Document: 363 U.S. 194 80 S.Ct. 1103 4 L.Ed.2d 1158 UNITED STATES of America, Appellant,v.MANUFACTURERS NATIONAL BANK OF DETROIT, etc. No. 350. Argued March 31, 1960. Decided June 13, Mr. Robert Kramer, Dept. Justice, Washington, D.C., for appellant. Henry I. Armstrong, Jr., Detroit, Mich., appellee. Chief Justice WARREN delivered the opinion Court. 1 The question here is whether Section 811(g)(2)(A) Internal Revenue Code 1939 constitutional as applied in this case. That section, 'payment premiums' provision Code, requires inclusion insurance proceeds gross estate an insured where are receivable by beneficiaries other than executor but attributable to premiums paid insured.1 Inclusion required regardless retained any policy rights. However, if possessed no 'incident ownership' after January 10, 1941, him before that date excluded determining portion which he premiums.2 2 facts case stipulated. died testate on July 15, 1954. taxpayer his executor. On tax return, included, part estate, four policies payable wife insured. These were originally issued insured, divested himself rights assigning them December 18, 1936. continued pay until died. After death, insurer benefit family, pursuant provisions a settlement option selected wife. 3 In auditing Service determined only should be included estate.3 Accordingly, was adjusted and refund made. then filed claim rest proceeds. claimed because decedent had all interest 1936, constituted unapportioned direct property, invalid under Article I, Sections 9, Constitution.4 Commissioner refused allow claim, present suit followed. District Court, added also Due Process Clause Fifth Amendment 'because it retroactive discriminatory its operation.' Court sustained taxpayer's contention that, case, unconstitutional. It held incidents ownership 'no transfer property herein sought occurred at time death.' (175 F.Supp. 293.) court concluded therefore themselves could not levied without apportionment.5 175 291. Government appealed directly 1252 2101 Title 28, we noted jurisdiction. 361 880, 151, 116. 5 first objection is, upon or taxable event instead, property—which Congress cannot exact apportionment. 6 This argument does do justice evident intent events, 'as distinguished from (their) tangible fruits.' Tyler v. United States, 281 497, 502, 50 356, 358, 74 L.Ed. 991. From inception, has been class events chosen label, actually imposes tax, 'the net every decedent.'6 (Emphasis added.) See New York Trust Co. v.Eisner, 256 345, 41 506, 65 963. If there can fairly said 'transfer' language 810 clearly For such always 'been treated duty excise, particular occasion gives rise levy.' Knowlton Moore, 178 41, 81, 20 747, 763, 44 969; Eisner, supra, page 349, 507. 7 Under statute, maturing beneficiaries' right death Of course, rights, moment death. But fact material, 'transfer,' proceeds, crucial last step what reasonably treat testamentary disposition favor beneficiaries. disposition, began with payment completed His creates genuine enlargement 'generating source' full value Schwarz 170 2, 6. appropriate taxing transaction Cf. 503, 504, 359. 8 There inconsistency between view basic definition subject 810. 'Obviously, word privilege may constitutionally taxed, taken restricted sense refer passing items transferee. must * least include procured through expenditures purpose, effected having pass another.' Chase National Bank 278 327, 337, 49 126, 128, 73 405. 9 makes difference during lifetime indirectly inter vivos owner properly impose excise taxes wholly gifts. Bromley McCaughn, 280 124, 46, 226. transfers looking toward Milliken 283 51 324, 75 809. Surely, then, final step—the proceeds—in partly been, strict word, owned brought into being ripened survivor, character make imposition result *.' 10 Therefore, laid 'ripening,' decedent, within meaning Constitution. supra; Fernandez Wiener, 326 340, 66 178, 90 116; States Jacobs, 306 363, 59 551, 83 763.7 11 Further objections statute predicated Amendment. 12 operates retroactively. event—the death—occurred long enactment 1942. Moreover, few effective those period when regulations gave fair notice likely consequences. T.D. 5032, 1941—1 Cum.Bull. 427.8 impact. material purchased assigned enacted. creation 'does operate retroactively merely some conditions application depends came prior tax.' 367, 554. 13 argues, however, subjected choice unpleasant alternatives: '(H)e stop paying premiums—in would destroyed; or, continue they estate.' away possibility eventually faced obvious risk, administrative history test. Paul, Federal Estate Gift Taxation, § 10.13. complain gambled lost. And, while true have avoided price loss investment already made, alone prove lawmakers did 'a arbitrary thing,' 'found equivalence none,' 'laid burden unrelated benefit.' Burnet Wells, 289 670, 679, 53 761, 764, 77 1439. Without showing, offends due process. 14 Reversed. 15 DOUGLAS took consideration decision enacted, amendment 811(g), 404(a) Act 1942, 56 Stat. 798, 944, 26 U.S.C.A. 811(g). As amended, 811 provides pertinent that: 'The shall including real personal, intangible, wherever situated, except situated outside States— '(g) Proceeds life '(1) Receivable To extent amount decedent. '(2) beneficiaries.—To extend (A) premiums, consideration, proportion so bears total insurance, (B) respect ownership, exercisable either conjunction person 404(c), 945, note. 404(c) amendments made subsection (a) (see note 1, supra) applicable estates decedents dying (October 21, 1942); (but paid) incident policy.' Treasury Regulation, 427, provided use test 811(g) existed 1942 amendments, see ownership. regulation provided, thereafter possess abandoned 1954 reverted exclusive U.S.C. 2042, 2042. supra. 'Representatives Taxes apportioned among several Union, according their respective Numbers 'No Capitation, direct, Tax laid, unless Proportion Census Enumeration directed taken.' accord Kohl Cir., 226 F.2d 381, reasoning 'adopted' own. recognized, conflict Loeb Commissioner, 261 232, affirming 29 T.C. 22; 2; cf. Colonial Kraemer, 63 866; Baker 30 776. Compare 201 1916, 39 756, 777, 1939, 120, 'taxable' substituted 'net' provision. 2001, 2001. Our nature involved unnecessary discuss Bess, 357 51, 78 1054, 1135, similar cases relied Nor find necessary consider length Lewellyn Frick, 268 238, 45 487, 69 934, progeny. Frick reach issue. We agree holding 385, 5032 'transcended' 1941 'illegal void.' effect, construed controlling earlier statute—'taken out decedent,' 122—as Such construction unreasonable.

Category: 11