Court Opinion

ID: 9419305
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:48:35.165148+00
Date Added: 2024-06-11T17:22:17.340644
License: Public Domain

Mr. Justice Roberts :
I dissent. I am of opinion that, except for the life estate in the wife, the gift qua the donor was incomplete and not within the sweep of §§ 501 and 506. A contrary conclusion might well be reached were it not for Helvering *182v. Hallock, 309 U. S. 106. But the decisions in Burnet v. Guggenheim, 288 U. S. 280, and Sanford v. Commissioner, 308 U. S. 39, to which the court adheres, require a reversal in view of the ruling in the Hallock case.
The first of the two cases ruled that a transfer in trust, whereby the grantor reserved a power of revocation, was not subject to a gift tax, but became so upon the renunciation of the power. The second held that where the grantor reserved a power to change the beneficiaries, but none to revoke or to make himself a beneficiary, the transfer was incomplete and not subject to gift tax. At the same term, in Porter v. Commissioner, 288 U. S. 436, the court held that where a decedent had given property inter vivos in trust, reserving a power to change the beneficiaries but no power to revoke or revest the property in himself, the transfer was incomplete until the termination of the reserved power by the donor’s death and hence the corpus was subject to the estate tax.
When these cases were decided, the law, as announced by this court, was that where, in a complete and final transfer inter vivos, a grantor provided that, in a specified contingency, the corpus should pass to him, if living, but, if he should be dead, then to others, the gift was complete when made, he retained nothing which passed from him at his death, prior to the happening of the contingency, and that no part of the property given was includible in his gross estate for estate tax. McCormick v. Burnet, 283 U. S. 784; Helvering v. St. Louis Union Trust Co., 296 U. S. 39; Becker v. St. Louis Union Trust Co., 296 U. S. 48. So long as this was the law the transfer might properly be the subject of a gift tax for the gift was, as respects the donor, complete when made.
In 1940 these decisions were overruled and it was held that such a transfer was so incomplete when made, and the grantor retained such an interest, that the cessation of that interest at death furnished the occasion for im*183posing an estate tax. Thus the situation here presented was placed in the same category as those where the grantor had reserved a power to revoke or a power to change beneficiaries. By analogy to the Guggenheim and Sanford cases, I suppose the gift would have become complete if the donor had, in his life, relinquished or conveyed the contingent estate reserved to him.
In the light of this history, the Sanford case requires a holding that the gifts in remainder, after the life estate, create no gift tax liability. The reasoning of that decision, the authorities, and the legislative history relied upon, are all at war with the result in this case. There is no need to quote what was there said. A reading of the decision will demonstrate that, if the principles there announced are here observed, the gifts in question are incomplete and cannot be the subject of the gift tax.
It will not square with logic to say that where the donor reserves the right to change beneficiaries, and so delays completion of the gift until his death or prior relinquishment of the right, the gift is incomplete, but where he reserves a contingent interest to himself the reverse is true, — particularly so, if the criterion of estate tax liability is important to the decision of the question, as the Sanford ease affirms.
The question is not whether a gift which includes vested and contingent future interests in others than the donor is taxable as an entirety when made, but whether a reservation of such an interest in the donor negatives a completion of the gift until such time as that interest is relinquished.
All that is said in the Sanford case about the difficulties of administration and probable inequities of a contrary decision there, applies here with greater force. Indeed a system of taxation which requires valuation of the donor’s retained interest, in the light of the contingencies involved, and calculation of the value of the subsequent remainders *184by resort to higher mathematics beyond the ken of the taxpayer, exhibits the artificiality of the Government’s application of the Act. This is well illustrated in the companion cases of Robinette and Paumgarten, infra, p. 184. Such results argue strongly against the construction which the court adopts.