Court Opinion

ID: 9419403
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:49:19.797772+00
Date Added: 2024-06-11T16:42:07.671445
License: Public Domain

Me. Chief Justice Stone and Me. Justice Robeets,
dissenting:
We are of opinion' that the judgment should be reversed.
This litigation is concerned only with the tax to be paid on the exercise of the testamentary power which purported to give outright to decedent’s wife and daughter, each, about 7% of one-third of the trust fund created under the earlier will and the income for life from the remainder of that third, instead of the outright gift of a full one-third of the trust fund which, in default of appointment, each was entitled to receive under the earlier and then operative will.
The only effect of the exercise of the power upon the shares of the wife and daughter was to diminish the gifts *416which they were already entitled to receive under the earlier will. The Board of Tax Appeals has found that, as a result of the exercise of the power, the value of the property which the two appointees will receive is less than each was entitled to receive under the first will, which •fixed their rights as legatees subject only to exercise of the power.
We think that neither the history nor the words of the taxing statute justify any assumption that in enacting a tax on testamentary gifts it was the purpose of Congress to tax also the exercise of a testamentary power to deprive a legatee of part of his legacy in addition to taxing the use of the power to appoint that part to a third person. The statute lays a tax on gifts such as the earlier will in this case made to the wife and to the daughter and as now interpreted the statute imposes a second tax on the testamentary exercise of the power to diminish the gifts previously made to them by will. Authority for so incongruous a result is found in the provisions of § 302 (f) of the Revenue Act of 1926, which directs the inclusion in the decedent’s estate for taxation, of “the value” of property “to the extent of any property passing under a general power of appointment” exercised by a decedent. The statute thus selects property values passing under the exercise of a power of appointment as the measure of the tax. It gives no indication that beyond this it is concerned with the technical quality of estates passing under either the will or the subsequent exercise of the power. And, unlike later amendments to the estate tax statute, Revenue Act of 1942, § 403, 66 Stat. 942; cf. 26 U. S. C. § 811 (d), it taxes not the mere existence of a power to affect the disposition of property, but its exercise to bestow on the appointee such property values.
Looking to the words of the statute in the light of its purpose, we think that the effective operation of the exer*417cise of the power to transfer property values was the intended subject of the tax, and not a use of the power which adds nothing to, but subtracts from, gifts already made and subject to taxation. This Court so stated in Helvering v. Grinnell, 294 U. S. 153. We can hardly suppose that a purported exercise of a power to make to the wife and daughter gifts, identical with those to which they were already entitled under the will, or to appoint to a third person an interest less than the whole in the shares given to them by the will, would result in a tax on the shares which the wife and daughter were permitted to retain.
To say that such a tax must be imposed because by a different form of words the same end is attained, is to sacrifice substance to form in the application of a taxing statute which is concerned only with substance, the effective transfer of property values to an appointee. Helvering v. Grinnell, supra, 156; Rothensies v. Fidelity-Philadelphia Trust Co., 112 F. 2d 758; Legg’s Estate v. Commissioner, 114 F. 2d 760. We have too often committed ourselves to the proposition that taxation is a practical matter concerned with substance rather than form, see Bowers v. Kerbaugh-Empire Co., 271 U. S. 170, 174; Chase National Bank v. United States, 278 U. S. 327, 336; Corliss v. Bowers, 281 U. S. 376, 378; Griffiths v. Commissioner, 308 U. S. 355, 357-8; Helvering v. Hallock, 309 U. S. 106, 116-19; Helvering v. Horst, 311 U. S. 112, 116-19, to depart from it now.