Document: 66 L.Ed.2d 513 101 S.Ct. 549 449 U.S. 292 UNITED STATESv.DARUSMONT et ux. No. 80-243. Jan. 12, 1981. PER CURIAM. 1 Appellees instituted this federal income tax refund suit, claiming that the 1976 amendments of minimum provisions contained in §§ 56 and 57 Internal Revenue Code 1954, 26 U.S.C. 57, could not be applied to a transaction had taken place 1976, prior enactment amendments, without violating Due Process Clause Fifth Amendment. 2 prevailed District Court. The United States has an appeal Court pursuant 28 § 1252, which authorizes direct from final judgment court holding Act Congress unconstitutional any civil action is party. And may when, as here, statute been held particular circumstance. Fleming v. Rhodes, 331 100, 67 1140, 91 L.Ed. 1368 (1947). See Christian Echoes National Ministry, Inc., 404 561, 563, 92 663, 30 716 (1972). 3 * appellees, E. M. Darusmont B. L. Darusmont, are husband wife. Mrs. party solely because she her filed joint return for calendar year 1976. We hereinafter sometimes refer appellees singular, either "appellee" or "taxpayer." 4 In April Mr. was notified by his employer he transferred Houston, Tex., Bakersfield, Cal. Appellee, accordingly, undertook dispose Houston home. That home triplex. One three units occupied Darusmonts; taxpayer rented other two. Appellee retained real estate firm list property give him advice most advantageous way sell it. suggested various alternatives (sale separate condominium units, whole, cash on installment basis). appellee discussed consequences each alternative, including capital gain, method reporting, possibility deferring portion gain timely purchase replacement California. 5 After considering several possible methods structuring sale, after computing projected method, decided outright sale. sale effected July 15, cash. This resulted long-term taxpayer. Because, however, purchased residence California, able, under 1034 Code, 1034, defer recognition attributable unit Texas house Darusmonts occupied. Appellee's recognized two $51,332. taking into account deduction 50% net then permitted 1202 1202, included remainder reported taxable income. their showed $25,384, paid. 6 present controversy concerns $2,280, appellee's liability imposed items preference defined 57. These provisions, impose addition regular tax, first appeared with Tax Reform 1969, Pub. 91-172, 301, 83 Stat. 580. Originally, equaled 10% amount aggregate enumerated exceeded sum $30,000 exemption plus taxpayer's liability. For individual, one gain. 57(a)(9)(A). Thus, triplex item preference. If statute's original formulation, its base liability, would have owed result house. 7 On October 4, President signed 94-455, 90 1520. Section 301 Act, 1549, amended 56(a) so increase rate reduce $10,000 one-half (with certain adjustments), whichever greater. 301(g)(1), 1553, exceptions pertinent provided "the made section shall apply years beginning December 31, 1975." It stated effective date creates issue now for, sense, amendment operated "retroactively" cover date. A statutory change subjected contested $2,280 preceding 15. 8 proper claim paid duly Service. Upon denial claim, suit Eastern Taxpayer argued constitutionally fully consummated enactment. He further known structured avoid tax. conceded, when ways property, aware existence 9 entered favor appellee. application "to new, distinct tax," "so arbitrary oppressive due process" guaranteed App. Juris. Statement 3a; 80-2 USTC ¶ 9671, p. 85,208, 47 AFTR 2d 81-366, 81-519. note Court's ruling conflict later decision Appeals Eighth Circuit Buttke Commissioner, 625 F.2d 202 (1980), aff'g 72 T.C. 677 (1979).1 II 10 enacting general revenue statutes, almost exception given such actual true respect Tariff Oct. 3, 1913, successive Acts 1916 through 1938.2 also Codes 1939 1954.3 Usually "retroactive" feature only current enactment, but 1918 1926 applicable entire expired apparently confined short limited periods required practicalities producing national legislation. safely say it customary congressional practice. 11 consistently took does per se violate Stockdale Insurance Companies, 20 Wall. 323, 331, 332, 22 348 (1874); id., at 341 (dissenting opinion); Brushaber Union Pacific R. Co., 240 1, 20, 365 236, 242, 60 493 (1916); Cooper States, 280 409, 411, 50 164, 74 516 (1930); Milliken 283 21, 51 324, 326, 75 809 (1931); Reinecke Smith, 289 172, 175, 53 570, 572, 77 1109 (1933); Hudson, 299 498, 500-501, 309, 310, 81 370 (1937); Welch Henry, 305 134, 146, 148-150, 59 121, 125, 126-127, 87 (1938); Fernandez Wiener, 326 340, 355, 178, 186, 116 (1945). Ballard, Retroactive Federal Taxation, 48 Harv.L.Rev. 592 (1935); Hochman, Supreme Constitutionality Legislation, 73 692, 706-711 (1960). 12 Justice Miller succinctly principle century ago writing Stockdale, supra: 13 "The right new statute, although measure governed past year, cannot doubted; much less can doubted though part elapsed passed." Wall., 331. 14 Van Devanter supra, similarly approved practice: 15 "As respects statutes long practice make them retroactive relatively include profits transactions while process within preceded enactment; repeated decisions sustained consistent clause Constitution." U.S., 500, S.Ct., 309. 16 underlying rationale allowing "retroactivity": 17 "Taxation neither penalty nor assumes contract. apportioning cost government among those who some privileged enjoy benefits must bear burdens. Since no citizen enjoys immunity burden, imposition necessarily infringe process, challenge enough point out event, receipt income, antedated statute." 146-147, 125-126. 18 Judge Learned Hand commented upon set forth answer constitutional argument: 19 "Nobody vested taxation, retroactively changed will least than twelve months; done outset. . injustice greater if man chance profitable months before rates changed. Such indeed complain that, foreseen increase, kept unliquidated, avail him; prepared possibilities, system being already operation. His different case who, takes action, reason suppose sort taxed all." Cohan 39 540, 545 (CA2 1930). concedes "has 'due process' Constitution se." Motion Affirm 6. asserts, tests developed determining whether harsh namely, altered behavior anticipated time effected; notice engaged transaction; merely existing argues fits these tests. 21 support proposition, cites Blodgett Holden, 275 142, 105, 206 (1927), modified, 276 594 (1928), Untermyer Anderson, 440, 353, 645 (1928). These, gift cases, gifts question were completely taxing statute. do regard controlling authority 147-148, Regarding second test, states notice, constructive, forthcoming changes sold consequence, arbitrary, harsh, oppressive. Assuming, purposes argument, personal relevant, hardly position surprise proposed public discussion H.R.Rep.No. 94-658, pp. 130-132 (1975); S.Rep.No. 94-938, 108-114 (1976), U.S.Code Cong. & Admin.News 2897. reflected compromise between House Senate proposals. Both bills, 1975. therefore, ample advance rate. 23 "new tax" argument answered fact did create To sure, described 56(a), "[i]n to" But provision untaxed 582. 24 far individual language quoted above, affected decreasing allowable increasing percentage "Congress intended raise items. ." Staff Joint Committee General Explanation 94th Cong., Sess., 105 (Comm.Print 1976). possessed kind persuaded proffered distinction (CA8 1980), Buttke, unlike appellee, incurred anyway form Estate Lewis 40 TCM 78, 80,106 P-H Memo TC (1980) (appeal pending CA5). 25 think (1930), particularly close case. There taxpayer, November 7, 1921, stock acquired week earlier. 23, 1921 became law. basis received 1920, same donor's basis, instead fair market value gift, rule theretofore prevailed. sought lower carryover should completed Id., 164. Court, rejected contention, saying, ibid.: "That questioned declared requires gains recent treated gross open serious doubt since [36 493] Lynch Hornby, 247 339 [38 543, 62 1149]." 27 California therefore reversed, remanded directions enter States. ordered. adhered position. Kearns 1223 (1980); Westwick 38 1269, 79,329 (1979) CA10); CA5); Schopp 275, 80,148 Witte 1259, 80,393 (1980). Other rulings adverse Appendrodt 490 F.Supp. (WD Pa. 1980); Metzger 78-0346-S (SD Feb. 16, 1979) CA9). II, D 168; 1916, 8(a) (b), 13(a) 761, 770, 771; War 1917, 2, 300-302; 1918, 200, 1058; 200(1), 42 227; 1924, 200(a), 43 254; 1926, 44 (part 2) 10; 1928, 48(a), 45 795, 807; 1932, 173, 187; 1934, 683; 1935, 49 1014; 1936, 1652; 1937, 813; 1938, 52 452. 1939, 4; 7851(a)(1)(A), 68A 919.

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