*1 38S REVE- Atty. INTERNAL Mahoney, Sp. Assts. OF COMMISSIONER Maurice J. Gen., petitioner. NUE v. GREENE. for No. 9619. Parker, Mannon, Jr., W. M. J. John Cal., Francisco, Doyle, M. all of San Morris Appeals, Ninth Circuit. Circuit Court of respondent. for April 21, 1941. HANEY, GARRECHT, Before Rehearing May 23, Denied STEPPIENS, Judges. Circuit
HANEY, Circuit Internal The Commissioner of petitions us review (decisions Tax no Appeals that there were taxpayer’s gift for deficiencies years H. E. Alice Lester and W. Lester were forty years ago. more than As a married marriage daughters, result two Car- olyn Beatrice, were born. The former years old, now about and the latter years ago More than 30 Alice about 43. H. became and ever Lester since has been and is now confined an persons. for Prior there- institution to, insane husband, wife and luxury together family unit lived people of in the manner of wealth. wife, After together and two lived family marriage unit until the of Car- olyn, thereafter, the husband and continued to live as unit marriage Beatrice. until Hamilton, one and in 1930’ first married who is now her married Thomas Loan J. in 1932 married one husband. Beatrice whom in 1938- Pauli from she was divorced and has been unmarried. Lester husband of Alice LI. died on appraised and left an estate May $38,000 which was distributed in- at about equal shares Judge, STEPHENS, Circuit dissent- ing. _»_ always per- example, For large means. son financial principal of from the her estate the income $2,000,000 for excess of was: $121,931; $91,473.85; for 1932— 1933— $88,385.74; $68,468.91; 1934— 1935— $109,673.53; and for 1936— 1937— 614.13. never Loan has contributed Carolyn, has never Pauli contributed of Beatrice. Both from birth accustomed a life of denied; STEPHENS, Rehearing luxury, and neither of them ease occupation dissenting. any gainful Judge, trained during any of said neither Gen., Ally. Clark, Jr., Asst. O. Samuel any gainful engage oc- Gage, A. Key, Sewall John *2 incompetency kin, cupation. next the of had sound said ward of been ” support avail- mind. mother, of the means incompetent’s has been the to In the order the court directed in- their Except to the extent of estate. paid daughter 500 be to each and found: estate, terest, any, if in the court, “That judgment in the the due of the therefrom, and the received being given the amount of to father’s from their received distributions surplus income, and said the circumstances estate, been at all times daughters have both condition of life to ward and which said 6, 1932,poor persons prior to accustomed, June her said children been have by work. maintain themselves able to mind, ward, said if were of sound would she inception of pay the to time since aid said and dis- From time children and would proper mother, the portion the tribute the of the of to her said children directing the surplus has orders he is here- state court said income which [the] the money from the estate payment of inafter directed be so distributed.” ' daughters. Prior $7,500 in addition refused such court year the calendar amounts paid ordered to maintenance be payments except for to direct the daughters. of father and of the The orders of contained the state court ordered to daughters. The amounts findings daughters were unable payments were paid liberal. Such work; the following pursuant parently made necessary for the com- and Civil Code provisions of the California fortable and and main- suitable respectively: Code, daughters of the tenance of the as members * * * duty of the the family; judg- 206. court’s ward’s “§ any father, mother, the children of ment, would, had she been 'maintain him- poor person mind, who is of sound have aided the person work, to maintain such question. self The amounts * ** ability. of follows: were as * Every guardian of an To Year To “§ manage frugally it $5,000.00 $7,392.83 income, as far waste, 9,816.49 9,607.70 and suit- the comfortable 11,000.00 11,000.00 of and education maintenance able support, 14,362.91 16,844.91 ** family, if his ward 21,000.00 21,000.00 19, 1937, the state court or- On October 20,000.00 20,000.00 payments be made to dered that additional surplus All income such amounts to Calif. Pro- “ * * * not used On as follows: bate of the guardian of the of next of incompetent person, pay- kin an insane or Commission determined of guardian pay direct the ments were and assessed deficiencies the court income, surplus not used Re- in the distribute taxes for ward, of the spondent petitioned for a rede- income, surplus any part such The Board termination of the deficiencies. would, ward no de- next kin whom there were entered decisions that aided, court, have if judgment ficiencies, said seeks re- Commissioner grant- mind. The been of sound decisions. ward had view of those and the amounts ing allowance of such the Revenue discretionary shall be proportions thereof 580, provides Int.Rev.Acts, page U.S.C.A. court, give shall but the court con- with the year part: “(a) 1932 and For the calendar surplus amount of income sideration to tax, comput- year thereafter a each provision due after available provided im- ed as section proper and maintenance during posed upon the transfer calen- ward, and con- circumstances ** year any individual dar to which the ward and said life dition of kin have been accustomed and to next of Int.Rev.Acts, 503, 26 U.S.C.A. would, the ward 585, provides: “Where court, page have allowed said judgment adequate $5,000 in transferred less than an “the than of [other full future property]”. interests in In the last worth, the value taxpayer argued then cited case that since property exceeded value did not define “future interests” *3 shall, purpose the they taken be future interests title, gift, imposed by tax by be deemed as defined local court law. The computing included said: But as we have often had “* out, during amount point occasion to are revenue laws year.” gen to be light construed in the eral to establish a nationwide A that all majority of Board held applica scheme taxation uniform in its for main- provisions tion. not to be Hence are were in satisfaction of subject taken as to state control limita or an obligation by Civil (Calif. law language tion unless the im 206; 1502) Code Calif. Probate Code § § plication of the section involved makes its and were be classed therefore ”* application dependent on state gifts; $7,500 payments that 1937 gifts. One member Here, money,1 property, e., i. opinion. without Three dissented transferred, 503, to § that ground members dissented on the amount of the is “the which 1932, der 503 of the Revenue Act of § the value of exceeded gifts. Two dis- members only thing value of the consideration”. The 206, sented ground on Calif. Civil § question is the here “consideration”. only required parent supply Nothing expressly in the act states necessities, reasonable existence of consideration is be deter supplied ordinary tenance “beyond mined state law. There no more is necessities”. saying Congress reason here that meant Respondent’s argument is that Calif. law, consideration as defined than Code, 1502, Civil Calif. § saying there was Congress meant 206, impose obligations the incom- § “future interests” as defined state law. petent’s daughters; estate to reports The committee state that the tax binding the state court’s orders were imposed by designed reach the act “is that, question; on transfers the extent were made without donative intent and donative, and to exclude not, gifts. money money’s not reducible to * * * worth. argument theory on based that state Reports on See Committee applicable. law is first to be Acts, 2), (Part Cum.Bull.1939-1 decided whether state law is 478, pp. Regula- 1 of Treasury 526. Art. plicable. 79, promulgated in' tions under provides lim- that the “tax is not is that rule “State law imposition prop- ited transfers of taxing when the federal consideration, erty express without a valuable language necessary implica ”** tion, law treated as operation dependent at common provides part: regulations Harmel, Art. state law”. Burnet v. 287 103, 110, 77, 199; “Transfers reached statute are not 74, U.S. 53 S.Ct. 77 L.Ed. only which, see, being also, Perkins, 655, to those v. confined Thomas 301 U.S. consideration, 659, 911, 1324; accord with the 57 81 a valuable S.Ct. L.Ed. Biddle concept gifts. 573, 578, A Commissioner, v. 302 U.S. 58 common S.Ct. 431; 379, Lyeth Hoey, 82 305 consideration value, L.Ed. v. U.S. 188, affection, 119, promise 194, 155, as love 59 83 S.Ct. L.Ed. 119 410; Commissioner, wholly disregarded, is to be Morgan A.L.R. v. 309 78, 80, 81, 424, the entire value of the trans- U.S. 60 S.Ct. L.Ed. 585. constitutes ferred case, argument Since the of this 660, apparent Pelzer, 659, nothing there is thus S.Ct. L.Ed. 3, , 1941, law was to - to indicate local determine was decided. That might consideration, but, ques on 504(b) case what contrary, considered of the act tion, taxing act considered certain exclusion of for an Reports 478, 526. See Committee on the Reve- pp. Acts, (Part 2) nue Cum.Bull.1939-1 date”, so future local law and that this was what was gifts, transfers as meant local law words “future interest” considered them or not. taxing immaterial what statute. The had de- controlling, it is said, held. fined “future interest” in the terms. local statutes or local same merely provisions Court held that the Freuler v. relies on Respondent cites and were not 78 L. 54 S.Ct. Helvering, 291 U.S. respect. state control in this Commissioner, 634; 300 U.S. Ed. 5, Blair v. In reports the instant case the committee 465; v. Botchford imposed by state that the “is the Act Cir., A.L. Commissioner, 81 F.2d designed ex- to reach all transfers to the Cir., Commissioner, F. R. Letts v. *4 donative, tent that exclude and to Merchants 2d States v. United not consideration Bank, Cir., 101 Savings Nat. Trust & worth The involve F.2d such cases 399. None of provide promulgated under act, point. are, gift tax the tax shall consideration, to transfers that there contention “a immaterial, intention is was no donative money value, reducible to a affection, promise love and as does because require it. wholly disregarded”. say are reversed and But decisions not to transfer The Board’s fur- discharge legal obligation the Board for is remanded to cause with local law is a considera- proceedings ther accordance transfer without opinion my tion expressed. under the It views herein act. obligation is discharge legal of a clearly meaning “consideration” within STEPHENS, the statute op- implication I dissent. its own upon respect dependent eration in State opinion majority holds moneys es- óf the out of her adult married tate for daughters It clear California Civil seems that under such, “gifts” as construing and the cases legal fact section, as immaterial holds at duty legal imposed a the upon controversy California material to this was indigent children. her her legally obligation enforceable theory that “State upon were, This is based maintain her who as only when the federal pointed majority, “poor persons out act, by express language or neces- taxing sary work” operation implication, makes meaning of the California law. within law”, citing the recent dependent obligation 206 fixes as “to Pelzer, 61 ability”. Section 1502 of [her] —, Probate Code the California of an the Pelzer case au- are I not read do far by the of the income “as proposition that thority we comfortable law in the State instant not bound support, and suitable involved There case. family. The measure of education” gift under or not and maintenance allowance was “future interest”. of a was a argued matter for the discretion the California .taxpayer that the Federal Court, probate, Superior sitting in defining the State law bound that the amounts distributed determination a “future interest”. what constituted incompetent’s daughters were neces- re- Supreme committee Court looked sary their comfortable and suitable determined
ports and binding us. to make taxable the statute was contingent, the Board should be af- decision of limited to “whether vested enjoyment firmed. possession at a commence