Court Opinion

ID: 9651350
Source: CourtListenerOpinion
Date Created: 2023-08-23 16:15:59.311873+00
Date Added: 2024-06-11T18:12:32.505310
License: Public Domain

STEPHENS, Circuit Judge.
I dissent.
The majority opinion holds that all moneys paid out óf the incompetent’s estate for the support of her adult married daughters are “gifts” and taxable as such, and holds as immaterial the legal fact that the California Code imposed a legal duty upon her to support her indigent children. This is based upon the theory that “State law may control only when the federal taxing act, by express language or necessary implication, makes its own operation dependent upon state law”, citing the recent case of United States v. Pelzer, 61 S.Ct. 659, 85 L.Ed. —, March 3, 1941.
I do not read the Pelzer case as authority for the proposition that we are not bound by the State law in the instant case. There the question involved was whether or not the gift under consideration was a gift of a “future interest”. It was argued by the .taxpayer that the Federal courts were bound by the State law defining what constituted a “future interest”. The Supreme Court looked to the committee reports and determined that the purpose of the statute was to make taxable gifts “whether vested or contingent, limited to commence in possession or enjoyment at a future date”, and that this was what was meant by the words “future interest” in the taxing statute. The Regulations had defined “future interest” in the same terms. The Court merely held that the provisions of the taxing statute were not subject to state control in this respect.
In the instant case the committee reports state that the tax imposed by the Act “is designed to reach all transfers to the extent that they are donative, and to exclude any consideration not reducible to money or money’s worth * * The Regulations promulgated under the Act provide that the tax shall apply to transfers without consideration, and that “a consideration not reducible to a money value, as love and affection, promise of marriage, etc., is to be wholly disregarded”.
But this is not to say that a transfer in discharge of a legal obligation imposed by local law is a transfer without consideration under the taxing act. It is my opinion that the discharge of a legal obligation is clearly “consideration” within the meaning of the tax act, and that the statute by necessary implication makes its own operation in that respect dependent upon State law.
It seems clear that under California Civil Code, Section 206, and the cases construing that section, the incompetent at all times material to this controversy was subject to a legally enforceable obligation to support and maintain her daughters, who were, as pointed out by the majority, “poor persons unable to maintain themselves by work” within the meaning of the California law. Section 206 fixes the obligation as “to the extent of [her] ability”. Section 1502 of the California Probate Code provides for the support of the family of an incompetent by the application of the income “as far as may be necessary, to the comfortable and suitable support, maintenance and education” of the family. The measure of the support and maintenance allowance was a matter for the discretion of the California Superior Court, sitting in probate, and its determination that the amounts distributed to the incompetent’s daughters were necessary for their comfortable and suitable maintenance is binding upon us.
The decision of the Board should be affirmed.