Court Opinion

ID: 4476146
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:11:52.442122+00
Date Added: 2024-06-11T14:53:53.931518
License: Public Domain

Murdock, J., dissenting: The Commissioner properly allowed the 1947 gifts (in excess of the exclusion which is not a part of a gift for tax purposes) to be deducted in full as prior taxed property-under section 812 (c) without diminution for the $8,400 balance of the $80,000 specific exemption which was not needed to offset the 1946 gifts. But the majority opinion reaches the conclusion that no part of the 1946 gifts is deductible because those gifts, in excess of the exclusion, were entirely offset by a part of the specific exemption so that they produced no “net gifts” subject to tax for that year. Section 812 (c) does not contain the phrase “net gifts” or any restriction or requirement based upon “net gifts.” The majority opinion reaches a result repugnant to the words and intent of Congress and inconsistent with the deduction allowed for the 1947 gifts by failing to test the facts in this case by the clear provisions of section 812 (c) and by reading requirements into that section which are not there and were not intended by Congress. The gift tax liability is reported and paid on an annual basis but the rates increase as any additional gifts are made from year to year. Gifts of any one year are not taxed as if they stood alone, as in the case of income. All prior gifts, all prior exclusions, prior use of all or part of the specific exemption, and taxes computed on the prior gifts are taken into the computation of the tax for all succeeding years so that the tax for that year is upon the top of the pile and is higher than it would be had no prior gifts been made. The specific exemption comes off the bottom of the pile no matter when or how it is taken and can not be saved successfully to offset later gifts which would otherwise be taxed at a higher rate. Section 1000 imposes a gift tax for each calendar year “upon the transfer during such calendar year * * * of property by gift.” The gift tax computed under section 1001 for each calendar year is “the excess of— (1) a tax, computed in accordance with the Bate Schedule hereinafter set forth, on the aggregate sum of the net gifts for such calendar year and for each of the preceding calendar years, over (2) a tax, computed in accordance with the said Bate Schedule, on the aggregate sum of the net gifts for each of the preceding calendar years.” “Net gifts” means, for present purposes, the total gifts for the year, exclusive of the exclusion of $3,000, less the specific exemption available and needed to offset such gifts. Thus, the tax for each year, while in a sense imposed upon the gifts of that year, is in a real sense a cumulative addition to the tax on all gifts up to and including that year. H. Bept. No. 708, 72d Cong., 1st Sess. (1939-1 C. B. (Part 2) 477.) Congress had this situation in mind when it enacted section 812 (c) allowing a deduction from the gross estate of a donee for estate tax purposes of “An amount equal to the value of any property * * * transferred to the decedent by gift within five years prior to his death, where such property can be identified as having been received by the decedent from the donor by gift * * It is not disputed that the 1946 gifts meet all of those requirements. Section 812 (c) further provides that “This deduction shall be allowed only where a gift tax imposed under chapter 4 * * * was finally determined and paid by or on behalf of such donor * * * and only in the amount finally determined as the value of such property in determining the value of the gift * * The facts show that a gift tax was imposed on, determined against, and paid by the donor. The deduction is claimed only in the amount finally determined as the value of the donated property in determining the value of the gift. Thus, the 1946 gifts meet all of those further requirements of section 812 (c) and there is no justification for denying the deduction. The majority opinion does not point out where the petitioner fails to meet any specific requirement of section 812 (c). The majority result could only be proper if the portion of section 812 (c) last quoted included some such additional words as are given below in italics: This deduction shall be allowed only where a gift tax imposed under chapter 4 was finally determined and paid by or on behalf of such donor for the yearn in which the gift sought to be deducted was made and only in the amount finally determined as the value of such property in determining the value of the gift am/1 in determining a tax on that gift. However, neither the italicized words nor any similar ones were put in the provision by Congress and that meaning may not be read into the law to deny the deduction. Furthermore, it is unlikely that Congress meant to deny a deduction in a case like this. It looked at the entire gift tax picture of the donor at the time of the donee’s death and logically allowed a deduction from the latter’s estate for all property contained therein received by gift from the donor provided that the latter had paid some gift tax on his total gifts up to that time. Cf. Regs. 105, sec. 81.41 (a) (8) and (4). The law, the regulations, and the Commissioner’s practice as demonstrated in this case all show that the deduction under section 812 (c) is not reduced by the specific exemption claimed. Apparently the Commissioner never before made such a determination as he has made on the 1946 gifts. The majority makes the deduction depend upon the circumstance that the 1946 gifts, above the exclusion, did not exceed the specific exemption of $30,000, but under its reasoning the entire gifts for that year, above the exclusion, could have been deducted had their amount exceeded ever so slightly the specific exemption, or had less than $26,600 of the exemption been claimed. No reason is apparent why Congress would want to make a distinction between gifts at the bottom of the pile and those higher up in the pile where all gifts in the pile have had a definite bearing upon the total gift taxes paid by the donor. Congress made no such distinction in regard to devised property but allowed a deduction for the property in the gross estate of the prior decedent without regard to the specific exemption. The gift tax and the estate tax are designed to accomplish somewhat the same purpose and they must be construed with reference to each other. Sanford's Estate v. Commissioner, 308 U. S. 39. Section 812 (c) shows that Congress did not make any such distinction in regard to prior taxed donated property. Keen, Van Fossan, and Oppee, JJ., agree with this dissent.