Court Opinion

ID: 9443098
Source: CourtListenerOpinion
Date Created: 2023-08-03 19:11:07.621373+00
Date Added: 2024-06-11T17:29:22.417510
License: Public Domain

KERNER, Circuit Judge,
dissenting.
It is with regret that I find myself under the necessity of dissenting from my associates. The Revenue Act of 1932 (§ 501) is clear and unambiguous. It imposes a tax on transfers of property by gift, and since taxation is an intensely practical matter, the solution of our problem must be found in the statutory language.
The majority assume that the obligation to pay $1,000,000 was the equivalent of $1,-000,000, having the immediate effect of depleting the net worth of the husband’s estate and augmenting that of the wife by that precise amount. That I cannot understand. That the agreement was not self-executing is evidenced by the fact that thirtéen years elapsed between the date of the promise and the date the wife actually came into possession of the full amount of the fund agreed to be turned over to her upon her marriage.
To me it is clear that the taxable event is the transfer of property. The essence of a transfer is the passage of control over the economic benefits of property rather than any technical changes in its title, Estate of Sanford v. Commissioner, 308 U.S. 39, 43, 60 S.Ct. 51, 84 L.Ed 20, and whatever may have been the equitable rights of the wife, until the Southern California notes and the preferred stock of the Copley Press were actually transferred in 1936 and 1944, the taxpayer remained and was the owner of the notes and stock. He had command over and enjoyed the economic benefits of the property.
As I construe the Act, the tax is to be imposed on the transfer of property, not on the promise to transfer, regardless of the enforceability of that promise under the law of Contracts. It is the transfer of property which is taxable as a gift, not the promise to transfer, that is to say, the determinative factor is not the contract of 1931. And since the consideration for the promise, which we must construe in accordance with the statutory definition, is not adequate in money or money’s worth, so that the transfer when actually made is, under the terms of that definition deemed a gift, then I think the transfers were not exempt — instead they were subject to the gift tax. I do not consider that this construction of the Act renders it retroactive. Retroactive effect would have been given if Congress had, by the Act, attempted to tax transfers previously made, as it did by the Act of 1924, held invalid or inoperative as to transfers by gift consummated before its enactment. See 2 Paul, Federal Estate and Gift Taxation (1942) p. 962. Here the actual “transfers by gift” were not consummated until after the enactment.