Court Opinion

ID: 4480738
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:14:30.139267+00
Date Added: 2024-06-11T13:16:08.852378
License: Public Domain

Ahnold. J., dissenting: I think the majority errs in following Herbert Jones, 1 T. C. 1207. The doctrine of that case has, in my opinion, been repudiated by the Supreme Court in Commissioner v. Wemyss, 324 U. S. 303, and Merrill v. Fahs, 324 U. S. 308, and no basis for a distinction between antenuptial and postnuptial transfers now exists. The First Circuit in Commissioner v. Bristol, 121 Fed. (2d) 129, reversing 42 B. T. A. 263, accepted the Commissioner’s theory, which we had rejected, that the comparable sections of the estate and gift tax laws should be construed alike. Our Jones case brushed aside this reversal with the remark: “We have not, however, departed from the view expressed in our opinion in that case.” But the Jones case also distinguished the Bristol case upon the ground that the latter involved an antenuptial agreement, whereas the Jones case involved a post-nuptial agreement in connection with a divorce, which we there said was “a far cry” from antenuptial transfers. In the Wemyss and Merrill cases the Supreme Court, by its own statements and by approving the reasoning of the First Circuit in the Bristol case, forced us to depart from the views we expressed in our Bristol case and reaffirmed in our Jones opinion. The Converse case follows the Jones case, because both cases involved a postnuptial transfer, but, contrary to the latter case, it omits any reference to our previously expressed views on antenuptial transfers. Inherent in the Converse opinion is recognition of the rule, established by the Wemyss, Merrill, and Bristol cases, that antenuptial transfers in relinquishment of marital rights are taxable as gifts, because the promised relinquishment of marital rights is not considered to any extent full and adequate consideration in money or money’s worth for the property transferred. In other words, the Converse opinion recognizes that the estate and gift tax laws should be construed alike when the transfers are ante-nuptial. If comparable provisions of the estate and gift tax laws are to be construed alike with respect t.o antenuptial transfers of property, there is no logical reason why a different rule should apply to post-nuptial transfers. And it seems equally logical that, if the release of marital rights is not full and adequate consideration in money or money’s worth for the transfer of property before marriage, the release of the same rights in exchange for property after marriage brings no better or more adequate consideration in money or money’s worth into the transferor’s estate. Wemyss and Bristol cases, supra. The 1932 amendment to the estate tax act provided that the relinquishment or promised relinquishment of marital rights “shall not be considered to any extent a consideration ‘in money or money’s worth.’ ” In the Merrill case, supra, the Supreme Court construed the 1932 amendment to be a clarification of the estate tax law as it existed prior to the amendment. Specifically, the Court said : * * * Plainly, the explicitness was one of cautious redundancy to prevent “subversion of the legislative intent.” Without this specific provision, Congress undoubtedly intended the requirement of “adequate and full consideration" to exclude relinquishment of dower and other marital rights with respect to the estate tax. Commissioner v. Bristol, 121 Fed. (2d) 129; Sheets v. Commissioner, 95 Fed. (2d) 727. The Supreme Court then in effect read the estate tax amendment into the gift tax law by holding that the estate tax and gift tax laws should be construed harmoniously, that there was every reason for giving the same words in the gift tax the same reading, that strong reasons urge identical construction, and that to hold otherwise would encourage tax avoidance and would not fulfill the purposes of the gilt tax. In the Bristol case, cited in the above quotation, the First Circuit, in discussing the estate tax as amended and the gift tax, stated that “the amendment was added merely from an abundance of caution and should be regarded as declaratory of the law as it previously existed,” that it seems improbable that identical phrases should be accorded a different meaning in the gift tax, enacted at the same time, and that an important purpose of the gift tax was to discourage the avoidance of surtaxes by the division of income-producing assets among members of the family. The Sheets case, cited by the Supreme Court, also states that the 1932 amendment should be regarded as a declaratory definition of terms. These authorities convince me that the same rule applies to post-nuptial transfers that applies to antenuptial transfers. They establish that the 1932 estate tax amendment added no new law; that the amendment was merely declaratory of existing law; that comparable provisions of the estate tax and gift tax laws should be construed alike, regardless of the 1932 amendment; and that the gift tax, like the estate tax, reaches postnuptial transfers. This brings up the question of consideration, who shall receive it, and what constitutes full and adequate consideration in money or money’s worth under section 503 for property transferred. The majority holds that Converse received “full and adequate consideration in money or money’s worth for the $625,000 paid out of his estate. In the Wemyss case the Supreme Court definitely stated that: “if we are to isolate as an independently reviewable question of law the view of the Tax Court that imoney consideration must benefit the donor to relieve a transfer by him from being a gift, we think the Tax Court-mas correct. See Commissioner v. Bristol, 121 F. 2nd 129.” (Emphasis supplied.) The Bristol case stated in this connection that “ ‘Consideration’, as used in section 503, is not the same as common law consideration; it means that when the transferor gives something away and does not at the same time replace it with money of equal value or some goods or services capable of being evaluated in money, he is deemed to have made a gift within the taxing law.” The Commissioner has determined that the present transaction was a gift. It is incumbent upon petitioner to overcome this determination by a showing that he received adequate and full consideration in money or money’s worth for the $625,000 transferred out of his estate. A showing sufficient to support a contract is not enough. Under the Wemyss case it must appear that the consideration benefited the donor to relieve a transfer by him from being a gift. Under the Bristol case, which was approved by the Supreme Court, the taxpayer must show that he received for the property transferred money or property of equal value, or goods or services capable of being evaluated in money. The evidence in this case does not show that Converse received anything of monetary value for his postnuptial transfer. Nothing is shown as to the value of the wife’s marital rights or the financial standing of Converse before or after the transfer. Petitioner has failed to show that he received adequate and full consideration in money or money’s worth under the gift tax statute. For these and the aforementioned reasons, I think the Commissioner’s determination should be approved. TURNER, J., agrees with this dissent.