Court Opinion

ID: 9650526
Source: CourtListenerOpinion
Date Created: 2023-08-23 15:42:04.690881+00
Date Added: 2024-06-11T18:12:22.837050
License: Public Domain

WOODROUGH, Circuit Judge
(dissenting) .
It seems to me that the gift tax exemption clause, 26 U.S.C.A. § 553, has been learnedly interpreted too much. The interpretations are in diametrical conflict, but join 'in defeating the tax assessor. I disagree with the result.
After the federal inheritance tax laws went into effect, the practice became even more general in this country to transfer estates upon long time trusts that preserve *649the property and carry the beneficial interests into the future, usually beyond the life expectancy of the trustors. The trusts are not made causa mortis, but they accomplish the transmission of property beyond death more effectually and safely than testamentary dispositions or descent laws. Congress passed the gift tax acts to meet that situation.
But it was apparent to Congress that there are always many gifts being made in this country without anybody thinking about death or estates that might exist at death or about the interests of the donees at some future time — current bounties concurrently gratifying to those that give and those that take them. That kind of gifts ought not to be treated just like inheritances in taxation, and Congress did not want to so treat them. They are hard to delineate and differentiate from the other kind of gifts exactly without using the word “intent”, which makes administrative difficulties in tax laws. But at that, I think Congress did identify them in plain words, well chosen to mark off the kind of gifts that should be subjected to tax different from gift transfers in general. Congress looked to the predominant characteristic of those gift transfers that do not work out like testamentary dispositions and which ought not to be taxed like inheritances. It observed that the distinguishing feature is that the donees get such gifts at the time they are made and for present enjoyment.5 To exempt the sum of $5,000.00 out of that kind of a gift would have little effect on either inheritance or gift tax revenues. So Congress used the most apt words to describe that kind of a gift.6
After laying the taxes on all transfers given without consideration, Congress made exception of “Gifts Less Than $5,000.00”, but it did not except all “Gifts Less Than $5,000.00”. It eliminated from the $5,000 gift exception all of those gifts that carried “future interests in property”. It said, “other than future interests in property”. The intent-was obvious.
Transfers of property upon trusts that insure to the objects of a man’s bounty nothing in the present but an interest in and income from his property in the future or after the donor’s death, work out results like testamentary provisions and descent laws. Congress wanted and had a right to exact tax on inheritances, and it wanted to and had the same power to exact the tax on transfers that accomplish effects similar to letters testamentary and descent laws. The salient and universal characteristic of the transfers that do accomplish such effects is the preservation of the interest in property to the object of the bounty into the future. Therefore, as to those transfers that do provide for the future interests, Congress plainly said that they should be taxed. The words it used to make an exception to the exemption, “other than future interests in property”, seem to me to convey the true intent too plain for argument. The phrase is not of technical significance or used in law like “estates in futuro.” It is a layman’s expression that every man on the street knows of. Who does not know the difference between getting his property now and getting future interests in it tied up so that he can’t get his hands on it till he’s old?
What else could have been in the mind of Congress when it said “future interests”, save only the transfers that provide for the donee’s future instead of his present enjoyment of property? Of course, there is a sense in which the beneficiary of a trust made to insure his future can be said to get a present interest. He can go to Shylock and cash in on his future. But what he gets then is not the gift his donor or the Congress had in mind. Congress was attempting to tax the donor of gifts. It spoke from that angle. It said to the donor, “If you give to the object of your bounty outright for his present enjoyment, you need not pay so much tax. But if you are providing for his future and give him a future interest, then you shall pay the full tax.”
And observe that Congress had to make its gift tax exemption in just about that way, or give up its main purpose to tax all the gift transfers which work out like effects with testamentary dispositions. In laying taxes on estates of decedents Congress could properly and safely exempt certain amounts of an estate from tax. A man *650dies only once, and only once is deduction taken from the amount of his estate. But it was. obvious to Congress that a living man can multiply his gift transfers to the limit of his estate. Manifestly, if Congress let him make $5,000 transfers of the kind that work out effects like testamentary dispositions without liability for tax, then all he had to do was to multiply and split his transfers and in that way effectively insure the future interests of his heirs presumptive without liability for any tax. Can it really be thought that such was the intent of Congress?
After the gift tax was passed, demand was soon made on the Tax Commissioner to exempt five thousand dollars out of the gift transfer of a large estate upon trusts intended to preserve the property and to provide for the future interests of heirs presumptive. The Commissioner refused to allow exemption and defended the suit of the taxpayer based on the demand. The Commissioner insisted that such transfers made to provide for the interests of the objects of the donor’s bounty out of the future income ,of his property were plainly outside of the letter and the intent of the exemption clause of the Act of Congress. The taxpayer argued that his transfer was a gift, that it was an entity, that the trustee named in the transfer was a person as defined in the gift tax act, and that as the transfer was made to the trustee and he got all the estate in praesenti, in contrast to the future interests which would go to the beneficiaries, there ought to be one $5,000.00 deduction. The Circuit Court of Appeals of the Seventh Circuit sustained those contentions of the taxpayer and held that one $5,000.00 deduction should be' made from all such transfers upon long term trusts. Commissioner v. Wells, 88 F.2d 339. With due respect, I think the Commissioner was right.
Of course, the case of Noyes v. Has-sett, D.C., 20 F.Supp. 31, promptly resulted from the Wells decision. There the taxpayer, wanting to provide for the future interests of his children, transferred a very substantial estate upon long enduring trusts. He accomplished the transmission of the future interests in his property, to his heirs presumptive as effectually as by testamentary disposition, but he split the transaction up into separate trust indentures as suggested by the Wells decision, and tht court, following that decision and Commissioner v. Krebs, 3 Cir., 90 F.2d 880, held (as it must) that there was no tax in respect to $70,000 of the estate transferred. When the Congress was apprised of such interpretation put on' the act, it eliminated the $5,000 gift tax exemption altogether. Obviously the only possible alternative open to Congress was to lose all the gift taxes it had determined to impose.
In the present case, a large estate has been transferred on trusts to provide for the future of the donor’s-children and those to come after them. None take anything to enjoy in the present — the whole transfer looks to future earnings and corpus that may exist in the future. We are asked to go a step further than the Wells case and to veer the interpretation as in the Krebs case, supra, and order not one, but several $5,000 deductions to be made out of this transfer. .The taxpayer demands that we count the beneficiaries who may get income from the property and its corpus in the future and make $5,000 deduction for each one of them. It is suggested (not without humor) that the Commissioner and Boards of Tax Appeals have taken positions that help justify such counting of beneficiaries and accelerated frustration of the gift tax law. Certainly those officers have been obedient to the court. But the responsibility to apply Acts of Congress to facts before the court is upon the court. It is the court’s task to find the true intent of Congress and to carry that intent into .effect.
These future interests in property created by these long term trusts can only be relieved from the gift tax laid by Congress on interpretations the court expounds. .Those conflicting ones the court has put forward seem unconvincing to me. I think the Commissioner did the best he could to apply the law according to the plain meaning and intent of Congress, and that he was right in refusing to extend the exemption to these trust transfers which according to their letter and intent provide nothing but future interests in the property to the bene- , ficiaries.

 The amount in such gifts could not be taken as criterion because $5,000.00 to one man is large and to another petty. Accordingly, the first $5,000.00 is exempted.

 The language descriptive of the gifts not to be taxed up to $5,000.00 is: “Gifts Less Than $5,000.00 — In the ease of gifts (other than of future interests in property) made to any person by the donor, the first $5,000.00 of such gifts” shall not be taxed.