Court Opinion

ID: 9448694
Source: CourtListenerOpinion
Date Created: 2023-08-03 23:43:04.32108+00
Date Added: 2024-06-11T17:31:31.815418
License: Public Domain

WHITAKER, Judge
(concurring).
This case presents what is to me a novel problem. The Deferred Compensation Plan of the C. & 0. Railway was adopted solely on its own initiative; it was not the result of bargaining between the railroad and its officers. At the death of the employee the railroad paid to the employee’s beneficiaries the amount it had voluntarily agreed to pay. Hence, it has been difficult for me to discern any transfer from the decedent to the beneficiaries. If there was no transfer from him to them, the amount they received under the Plan could not constitutionally be included in his gross estate for estate tax purposes.
The Constitution, art. 1, § 9, cl. 4 provides that “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census * * This prohibits the levy of a direct tax on this property. Only the states can levy such a tax.
I suppose this constitutional prohibition has so far survived the innovations of modern constitutional “interpretation.” If it has, the Federal Government has no power to tax property passing at death unless it can be justified as an excise tax. It was so justified by the Supreme Court in Knowlton v. Moore, 178 U.S. 41, 20 S.Ct. 747, 44 L.Ed. 969, as a tax on the privilege of transmitting property at death to the survivors of the decedent. The rationale of that decision is well known and I shall not elaborate on it in this opinion.
It follows from this, it seems to me, that, if the decedent did not transfer this property at death, it cannot be included in his gross estate for estate tax purposes. The question then is, did the decedent transfer it?
Although the Plan was initiated by the railroad and was wholly of its own volition, nevertheless, the Plan did contain this provision:
'"In any case, an officer leaving the service of the Company for any reason other than death, incapacity as hereinbefore defined, or retirement, shall forfeit all benefits under the Deferred Compensation Plan.”
Under this I suppose it is not unreasonable to say that, by the act of continuing in the employ of the railroad, the employee made it possible for his beneficiaries to receive what the railroad agreed to pay them. They were entitled to benefits under the Plan only if the employee remained with the railroad until death or until he was eligible for retirement. Therefore, by remaining with the company, he fulfilled that condition without which the beneficiaries would have been entitled to nothing. So it can be said, and properly so, I suppose, that the decedent “had a hand” in the transmission of the property to the beneficiaries, and, hence, Congress intended it to be included in his gross estate.
I concur.