Court Opinion

ID: 8591667
Source: CourtListenerOpinion
Date Created: 2022-11-23 15:50:06.770336+00
Date Added: 2024-06-11T16:54:31.016932
License: Public Domain

Laramore, Judge,
dissenting:
I respectfully dissent.
The plaintiff bases his case on the proper application of subsection (b) of section 1000 of the Internal Revenue Code of 1939, quoted in full in the majority opinion, which provides for the taxation of the type of property here in question but further provides that “in the case of a nonresident not a cititzen of the United .States, [the tax] shall apply to a transfer only if the property is situated within the United States.” This clause is not defined in the gift tax statute itself, hence, without more it would appear that a bank account in a New York bank is property within the United States and thus subject to the assessment of a gift tax upon its transfer in gift.
*203Taxpayer, however, alleges that because of other sections of the Internal Revenue Code of 1939, the bank account is exempt from a gift tax and cites section 863 which reads as follows:
The following items shall not, for the purpose of this subchapter, be deemed property within the United States:
(b) Bank Deposits. — Any moneys deposited with any person carrying on the banking business, by or for a nonresident not a citizen of the United States who was not engaged in business in the United States at the time of his death. * * *
The issue then, as it appears to me, is the correct interpretation and application of the clause “property * * * situated within the United States” as used in section 1000 (b) of the Code.
As noted in the majority opinion, the Supreme Court on numerous occasions held that the gift tax statute and the és-tate tax statute are in fari materia and that the gift tax should be construed in the light of the text and judicial interpretation of the estate tax statute. Merrill v. Fahs, 324 U. S. 308 (1945); Estate of Sanford v. Commissioner, 308 U. S. 39 (1939) ; Burnet v. Guggenheim, 288 U. S. 280 (1933). Accordingly, if the term “property * * * situated within the United States” is defined in the estate tax statute in a way that would place a meaning on it different from that which would ordinarily be implied therefrom, that definition must also apply to the gift tax statute unless otherwise negatived therein. It is not so negatived by the gift tax statute.
Certainly, the clause cannot be given one meaning in the one statute and a different meaning in the other, unless expressly done so by the statutes themselves, and this for the very reason asserted by the majority as being the purpose of the gift tax statute, to wit, to prevent evasion of the estate tax statute. If the bank deposit in the case at bar was excluded by specific statutory provision from the estate of a deceased nonresident alien, there could have been no evasion *204of the estate tax by making an inter vivos transfer of the property. The majority points out that before the enactment of the gift tax statute in 1924 wealthy persons were making inter vivos gifts of their property to the persons who would have taken it by inheritance or by devise if the donor had held the property until death and thus deprived the Government of estate tax revenue. To prevent this, the gift tax statute was passed with the result that, in effect, the assessment of a gift tax on a donor (the prospective decedent whose estate would have been taxed on the property given away if still held at death) is a downpayment on the estate tax which otherwise would have had to have been paid. Burnet v. Guggenheim, supra at 286.
To tax the gift in a case such as this would be to tax property donated before death which would not have been taxed if held until death. The estate tax is the basis of taxation in this field, the gift tax being only supplementary thereto. Estate of Sanford v. Commissioner, supra at 44; Merrill v. Fahs, supra at 311. Thus, it would seem inconsistent to levy a tax under the gift tax statute (the statute designed to prevent evasion of the estate tax statute) on a transfer of property when the property was specifically exempt from tax under the estate tax statute. The estate tax statute has expressly defined what constitutes property located within or without the United States in the case of a nonresident alien and it should, on the basis of the aforementioned Supreme Court decisions, be carried over to and applied in a gift tax situation.
To reach the result I have suggested herein would not “produce a result incongruous with the recognized provisions of the estate tax statute,” Estate of Sanford, supra; rather, it would produce a result entirely consistent therewith.
Insofar as I have been able to determine, this problem has been ruled on only once previously and that by the Second Circuit in Harris v. Commissioner, 178 F. 2d 861, reversed on other grounds, 340 U. S. 106 (1950). The court in that case, with a dissenting opinion, reasoned somewhat the same as the majority in the case at bar. It went to the Supreme Court but that part of the case which related to our problem here was not before that Court. The order granting cer-*205tiorari provided the hearing would be limited to the other two issues of the case.
The taxpayer should be entitled to recover the amount of gift tax paid because of this alleged transfer of property by gift.
LittletoN, Judge, joins in the foregoing dissenting opinion.
In accordance with the opinion of the court and with the consent of the parties, it was ordered June 5,1957, that judgment for the plaintiff be entered for $1,042.64, together with interest thereon as provided by law from December 19, 1949. In consenting to entry of judgment the parties reserved the right to seek reconsideration of other issues decided adversely to them.