximately $3,600,000. $1,700,000. records (but Shelton Hadlock, Conn. 143, A. 483, Locke Kohn, Practice (1951), higher attack district. F.Supp., 457; supplementary Committee, concerned legislation eventually became 1948, S.Rep.No. doubtless broadly virtually pertinence sentence's last four words suggests, other. Maternally Yours, Inc. Your Maternity Shop, Inc., 234 538; Praise Erie—and Law, N.Y.U.L.Rev. 383, 408, n. 122; 1084, 1087. 608. Compare 204, 209-211, 276, 280, Vandenbark Owens-Illinois Glass 538, 347, 327. All exception field, different Vandenbark, They repeatedly criticized commentators. descib ed 'outrages,' 401. Corbin, Laws Several 762, 766-768; Clark, Law Courts, 55 267, 290-292; Crosskey, Politics 922-927 (1953). wondered vitality Bernhardt, 634; Hylton Dall. 171, 556; Cahn, Local Taxation, 799. doubted, actually produce serious disadvantages. embodied Treasury Regulations 1919, Treas.Reg. §§ 20.2053-1(b)(2), 20.2056(e)-2(d)(2), urged counsel moreover, opinions appeals. Saulsbury 578; Brodrick Gore, 224 892; re Sweet's Estate, 401; Old Kent 362 444. 818-819; Tax.L.Rev. 545. difficulties attend standard, wide use, yet appeared.

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