Court Opinion

ID: 9639442
Source: CourtListenerOpinion
Date Created: 2023-08-22 16:17:55.586361+00
Date Added: 2024-06-11T18:10:18.513727
License: Public Domain

HAND, Circuit Judge
(concurring). I cannot see any escape from holding that section 402 (e) applies to the situation at bar, a donclusion in which the Circuit Court of Appeals for the Third Circuit concurs. Girard Trust Co. v. McCaughn, 11 F.(2d) 520. See, also, Coolidge v. Nichols (D. C.) 4 F. (2d) 112. “Possession or enjoyment” appears to me a phrase clearly intended to refer to the period when the remainders “fall in,” not to that at which they “vest.” Thus we cannot avoid considering the question of constitutionality.
I agree that under the guise of assessing a tax upon the transfer of Mr. Nash’s estáte Congress might not include other property on which at that time it could not levy an excise. Latterly, at least, the taxing power has been limited to its proper scope, despite formal :disguises. The Child Labor Tax Case, 259 U. S. 20, 42 S. Ct. 449, 66 L. Ed. 817; Hill v. Wallace, 259 U. S. 44, 42 S. Ct. 453, 66 L. Ed. 822; Lipke v. Lederer, 259 U. S. 557, 42 S. Ct. 549, 66 L. Ed. l061; Regal Drug Co. v. Wardell, 260 U. S. 386, 43 S. Ct. 152, 67 L. Ed. 318. There was a strong intimation in U. S. v. Daugherty, 269 U. S. 360, 46 S. Ct. 156, 70 L. Ed. -, that the Narcotic Act would eventually fall for the same reason. It is quite true that these were eases of an effort to exercise general legislative powers under cover of taxation, but I can see no more reason to stop there than at the effort to include forbidden objects of taxation by including them in substance within taxes permissible in form.
The taxing powers of the states have been limited on just such grounds. Western Union Tel. Co. v. Kansas, 216 U. S. 1, 30 S. Ct. 190, 54 L. Ed. 355; International Paper Co. v. Massachusetts, 246 U. S. 135, 38 S. Ct. 292, 62 L. Ed. 624, Ann. Cas. 1918C, 617; Air-way Corporation v. Day, 266 U. S. 71, 45 S. Ct. 12, 69 L. Ed. 169; Alpha Cement Co. v. Massachusetts, 268 U. S. 203, 45 S. Ct. 477, 69 L. Ed. 916. Yery directly in line is Prick v. Pennsylvania, 268 U. S. 473, 45 S. Ct. 603, 69 L. Ed. 1058. Nor is there any reason for a distinction in this regard between federal and state powers! In the ease at bar the effort appears to me to be quite as plain as it was in the eases just cited.
So I think that the validity of this tax must depend upon whether an excise could have been levied in 1918 upon the transfer by Mr. Nash in 1910 of the property in question, and whether it could be calculated upon the value of that property when he died in 1922. This is quite another question from whether a tax could at that time have been imposed upon the succession to the remainders, payable by the remaindermen or by the res. The law of the states is to the contrary. Matter of Pell, 171 N. Y. 48, 63 N. E. 789, 57 L. R. A. 540, 89 Am. St. Rep. 791; Matter of Craig, 97 App. Div. 289, 89 N. Y. S. 971, affirmed 181 N. Y. 551, 74 N. E. 1116; Com. v. Wellford, 114 Ya. 372, 76 S. E. 917, 44 L. R. A. (N. S.) 419; Hunt v. Wicht, 174 Cal. 205, 169 P. 639, L. R. A. 1917C, 961; Lacey v. State Treasurer, 152 Iowa, 477, 132 N. W. 843 (semble); United States ex rel. Tozer v. Probate Court, 102 Minn. 268, 113 N. W. 888. But those eases turned upon the Fourteenth Amendment, or its local equivalent, and the states are certainly more limited than Congress in taxation. How far Orr v. Gilman, 183 U. S. 278, 22 S. Ct. 213, 46 L. Ed. 196, and Chanler v. Kelsey, 205 U. S. 466, 27 S. Ct. 550, 51 L. Ed. 882, by implication support the doctrine, I need not inquire. Cahen v. Brewster, 203 U. S. 543, 27 S. Ct. 174, 51 L. Ed. 310, 8 Ann. Cas. 215, is in any ease distinguishable.
At any rate it is possible to take another view, taxing succession to the enjoyment, though it had earlier become certain because of events happening before the law was pass*630ed. There must be some law to secure the succession when it takes place, and vesting is no more than an intermediate assurance of eventual enjoyment, which alone gives any substance to the right. How far Wright v. Blakeslee, 101 U. S. 174, 25 L. Ed. 1048, depended upon the fact that the remainders were contingent, stricti juris, it is not necessary to inquire, for this tax is not laid upon the remainderman or the res.
If it were necessary that an excise should be imposed upon the activity or privilege which determines the tax, I should at once agree that it could not operate upon one exercised or enjoyed before the law was passed. There would be no subject-matter to tax. But I cannot see that it need be so imposed, and cases like Billings v. U. S., 232 U. S. 261, 34 S. Ct. 421, 58 L. Ed. 596, U. S. v. Bennett, 232 U. S. 299, 34 S. Ct. 433, 58 L. Ed. 612, Flint v. Stone Tracy Co., 220 U. S. 107, 31 S. Ct. 342, 55 L. Ed. 389, Ann. Cas. 1912B, 1312, and Brushabar v. Union Pac. R. R. Co., 240 U. S. 1, 36 S. Ct. 236, 60 L. Ed. 493, L. R. A. 1917D, 414, Ann. Cas. 1917B, 713, seem to me to establish the contrary. I can find no helpful definition of' excise, but there seems no reason why it should not be imposed upon individuals personally, merely because of some activity in which they have engaged or privilege which they have enjoyed. These will serve to define the class to be taxed, and the tax need not necessarily be direct, for that is purely a historical and conventional question. Knowlton v. Moore, 178 U. S. 41, 20 S. Ct. 747, 44 L. Ed. 969.
And so I am not prepared to say, if section 402(c) had merely included in Mr. Wash’s estate the property which he conveyed to the trustees in 1910, at the value it then had, that it would not have been valid. But it does not do that. In substance it imposes a tax upon the settlor, measured by the value of property at his death, over which he has parted with all control, perhaps, as here, long since. As to transfers made after the law went into effect I have nothing to say; one may insist that settlors take their chances. But as to those made before the law was passed it appears to me that the result is too whimsical to stand. There are settlements which the settlor outlives for 30 or 40 years. There is no limit to the increase in the value of land, for example, in such a period; it may easily be fiftyfold and the tax leave the settlor destitute when he dies. Conversely, another settlor may escape altogether. Such a tax is fixed by the mere sport of fortune. It has no more relation to the possessions or conduct of the taxpayer than if he were taxed upon the subsequent value of property he had sold outright, or his estate was doubled because he died on Wednesday. Such a law is far more capricious than merely retroactive taxes. Those do indeed impose unexpected burdens, but at least they distribute them in accordance with the taxpayer’s wealth. But this section distributes them in accordance with another’s wealth; that is a far more grievous injustice.
But it is answered that this result goes only to the equal assessment of the tax and must rest upon the Fifth Amendment, which does not apply to federal taxation. I quite agree that the Supreme Court has in many cases implied or said as much. Veazie Bank v. Fenne, 8 Wall. 533, 19 L. Ed. 482; Treat v. White, 181 U. S. 264, 269, 21 S. Ct. 611, 45 L. Ed. 853; McCray v. U. S., 196 U. S. 27, 81, 24 S. Ct. 769, 49 L. Ed. 78, 1 Ann. Cas. 561; United States v. Doremus, 249 U. S. 861; Billings v. U. S., supra, 282 (34 S. Ct. 421); Flint v. Stone Tracy Co., supra, 158 (31 S. Ct. 342). If the rule is to be taken unconditionally, taxpayers may be selected by lot and assessments may vary with the price of wheat. Perhaps it would have been necessary to go so far, had it not been for the opinions in Brushaber v. U. S., supra, 24, 25 (3& S. Ct. 236), and Barclay & Co. v. Edwards, 267 U. S. 442, 450, 45 S. Ct. 135, 348, 69 L. Ed. 703, and the strong intimations in Lewellyn v. Frick, 268 U. S. 238,, 251, 252, 45 S. Ct. 487, 69 L. Ed. 934. But these make it clear that the power is not utterly absolute. A tax may be so “arbitrary and capricious,” its “inequality” so “gross and patent,” that it will not stand, and as I can think of no other pertinent constitutional limitation, but the Fifth Amendment, it seems to me that the rule is not as stark as the defendant argues. If there be any limit whatever, I own I cannot,. except in fancy, think of a case more plainly beyond it than this.
I concur.

 39 S. Ct. 214, 63 L. Ed. 493.