Document: 340 U.S. 106 71 S.Ct. 181 95 L.Ed. 111 HARRISv.COMMISSIONER OF INTERNAL REVENUE. No. 14. Argued Oct. 16, 1950. Decided Nov. 27, Mr. Irwin N. Wilpon, Brooklyn, N.Y., for petitioner. Lee A. Jackson, Washington, D.C., respondent. Justice DOUGLAS delivered the opinion of Court. 1 The federal estate tax and gift tax, as held in a line cases ending with Commissioner v. Wemyss, 324 303, 65 652, 89 958, Merrill Fahs, 308, 655, 963, are construed pari materia, since purpose is to complement by preventing tax-free depletion transferor's during his lifetime. Both tax1 tax2 exclude transfers made 'an adequate full consideration money or money's worth'. In this requirement limited deductions claims based upon 'a promise agreement';3 but 'promise agreement' may not be release marital rights decedent's property.4 Wemyss question was whether applicable premarital property settlements. If standards were applied ex proprio vigore cases, those would taxable because there touching property. We sustained thus giving 'adequate worth' same meaning under both statutes insofar settlements agreements concerned. 2 present case raises require imposition type post-nuptial settlement involved here. 3 Petitioner divorced her husband, Reginald Wright, Nevada 1943. she husband had substantial interests. They reached an understanding respects unscrambling interests, all litigated separate properties, assumption obligations, transfer properties. 4 Wright received from petitioner creation trust lifetime income remainder interest then-existing trust; indebtedness $47,650; pay him $416.66 month ten years. 5 21/90 certain real controversy; discontinuance partition suit then pending; indemnification liability on bond mortgage London, England; against connection agreement. It found that value transferred exceeded $107,150. assessed theory any which might have given up entering into agreement could consideration. 6 parties without more gone ahead voluntarily unravelled their business interests basis compromise, no payable. For been effected relinquishment therefore fall ban provision tax5 judicial construction has incorporated statute. 7 But did simply undertake voluntary contractual division faced fact law only authorized instructed divorce court decree just equitable disposition community parties.6 recited it executed order effect respective 'in event should decreed;' provided submitted 'for its approval.' went say, 'It essence herein shall become operative manner nor Recitals covenants binding either party unless absolute between entered pending action.' 8 stopped court, clear applicable. That arrangement statutory sense. wholly conditional entry decree; accept provisions measure obligations; indeed add subtract them. decree, fix obligations parties. Internal Revenue Maresi, Cir., 156 F.2d 929, we think sound. 9 Even concedes result correct action. what happened Converse, 163 131, where decreed lump-sum award lieu monthly payments separation Yet enforceable, existing unlitigated. approval before obligation arises. happenstance approve entire settlement, modify unsubstantial details, work out material changes seems us unimportant. each creates duties; sense—popular statutory. 10 distinguished reason further undertaking decree. former 'the survive entered.' And stated ordered said forming part thereof decree.' Court Appeals turned provisions. concluded two sanctions transfers—contempt execution contract—they founded agreement'. excess gave over he gift. 178 861. 11 We, however, statute concerned source rights, at some distant time enforced. Remedies enforcement will vary state state. transfer' concerned,7 supplies enforce transfers. parties, pursuant fact. realistic sense litigation. if finer, legalistic lines drawn, Congress must do it. 12 If, hold, free concerning property, presents remaining problems difficulty. Treasury Regulations8 recognize sale, exchange, other ordinary course (a transaction bona fide, arm's length, donative intent).' This business' conventional Few transactions wife ever be; aegis not. partners dissolution firm character chancery them, seem doubt satisfy spirit Regulations. No apparent why heavier handicap absent brings tax. 13 now advised submission October 1950, died, take weeks administrator can appointed. Accordingly enter our judgment pursuance practice obtaining circumstances. See Mitchell Overman, 103 62, 64—65, 26 369; McDonald Maxwell, 274 91, 99, 47 497, 499, 942. 14 Reversed. 15 FRANKFURTER, joined BLACK, BURTON MINTON, dissenting. 16 Section 503 Act 1932 imposes 'transferred less than Stat. 247, now. I.R.C. § 1002, U.S.C. U.S.C.A. 1002. antenuptial subject tax.1 Believing I largely depends weight considerations prevailed, recapitulation them appropriate. conclusion exchange reinforced reading gloss interrelated year 'marital * considered extent worth." 1932, 804, 280, 812(b), 812(b). 17 concerns agreement, Tax called 'property agreement', contracted anticipation divorce. Each spouse agreed 'to completely arising marriage.' T.C. 741, 743. 18 Unless say winding up, were, marriage, smacks satisfies wanting overrule Fahs so infuse explicitness precluding surrender being deemed worth', hold surrendering 19 enacted amended adding consideration' prerequisite deduction 'claims estate' phrase, 'when 805, Legislative history demonstrates amendment intended change make prevent 'deduction liabilities imposed torts.' H.R.Rep. 708, 72d Cong., 1st Sess. 48; S. Rep. 665, 51. A similar principle implicit By language authoritative commentaries thereon leave incidence large entrusting application play subtleties necessary finding 'donative intent.' 306, 654, 958. while meant hit protean arrangements wit man devise transactions' common understanding, ibid., exaction does presuppose obedience law. supra, page 313, 657, interpret phrases taxes matter different ways obvious reasons compel divergent treatment introduce another needless complexity already irksome situation.' Application amount (transferred exceeds) when 'founded agreement.' taxpayer contest applicability principle; view assumed.2 Taxpayer contends (1) situation (2) Her position Court, rejected Second Circuit. 20 1. adhere views expressed decisions narrow scope exemptions.' 312, 657. Nor depart 'money definition implication read passed year. 21 2. here controversy agreement'? answer requires recital governing facts case. 22 separated August, 1942, shortly thereafter brought One week prior settling hereto removing field litigation.' After providing claims, recited, 'This approval, nevertheless entered. immediately effective hereto, proceed expeditiously possible carry herein, performed aforesaid.' 23 hearing represented, granted discharge legal which, relationship imposed' her; thereof, plaintiff defendant date February 27th, 1943 entitled approved.' 'approved' directed performance paragraphs, declared, 24 'Notwithstanding 25 ordered, adjudged, final divests itself power amend future consent hereto.' her. 27 3. Such case, Cornelia Harris 'solely terms court.' phrase technical term having well-known literature. was, within fair language, 'founded' husband. Did judge decreeing describe actually took place 'date 1943, settled marriage?' 28 undertakings defined come force occurrence condition, wit, divorce, apparently regarded decisive taxability. difference? agreement; 'nevertheless disapproved difficult see how made, solely compulsion condition comes supplant deed escrow escrow. gifts if, parents fiancee marriage? excluding tenable resting decision narrower ground embodied enforceable contempt upon' statute.3 sued sums obligated contract?4 though inadequate reduced judgment, claim deductible gross promise'. Markwell's Estate Revenue, 112 253. cease promise' merged survives ratifying fortiori agreement? 29 Judge Learned Hand's hard-headed convincing idle paraphrase views. 'In jurisdictions contracts, persist after terms, added available contract. That, example, New York, contract remains obligatory even modified allowances originally adopted; promises enforced like. Perhaps, also Nevada, govern 'all matters affecting interpretation parties.' Be may, bar, declared 'entitled approved,' included 'covenants' 'survive' well stipulations. Thus much indeed, they both; chose submit themselves sanctions—contempt tax.' 861, 865. 30 affirm judgment. 1002 (1946 ed.), provides: 'Where worth, shall, chapter, gift, computing calendar year.' (Italics added.) 812 812, 'For net determined, citizen resident United States deducting estate—* (b) Expenses, losses, indebtedness, taxes—Such amounts—* (3) estate, (4) unpaid mortgages upon, respect to, therein, undiminished such allowed laws jurisdiction, States, administered, including death decedent, accrued death, succession, legacy, inheritance taxes. mortgages, fide worth *. purposes subchapter, promised dower, curtesy, created dower 812(b) note Id. At Compiled Laws (Supp.1931 1941), 9463 provided: granting alimony appear equitable, regard merits left through whom acquired, burdens, any, benefit children. 1000 1000, '(a) 1940 computed section 1001, individual, nonresident, apply otherwise, direct indirect, personal, tangible intangible; but, nonresident situated States.' 86.8 Treas.Reg. 108 'Transfers confined valuable consideration, accord concept gifts, embrace sales, exchanges, dispositions donor exceeds therefor. However, intent), worth. reducible value, love affection, etc., disregarded, constitutes gift.' involve support rights. us, sought taxed wife, who him. are, therefore, Commissioner's satisfaction consideration.' E.T. 19, 1946—2 Cum.Bull. 166. Paul, Federal Gift Taxation 16.15. cf. Meyer's 110 367; Helvering Trust Co., 576. need pass suggestion Government instance materiae involved. contention resulting loss adopted reversal below important On broader employed, due. used, probable imposed. required agreement—the wife's $47,650 husband—was presumably enforceability criterion, due reflected determined represent attributable none twelve point like us. four actions subsequent contemplate survival directs Seuss Schukat, 358 Ill. 36, 192 N.E. 668, 672; Freeman Sieve, 323 Mass. 84 N.E.2d 16; Goldman Goldman, 282 N.Y. 296, 301, 265, 267; Holahan Holahan, Sup., 77 N.Y.S.2d 339; Mobley Mobley, Tex.Civ.App., 221 S.W.2d 565. three suits least inconsistent indicate intention terminate Heinsohn Chandler, Del.Ch. 114, A.2d 120; Coe Coe, Me., 514; Allen Allen, 196 Okl. 162 P.2d 193. five others appears lie except contempt; refusing permit survival. Hough Hough, Cal.2d 605, 160 15; McWilliams McWilliams, Colo. 173, 132 966; Hertz Hertz, 136 Minn. 188, 161 N.W. 402; Corbin Mathews, 129 N.J.Eq. 549, 633; Mendelson Mendelson, 123 Ohio.St. 11, 173 615. Lindey, Separation Agreements Ante-Nuptial Contracts, 389—395; Note, Control Post-Divorce Level Support Prior Agreement, 63 Harv.L.Rev. 337. Schacht Schacht, 295 439, 68 433, relied petitioner, determination fairness res judicata set aside fraud. issue

Category: 11