Court Opinion

ID: 9419165
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:47:08.01913+00
Date Added: 2024-06-11T17:19:22.978015
License: Public Domain

Me. Justice Roberts:
I disagreed with the decisions of the Court in Maguire v. Commissioner, ante, p. 1, Helvering v. Gambrill, ante, p. 11, and Helvering v. Campbell, ante, p. 15, construing the meaning of the phrase “time of distribution to the taxpayer,” as used in § 113a (5) of the Revenue Acts of .1928 and 1932. My dissent was bottomed upon the view that to construe that phrase as meaning the time of the distribution to a trustee, in a case where the taxpayer could neither receive nor enjoy the property, was to disregard the unambiguous words of the statute. I recognize the binding force of those decisions but think that the Court’s disposition of the present cases constitutes an even looser and less admissible construction, amounting, in effect, to legislation.
In all the revenue acts from that of 1921 to that of 1926, inclusive, the cognate provision was that if the property was acquired by bequest, devise, or inheritance, or by the decedent’s estate from the decedent, the basis should be the fair market value of 'such property at the time of such acquisition. In the Revenue Act of 1928 a new provision was .substituted making the basis in the case of a general or a specific devise or of intestacy the *436fair market value at the time of the death of the decedent. The same basis was provided if property was acquired by the decedent’s estate from the decedent. In all other cases, if the property was acquired by will or by intestacy, the basis was made value at the time of the distribution to the taxpayer. The language was retained in the Act of 1932. In the Revenue Act of 1934, § 113a (5) was again cast in'the exact language in which the cognate sections had appeared in all the acts prior to that of 1928.
The meaning of the provision is plain. What Congress was dealing with was the “property.” It did not specify a right inchoate or otherwise, or an interest less than ownership, but used the colloquial term “property.” And Congress employed a word in common and ordinary use, and not a technical expression' of conveyancers, when it spoke of the time of “acquisition” of the property. Anyone reading the sentence would be justified in concluding that if he sold, property which came to him from a decedent’s estate he must take ad his basis of value the market value as of the date when he became the owner of the property; when he became able to enjoy it and dispose of it at his will.
The present decision finds that Congress did not intend any such thing; that, on the contrary, by a circumlocution, it meant that the taxpayer’ must take as his basis the fair value at the date of the decedent’s death if his ultimate acquisition of the property is traceable to a decedent’s will. Thus, though he had no use or benefit of the property, could not dispose of it, and might never enjoy it, he is to be treated as having acquired it.
A .contrary conclusion is required by Helvering v. San Joaquin Fruit & Investment Co., 297 U. S. 496. There the Court, in applying the same section here involved, held that the term “acquired” was not a word of art; and though the acquisition had its origin in an option which *437the taxpayer exercised, as here the acquisition had its origin in a will, agreed with thé Government’s contention that the time of full enjoyment as one’s own is the date of acquisition, not the time of' obtaining some inchoate interest which may or may not ripen into ownership.
But if there were doubt as.to the meaning of Congress, the legislative history should preclude the strained construction now adopted. In the Maguire and related cases, administrative construction and legislative history were meagre and inconclusive. Here, violence must be done to a substantial volume of such.aids to construction to reach the announced result.
In 1920 the Treasury ruled that
“Where in a bequest of property the remaindermen have only a contingent interest prior to the death of the life tenant, the basis for determining gain or loss from a sale of such property by the remaindermen is its value as of the date of death of the life tenant.”1
There is no dispute that between 1920 and 1935 the Treasury uniformly so interpretéd the statutory provision now -otherwise construed. In 1930 this Court held that in the case of a residuary legatee whose property rights attached at the moment of death, and who was in contemplation of law and in fact the owner of the property bequeathed to him from the date of death, the time of acquisition was the date of death.2 The decision obviously did not touch a situation such as that disclosed in the present cases and the Treasury so understood. In 1932 the General Counsel of the Bureau of Internal Revenue rendered an exhaustive opinion in which he referred to, and analyzed, our decision and summarized the administrative practice by saying:
“. . . the position' of this office has been that one who has a mere contingent interest does not ‘acquire’ the *438property in question until his interest becomes vested. (O. D. 727, C. B. 3, 53; S. M. 4640, C. B. V-1, 60.) See also I. T. 1622, C. B. II-1, 135; S. O. 35, C. B. 3, 50.”
The judicial construction was uniform to the same effect.3
That the Treasury thought the distinction between the. acquisition date of vested and contingent interests improper is attested by the fact that in its briefs on applications for certiorari in several of the cases cited in Note 4 it so stated; and in the Pringle case it strenuously contended for a reversal of the judgment on that ground. In its brief in the San Joaquin case, supra, which arose under the very section now in question, the Government said: “It is quite generally recognized that the holder of a contingent estate in propérty does not acquire the same within the meaning of the revenue acts until the estate becomes vested.” (Citing several of the cases found in the note.) Of course that statement supported the position of the Government in that case. But a new view has apparently emerged, which better serves the Government’s interest here.
It seems plain that when, in 1934, Congress decided to re-adopt the language used in the revenue acts from 1921 to 1926, inclusive, it should be taken as having adopted it not only with a sense of its plain meaning but with a recognition of its uniform interpretation. We are not left, however, without light shed by-the legislative history, and that history furnishes confirmation of the view that Congress did not intend to give any strained, extraordinary, or unusual meaning to its language or to disregard its accepted significance.
The revenue acts have always, treated estates as taxpayers for purposes of income tax. From the adoption of the Revenue Act of 1918 the Treasury Regulations *439uniformly provided that if an executor sold estate property he must take as a basis the value of the property at the time of the decedent’s death for calculating taxable gain.4 The Treasury treated the estate’s time of acquisition as the date of the decedént’s death within the meaning of the sections of the revenue acts from 1921 to 1926. In 1926 the Court of Claims held that when Congress uséd the terms “acquired” and “acquisition” it meant that the executor might take, as the basis date, the date of acquisition by the decedent.5 This decision upset the uniform practice of the Treasury and required an amendment of the regulations to conform to it. .Congress was confronted with this situation when it came to pass the Revenue Act of 1928. The history of what happened in this respect is most enlightening. The Joint Committee on 'Internal Revenue, in its report,6 referred to the difficulty created by the McKinney decision, and the doubt the decision had thrown on the meaning of acquisition, and stated, with respect to the proposed section: “The ‘date of death’ is recommended to make the basis certain and definite.” The Ways and Means Committee also rendered a report to accompany that of the Joint Committee. In this it said:7 “It is believed that the basis should be the value of the property on the date of the decedent’s death, and this rule is incorporated in section 113(a)(5).” It continued: “It is also provided, in the same paragraph, that the basis in case of a sale by a beneficiary shall be the value of the property on the date of the decedent’s death.” (Italics supplied.)
It is thus abundantly clear that Congress knew how to write a statute to accomplish what the opinion of the Court holds totally different langúage accomplishes.
*440The Senate Committee on Finance rewrote the subsection as embodied in the House Bill, altering it to read as it does in the Revenue Act of 1928.8 This was the section which was construed in Maguire v. Commissioner and related cases.9 It thus appears that Congress rejected the verbiage intended to specify the date of the decedent’s death as the basis date to be taken by a beneficiary under the decedent’s will. .
With this background, Congress, in . adopting the 1934 act, discarded the various basis dates prescribed by the Acts of 1928 and 1932 and harked báck to the language which had been used in earlier revenue acts, which had uniformly been construed by the Treasury to mean that the basis date was the date when the taxpayer actually acquired as his own the property whose disposition gave rise to a taxable gain or a deductible loss. The reason for the change, as shown by the Committee Reports on the Revenue Act of 1934, was not a desire to alter the settled administrative construction of the phrase “time of acquisition” but to do away with the diversity between the basis dates for real and personal property which had been created by the provisions of the 1928 and the 1932 acts. No other purpose is shown by the reports.10
Regulations 86 were approved by the Secretary of the Treasury February 11, 1935, and were later promulgated as applicable to the Act of 1934. By these regulations it is provided: “Pursuant to this rule of law, [i. e. the doctrine of relation] section 113 (a) (5) prescribes a single uniform basis rule applicable to all property passing from a decedent by will or under the law governing the *441descent and distribution of the property of decedents. Accordingly, the time of acquisition of such property is the death of- the decedent, and its basis is the fair mar-. ket value at the time of the decedent’s death, regardless of the time when the taxpayer comes into possession and enjoyment of the property.” It is upon this regulation that the Court relies to justify its construction of the statute.
I think the regulation plainly unjustified, as an attempt on the part of the Treasury to legislate when Congress has failed to do so. The hearings on the Revenue Act of 1934 show that the Treasury was .not satisfied, with the provision the Committee recommended Congress should adopt and which Congress did adopt. It evidently attempted to rewrite the Congressional language to carry out what it thought Congress should have provided. It needs no citation of authority to demonstrate that such is not the function of a regulation and that the attempt should fail.
The Chief Justice joins in this opinion.

 O. D. 727, 3 C. B. 53.

 Brewster v. Gage, 280 U. S. 327.

 Lane v. Corwin, 63 F. 24 767; Pringle v. Commissioner, 64 F. 2d 863; Hopkins v. Commissioner, 69 F. 2d 11; Becker v. Anchor Realty & Investment Co., 3 F. Supp. 22, aff’d 71 F. 2d 355; Warner v. Commissioner, 72 F. 2d 225; Beers v. Commissioner, 78 F. 2d 447.

 See Hartley v. Commissioner, 295 U. S. 216, 220.

 McKinney v. United States, 62 Ct. Cls. 180.

 House Document No. 139,70th Cong., 1st Sess., pp. 17-18.

 H. R. No, 2,70th Cong., 1st Sess., p. 18.

 Senate Report No. 960, 70th Cong., 1st Sess., p. 26.

 For the language of the section see Note 5, Maguire v. Commissioner, ante, p. 3.

 “Report of Subcommittee oh Ways and Means of December 4, 1933, p. 17; Report of the Ways and Means Committee H. R. 704, 73d Cong., 2d Sess., pp. 27-28; Senate Report No. 558, 73d Cong. 2d Sess., pp. 34-35.