*1 OF INTERNAL REVENUE COMMISSIONER OF ESTATE CHURCH. Argued Reargued 5. October 1948. No. October January 17, 1949. Decided *2 Arnold Raum argued petitioner. the cause for With Perlman, him on the briefs were Solicitor General Assist- Attorney Caudle, ant General Lee A. and L. W. Jackson N. Post. Ellis Slack was on the brief on the also reargument.
William W. argued respondent. Owens the cause for Berry. With him on the briefs was Loren C. Frederick W. P. Lorenzen was reargument. also on the brief on the
Briefs of amici in support respondent curiae were Satterlee, by Hugh filed and Thorpe Rollin Browne Nes- bit, for the Roberts; Estate of and Leland K. Neeves Lloyd. the Estate of opinion Justice Black delivered the of the Court.
Mr. This case raises questions concerning interpretation part (c) of 811 Revenue § the Internal Code purposes which for estate tax in a requires including de- gross cedent’s of all estate the value
decedent had transferred or otherwise before trust his death possession which “intended to take effect in enjoyment at or after his death . . . .” Estate of Commissioner, Spiegel p. post, questions involves which depend upon interpretation also provision of that (c). argument After and consideration of the cases at the October 1947 an Term, order was entered restoring upon them to the docket and requesting counsel reargument particularly questions to discuss certain presented and originally those scope than
broader Court, 21, 1948, 296-298. Supreme Journal June argued. treated fully additional have now been questions Those arguments. briefs oral in 1924 This case a trust executed Francois involves unmarried years age, then Church, twenty-one York in in New ac- childless. He executed law. two with Church and brothers cordance state corporate stocks were were named Certain co-trustees. grant power trus- transferred the trust pro- to hold the stocks and to reinvest tees and sell power alter, amend, or ceeds. Church reserved no him the revoke, pay but the trustees to income required of life is the decisive for life. This reservation income *3 here. factor 1939) (which
At the trust Church’s death occurred agreement to trust contained some was terminate the for of the when he died. directions distribution trust assets not, however, final did These directions as to distribution contingencies. for all If Church died provide possible any or sisters, without and without of brothers children his children, surviving or their the instrument him, trust provision of Had disposal made no for the trust assets. possibility pass (at this come his death there unlikely of living, brothers, sister, were one and ten five their children) the distribution of the would have trust assets been New York been the controlled law. It has Gov- law had ernment’s contention that under York there New no such trust surviving corpus been beneficiaries have would to the pos- reverted decedent’s This estate. sibility plus reverter the settlor of retention life, income argued, trust the Government has re- quires the value of property inclusion of trust gross decedent’s estate under our holding Helvering v. Hallock, 309 S. 106. U. case held that where a while person living Hallock provides
makes a transfer of which for a rever- corpus upon contingency sion of the to the donor a ter- death, corpus minable at the value of the should be included in the gross “posses- decedent’s estate under the enjoyment” provision (c) sion or Internal In Tax case, Revenue Code.1 Court, relying upon holdings2 its former possibility declared that “The mere by operation upon reverter of law a trust, failure prior due the death of all the remaindermen death decedent, possibility is not such a as to come within the Hallock case.” This made it holding unneces- sary for the Tax Court disputed question to decide the as to whether New York law a operated to create such reversionary interest. Court Ap- The United States peals for Third Circuit, judge dissenting, one affirmed ground on the that it a identify could clear-cut mis- take of law the Tax Court’s decision. 161 2d 11. F. The United States Court of Appeals for the Seventh Cir- cuit in the Spiegel case found that law under Illinois there a possibility of reverter and reversed Tax Court, holding possible by operation reversion of law re- quired corpus inclusion of decedent’s estate. Estate, v. Spiegel’s
Commissioner
1 The Hallock case considered the
lan
*4
guage
(c)
appeared
(c)
of 811
which
in 302
of the 1926 Revenue
§
§
Act,
9, 70,
(a)
44 Stat.
as amended
803
of the Revenue Act of
1932,
169, 279,
(c).
47 Stat.
26 U. S. C. 811§
Cass,
562;
Kellogg,
2 Estate
3 T. C.
Commissioner v.
119 F. 2d
of
54, affirming
916;
Downe,
967;
40 B. T. A.
Estate
2 T.
Estate
C.
of
Houghton,
871;
Goodyear,
885;
2 T. C.
2
Estate
T. C.
Estate
of
of
Delany,
Because Spiegel case. strongly contended have the two estates Counsel for law of neither that the of these cases arguments both of reverter possibility a provides Illinois New York nor further They argue presented. under the circumstances possibility a law of those states if under the that even unjustifiable exten would be an exist, did of reverter possibility that such a rule to hold sion of the Hallock in a corpus a trust of the value of inclusion requires pointed in this case respondent estate. decedent’s decedent would improbability that out extreme and their brothers, sister, his outlived all his have such a happening argues He that ten children. a money value of such remote, was so contingency that it would infinitesimal, reversionary interest so rule hold the Hallock entirely be unreasonable contingency. tax because such an estate requires Rothensies, Co. v. Fidelity-Philadelphia Trust But see 108, 112. Spiegel and of this and consideration Arguments sharp divisions into focus prominently brought case to the commentators, as courts, judges legal and among par- decision, our Hallock scope and effect of intended opinion in that case holding our ticularly whether holding opinion incompatible with the are so Heiner, longer the latter can no 238, 281 U. interpretation “pos- controlling accepted be May v. provision (c).4 enjoyment” §811 session a trust transfer need not corpus held that the Heiner Bradley, Estate Hughes, 1196, Estate B. T. A. with Cf. Co., Helvering Washington Trust affirmed sub nom. 1 T. C. States, Cl. v. United 100 Ct. York Trust Co. 87. See New 2d 140 F. Estates, Montgomery, Federal Supp. 51 F. Taxes — Cf. Paul, Estate (1946) Federal Gifts, 461-462, 480-482 Trusts and Note, Inter 7.15, Taxation, 7.23. See also Supp. and Gift §§
637 the settlor estate, though even in a settlor’s be included corpus. from the life income himself a had retained for as to the and doubt that confusion have concluded We be May v. Heiner should effect of our Hallock case on judicial admin- sound tax and interest of at rest the set longer no v. Heiner is Furthermore, May if istration. corpus Church trust value of the controlling, the regard without estate, gross included in the properly Church re- law question, since the much discussed state follow, which For reasons for himself. served a life estate holdings v. Heiner May that the Hallock we conclude Hal- we adhere Since are irreconcilable. opinions “possession lock, interpretation v. Heiner be (c) longer can no of 811 provisions § enjoyment” or accepted as correct. appearing provision enjoyment” or “possession in- Pennsylvania in a originated (c) to have 811 seems Supreme early in 1826.5 as tax law As
heritance legal transfer of that where Pennsylvania Court of held posses- right carried with it a property was made which of income and grantor sion with reservation transfer was life, for his profits from the grantor’s until enjoyment intended to take effect considered, be death: “One cannot certainly right an who no to the enjoyment estate, actual has Reish, profits or therefrom.” arising accruing incomes or Commonwealth, Adm’r v. 526. That Pa. court “possession enjoyment” held clause further question title, did not a mere technical but involve imposed parted tax unless one had that the law death Tax, L. J. 1118 Yale Vivos and the Federal Estate Transfers Eisenstein, Learning (1940); Higher Estate Taxes and the (1948). Supreme Court, 3 Tax L. Rev. 395 Note, Origin Phrase, in Pos “Intended To Take Effect (e), (§811 Enjoyment Internal session or At or . . . Death” After (1946). J. 176 56 Yale L. Code), Revenue *6 his title and his possession his and his life with during case that was further held enjoyment. It subjective one, “intended” was not test of but parties do, what intended question was not title, pos- actually effected as to what the transaction enjoyment. session and Pennsylvania- have included the
Most of the states
enjoyment”
death tax
originated “possession or
clause
complete unanimity,
statutes,
appears
and with what
to be
Heiner,
they
up
day, despite May
have
to this
substan-
tially agreed
Pennsylvania Supreme
with
1884
Court
this
interpretation.6 Congress
“possession
enjoy-
used the
or
ment”
in‘death tax
legislation
1862, 1864,
clause
12
432, 485;
285;
1898.
Stat.
13 Stat.
223,
448,
Stat.
464.
In referring
provision
to the
Act,
the 1898
Court
liability
said that it made “the
for taxation depend,
upon
the mere
in a
vesting
technical sense of title
gift,
upon
but
actual possession
enjoyment
or
Eidman,
thereof.” Vanderbilt v.
480,
U.
years
And five
before the 1916 estate tax
incorpo-
statute
rated the “possession
enjoyment”
or
clause to frustrate
estate tax evasions, 39 Stat. 756, 780, this Court had af-
firmed a judgment of the New York
of Appeals
Court
sustaining
constitutionality
of its state inheritance tax
opinion
in an
which said: “It is true that an ingenious
may
mind
devise other means of avoiding an inheritance
tax, but the one commonly used is a transfer with reser-
vation of a life estate.” Matter
Keeney, 194 N. Y.
281, 287,
428,
87 N. E.
429; Keeney
York,
v. New
525. And see Helvering
Bullard,
6See cases 878-892; collected in 49 A. L. R. 67 A. L. R. 1250- 1254; 100 Rottschaefer, A. L. R. 1246-1254. See also Taxation of Taking Death, in Possession at Grantor’s 26 Iowa Transfers Effect (1941); Oliver, Property L. Rev. 514 Pragma Rationalism and Tax tism, 675, 704-709 (1942). 20 Tex. L. Rev. repeated
where foregoing quotation seeming approval.
From the first estate tax law 1916 until Heiner, 1930, supra, was decided in trust transfers which designed corpus were to distribute the at the settlor’s death and which reserved life had income the settlor always been Treasury Department treated as trans fers “intended to in possession enjoyment take effect at . . . his regulations death.” The had provided so millions had dollars been collected from taxpayers on this basis. g., See e. T. D. Dec. Treas.
(1919); and see 74 Cong. (March Rec. 7198-7199 *7 3, 1931). principle This of estate tax law was so well in settled 1928, that the Appeals United States Court of May decided v. Heiner in favor of the Government in a per one-sentence curiam opinion. 2d 32 1017. Never F. theless, March 1931, this Court followed May v. Heiner in three in per cases curiam opinions, upsetting thus century-old historic and the meaning long standing Treas ury interpretation “possession enjoyment” Co., clause. Burnet v. Northern 782; Trust Burnet, Morsman v. Burnet, 283 U. 783; McCormick v.
March 3, 1931, day the next per after the three curiam opinions rendered, Acting Secretary were Treasury Ogden Mills Speaker wrote letter to the of the House explaining the in holdings May v. Heiner and the three
cases day decided the pointed before. He the disas- out trous they effects would have on the estate tax law and urged that “in Congress prevent order evasion,” tax immediately “correct this situation” brought by about May v. and Heiner the other cases. 74 Cong. Rec.
7199 (1931). expressed He fear that without such action the Government would suffer “a loss in excess of one-third of the revenue tax, derived from the Federal Sec- $25,000,000.” excess
anticipated refunds apprehensions and his decisions retary's surprise at the repeated were on consequences evasion their tax supra. Cong. Rec. floor of the House Senate. Finance Com- Smoot, Chairman of the Senate Senator this judicial mittee, said on the floor of the Senate like a bomb- the statute “came almost interpretation of a decision.” nobody anticipated ever such shell, because unani- Congress Both houses of Cong. Rec. 7078. requested signed and the President mously passed day.7 that same resolution passage 28, 1938, this Court held neither
February nor its inclusion Rev- of the resolution later its apply Act was intended to to trusts created before enue Welch, Marshall, Helvering passage. Hassett Accordingly, corpus if the of the Church trust U. S. 303. be in the settlor’s estate executed 1924 is to included without this Court’s involvement the intricacies property law, it must be done virtue of state without the possession enjoyment section as stood joint added resolution. language v. Heiner was its holding Crucial to the Court’s corpus passed interest in the at the settlor’s finding that no irrev- legal passed death because title had from the settlor *8 reason the ocably executed; when the trust was for this 7“(c) any To of which the decedent the extent interest therein otherwise, any transfer, by in contem has at time made a trust or enjoyment plation possession or at of or intended to take effect in death, including the or a under which after his transferor transfer any period ending his death his has retained or before for life from, property (1) enjoyment of, the possession or the income the or enjoy (2) possess right designate persons shall or or the to the who are added the . . . The italics the or income therefrom (c) of by to 302 to the made the amendments indicate additions 1931, of 1926. Resolution of March the Revenue Act Joint Stat. 1516-1517. for his life8— the trust income reservation
grantor’s held bundle-of-ownership interests —-was chief one of the of transfers category within bring the transfer the not to at . his enjoyment in . . . . . “intended to take effect pos- limited This had never before so the death.” Court legal was formal section.9 enjoyment session Thus of a than transaction made title rather the substance from (c). under For taxability §811 test sole effect this viewpoint grantor significant and enjoyment transaction was his continued retention death; consequence income the important until his to the was the of their postponement right remaindermen enjoyment to grantor’s this of the income until the death.
The interpretation effect the Court’s of this estate person tax permit section to relieve his to estate by conveying legal from the tax its title to trustees whom selected, agreement they he with an manage during life, pay profits estate his to him all and income his property during life, from and deliver it his to 8 May go Barney- provided The for Heiner trust the income to wife, May during lifetime, May, his after his death to his Pauline grantor, upon corpus her death the was to be distributed grantor’s The record failed to the four children. Court said that the May husband, clearly held to disclose whether Mrs. survived her but special importance. was of no heavily on quoted from and Reinecke The Court also relied Co., there Trust 345. This Court held that Northern 278 U. S. grantor corpus of reserved life income to two trusts that in the power have decedent’s plus a to revoke should been included corpus held not includable. of five other trusts were estate. grantor power alone to five trusts not reserve a in the These did they grantor, revoke, they life to the but nor did reserve a life, during the settlor’s provided of that income accumulation subject prior go beneficiaries, to the at his death it was to Thus, by this case settlor. the beneficiaries as directed use May holding. is Nor directly v. Heiner support the did not Allen, 545, as shown supported by Heiner Shukert p. opinion at in the Reinecke v. Allen reference Shukert *9 chosen Preparation beneficiaries at death. papers defeat an tax thus became an easy chore for one skilled in the “various niceties of the art of conveyanc- ing.” States, v. Klein United 283 U. 234. And simple this method could, despite “possession one or enjoyment” clause, retain and all enjoy the fruits of property his during life and direct its distribution at death, free from taxes that others less skilled in tax technique would pay. Regardless have to of these facts May v. Heiner held that such an instrument preserving the beneficial use of one’s life during pro- viding for its distribution and delivery at death was “not testamentary in May Heiner, character.” supra at 243. Keeney York, supra New at Cf. year
One after May Heiner, this Court decided Klein States, v. United supra. There grantor made a deed conveying property to his wife for pro- her life with visions that if she him “by survived she should virtue conveyance take, have, and hold the said lands simple,” fee but the fee was to “remain vested in” him should his wife die first. This pointed Court out in general and under the law of Illinois where the deed was made, vesting of title in grantee “depended upon the precedent condition the death of the grantor happen that of the grantee.” Thus, since before it was found that under Illinois law -legal title to the land had been retained the husband, it was held that the value of the land should be included in gross his estate under “possession enjoyment” section. The Court did not cite v. Heiner.
In 1935, this Court decided Helvering v. St. Louis
Co.,
Trust
As out only support rejected directly unequivocally Heiner. May holdings possibly could suffice for Heiner the Court’s conclusion support That enjoyment property of his possession that retention value require inclusion its enough was not passing grantor if had succeeded gross estate In death. Hallock legal bare title out of himself before by declaring emphasized support removal of that we our pass- (c) property technically “deals at but with interests theretofore created. ing death ais transfer inter vivos. But measure taxable event at the tax is the value the transferred *11 enjoyment,” pp. time when it into 110-111. brings death Moreover, case, p. 114, plainly the Hallock stands “In principle determining whether a taxable complete only transfer becomes at death we look to sub- stance, not to form . . . However we label the device a in- gift is but means which the is rendered [if] complete “possession until the donor’s death” the enjoyment” provision applies. possible “complete”
How is it to call this trust transfer except by invoking a fiction? Church was sole owner of Probably the stocks before the transfer. greatest their property value to Church was his continuing right get to legal their income. After title to the stocks was trans- ferred, somebody property right still owned a in the That property right pass stock income. did not to the trust beneficiaries when the trust executed; it re- until mained Church he died. He no “com- made plete” gift date, effective before that unless we view “complete” gift the trust transfer as a to the trustees. gave But nothing, partially Church the trustees either or completely. He transferred no to them to right get spend the stock income. And teaching under the case, quite the Hallock in contrast Heiner, passage legal of the mere technical title to a necessarily trustee is not in determining crucial whether gift and when a “complete” becomes for estate tax purposes. Looking to merely form, substance as we depart teaching must unless we from of Hal lock, inescapable fact is that Church retained for a himself until death most right valuable property these right get spend stocks—the and to their income. far Thus Church did more than to a “string” attach remotely possible reversionary property, in the interest a sufficient reservation under the Hallock rule to make corpus the value of the subject to an estate tax. Church did not even risk an attaching unbreakable cable to the property most valuable in stocks, attribute their come. property, He retained this simply valuable right to the income, death, for himself until when for time the first stock with all its attributes “passed” from Church to if the trust beneficiaries. Even merely the interest of Church was “obliterated,” May beyond Heiner it is all language, doubt that simul taneously with his death, longer Church owned the no right income; to the the beneficiaries did. It had then “passed.” It never had time, before. For the first gift “complete.” had become
Thus, what we said in Hallock repudia- was not only *12 tion of which was reasoning support advanced to (St. two cases Becker) Louis Trust and that Hallock overruled, complete rejection but also a of the rationale May v. Heiner on which the two former cases had relied. thereby Hallock returned interpretation to the of the “possession enjoyment” or section under which an estate tax by any cannot be avoided except by trust transfer a bona fide transfer in which the un- settlor, absolutely, equivocally, irrevocably, and possible without reserva- parts all tions, with of his title all possession and of his and all of enjoyment his property. transferred After such a transfer has been made, the settlor must present be left legal with no title in property, no possible reversionary title, interest that and no right possess enjoy to or the property to then or thereafter. and out must be immediate a transfer
In other words such
grantor
whether
unaffected
out,
and
and must be
Allen,
547;
U.
dies. See Shukert
lives or
We declared
S. 176.
Shaughnessy,
318 U.
Smith
v. United
in Goldstone
of the Hallock case
to be the effect
said with ref
States,
There we
687, 690, 691.
ruling:
Hallock
(c) in
to 811
connection
our
erence
all
sweeps
gross
It
into the
. .
thus
is held
enjoyment of which
possession
ultimate
or
death
of the decedent’s
until
the moment
suspense
of an inter
Testamentary dispositions
..
.
or thereafter.
this section
escape the force of
nature cannot
vivos
in devices
legal niceties contained
behind
hiding
Fidelity-Phil
And see
by conveyancers.”
forms created
Rothensies,
and Commis
supra,
Trust Co. v.
adelphia
Field,
What was said opinion Hallock on question the stare appear decisis would to be a sufficient answer to that contention here. opinion The Hallock also answers argument as to recent Treasury regulations, all of which were made Treasury compulsion under of this Furthermore, Court’s cases. history struggle Treasury subject such transfers as this to the estate tax law, history part shown in in the Hassett v. Welch opinion, has served spotlight abiding conviction of the Treasury May statutory interpre- v. Heiner rejected. tation should be In view struggle of the Treasury in this tax field, judicial the variant and Tax Court opinions, opinion our in the Hallock case and others followed, which it is not easy taxpayers to believe that prior who executed trusts joint resolution felt secure a belief gave Heiner them a vested interest in protection from estate taxes under trust trans- fers such this one. And so far as this trust is con- cerned, Treasury regulations required the value of its corpus to be included gross when it was *14 up to then period from of the 1924, and most
made in in 1939. death the settlor’s repudi has been doctrine May v. Heiner
Moreover, the the challenged by repeatedly and Congress by the ated say to an overstatement certainly is Treasury. It May holding treated opinion and Hallock that Court’s had “dis Congress said respect. We with scant v. Heiner in (c); of 811§ construction v. Heiner May the placed” that out pointed Trust cases we the St. Louis overruling dis “Congressionally part on the had relied those cases Congress thought doctrine”; we May v. Heiner carded un attitude rejected general the already principle “had cases; Trust and St. Louis May v. Heiner derlying” rea only demolished opinion Hallock finally and our hold May v. Heiner support ever advanced soning 1917, 1919, case, trusts And in the Hallock created ing. under the subject tax held and were and did we said (c). in 811 What included provisions place Hallock case took May v. in the about Heiner that the had held after Hassett v. Welch years two applied to trusts could not be 1931 and 1932 amendments be Certainly, May v. Heiner cannot created before that ground on the of stare decisis granted sanctuary from troubles history and long tranquil has had free challenges. in the opinion joint resolution or Nor does the cases, decided Helvering v. Marshall Hassett Welch May v. Heiner support argument an that together, impossible It would be be left undisturbed. doctrine ratify accept and in 1931 intended to say Congress a “bombshell.”10 Congress hit like decisions that Treasury Department indicates May 22, 1931, A bulletin strong Treasury Department’s construction reason for the D. pre-1931 transfers. T. inapplicable to resolution as obviously a (1931). X-l, That reason Cum. Bull. 450-451 constitutionally might tax could not hold that the fear that this Court did not ask And in v. Welch the Government Hassett May v. Heiner or this Court to reexamine or overrule May relied on v. Heiner. per the three curiam cases that In brief v. Heiner fact, government argued on from v. Welch. distinguishable its facts was Hassett pointedly insisted that its government brief also position require did “not a reexam- Hassett Welch *15 2, three curiam decisions of March per ination of the in was the Government’s sole contention the 1931.” It that the 1932 reenactment of Hassett Marshall cases application not limited in joint the resolution was but was intended to make the created, trusts thereafter applicable past amendment trust agreements. new 1932 rejected. was The was limited holding That contention single question. to that opinion plain implications recognize the Hallock the and Marshall cases did not reaffirm
that the Hassett trust, In Marshall the May v. Heiner doctrine. the case a 1920, provision that should the created contained corpus would beneficiary, settlor outlive the trust the trust type provision That very revert to the settlor. is the inclusion of its require which we held Hallock would Hallock case did settlor’s estate. Since the value the a trust created involving not the Marshall case overrule and Hassett 1920, accepted it must have the Marshall value of the deciding cases as no more than that the in the de- properties could not be included there Coolidge, previously applied be to trusts created under the Nichols may 531, apprehension well have line of cases. This same 274 U. S. dissent, underlying statement, on for a relied been the reason made resolution was not made on the floor of the House that afraid that the Senate “retroactive for the reason that we were (1931). agree Cong. Recent cases would not to it.” 74 Rec. interpretation have indicated that the fear of such a constitutional 94, Kelly, 319 Hanover Bank v. U. is not a valid one. Central 97-98; Wiener, Fernandez sole reliance the Government’s gross estate where
cedent’s
and 1932
of the 1931
application
retroactive
on
law.
tax
amendments to the estate
opinion did
treat
the Hassett
That
the Hallock
in-
this Court’s
having
and Marshall cases as
reaffirmed
pre-1931 possession
enjoyment
terpretation
emphasized by the effect of
Hallock
clause is further
Burnet,
on the
of trust
in McCormick
type
case
before 1931. The United States
U. S.
trust created
had
the trust
that case
held
Appeals
Court
be
in the decedent’s estate
property should
included
provision
corpus
chiefly because of the trust
that she outlived
should revert to
settlor in
event
in its
children.
11 A in this an “decisions dissent filed case has appendix THE DECADE IN WHICH LEGISLATIVE HISTORY WAS DECI DURING PAST post, OP A SIVE OP CONSTRUCTION PARTICULAR STATUTORY PROVISION,” Many p. recent could also cited 687. other decisions of less date be nobody disputes. think establish this which But we well-known fact respondent reliance of on the The here Hassett and Marshall is misplaced. cases We hold that this trust agreement, because it reserved in life income trust property, was intended to take possession effect in or enjoyment at the death settlor’s and that the Commis- sioner therefore properly included the value of its corpus in the estate.
Reversed. Mr. Justice Jackson in concurs the result.
Mr. Justice 3, Spiegel No. Reed, concurring Commissioner, post, p. 701, and dissenting in 5, No. Com- Church, ante, missioner p. 632. may
As these tax decisions have an influence on sub- sequent beyond decisions limited area the issues I decided, have thought it advisable to my position state light may whatever I throw. agree judg- here, language opinion case, our opinion the Hallock which today’s was written dissent, author of actions of Con gress relied on any dissent have not “under rational canons legislative significance impliedly . . . particular enacted into law a which, light experience, decision in the of later seen to is create con application fusion and conflict in the principle a settled of internal legislation.” Helvering v. Hallock, 106, 121, revenue U. note principle” The basic as when “settled now Hallock was written is that agreement possession enjoyment where a reserves settlor’s or part death, all the trust until the value of the gross trust should be included in the settlor’s estate. arguments decisis, legislative based on dissent here stare
history, holding, possible consequences of this Court’s are strik- ingly arguments like forceful made in But the Hallock dissent. *17 persuasive arguments spokes- the by and sound advanced the Court’s majority man in were of this Hallock there considered the Court to be a sufficient answer to what was said in the Hallock dissent. Particularly Court’s in the forceful was this statement Hallock opinion try quicksand “we to find in that walk on when we the legislation controlling legal principle.” absence of a corrective Spiegel v. Commissioner by the Court ment directed upon solely opinion of rests and much the with so under possibility of reverter controlling effect Com- with disagree I Church the law Illinois. As accept I so much of missioner, cannot today, decided put p. as seems to Spiegel case, 705, opinion in the settlor retains the fact as trustee upon reliance that other than trust, any “possession enjoyment” opposed I the view am possibility a of reverter. written expressed the dissent Burton Justice Mr. of his rather than the effect that settlor’s intent taxability of his acts is touchstone to determine purposes. tax property for estate I concerned, v. Church is do So far as Commissioner Heiner, May 238, should S. not believe U. 3, 1931, The Joint Resolution March be overruled. in reaching stands as the determinative factor therefore, taxability estate. a as to the Church conclusion Welch, decided that the Reso- Hassett v. U. S. Consequently, the Church lution was not retroactive. tax subject is not to an estate because of the a life reservation of estate. an accept overruling
We are asked to Heiner, I North- think, of Reinecke v. supra, also, Co., U. not to the inci- ern S. mention Trust Welch, supra, side, Hassett v. on the one dental fall of hand, pos- or, on other to limit rule as to the Hallock, sibility Helvering U. of reverter teaching, numerous follow its 106, and the cases that Legis- in the expressly reverters reserved documents. purpose promote gifts lation as desirable indicates early means benefits. In property distribution judi- a long-settled course of upon legislative reliance construction, arrange- cial donors have made upset be summarily ments that should now no stronger reasons for so than courts doing former *18 in the interpret legislation and the did not Congress efforts to does. Judicial way same as this Court now make a national policy tax isolated decisions by mold or administer observe. system develop, tax difficult to upon legislated has thirty years Congress For more than enact- problem interpreted this and this Court has fair reasonably me a ments so that now what seems to Inter- (c) of tax under 811 interpretation liability § out. written, nal now has been worked Code, Revenue as under decisis upon desirability stare Relying I changes would leave such concerning (c), decisions 811§ Congress, general desirable to the where may seem purpose for that rests. authority in a including A decedent’s estate the
(1) provision any in at of death of interest transfer value time in contemplation “in of or intended to effect take or at or after his death” been possession enjoyment has Tax in the federal estate tax law since Income Act phrase relating of 1916.1 It will be noted that to take contemplation transfer “in of or intended to effect his death” possession enjoyment or at or after [settlor’s] Court, first, has not It was construed at changed. apply passed something those circumstances where (b) provision appeared in of the Revenue Act This first 202§ 1916, 756, 777-78, follows: 39 Stat. and read as gross deter- “That the value of the estate of the decedent shall be by including property, of all mined the value at the time of his death tangible intangible, personal, real or or wherever situated: “(b) any of which the decedent To the extent of interest therein any transfer, respect which he has or with has at time made effect in trust, contemplation of or intended to take created a except death, in case of possession enjoyment or his or at after money money’s a bona fide sale for a fair consideration worth. . . (c) of the Revenue changes in 402 With small it was included 227, 278, 1057, 1097; 42 Stat.
Acts of 40 Stat. donor or control of the “possession, enjoyment from the Co., Trust at his death.” Reinecke Northern every argued 348. “Of course it was not vested would take actual en- manifestly interest effect *19 grantor’s was within the joyment after the death statute.” Allen, 545, v. 547. after the When, Shukert 273 U. S. exe- trust, cution of a the “held no in right settlor the trust in any subject testamentary which was estate sense the disposition,” opinion this Court gift was the the not intended to in possession enjoy- take effect or Helvering ment at the donor’s death. v. St. Louis Union (c) 302 1926, 253, 304; of the Revenue Acts of 1924 and 43 Stat. § 9, provision by 44 Stat. 70. In 1931 the was amended H. J. Res. 529, 1516, No. present 46 Stat. and assumed its form in the Revenue 1932, 169, Act of 47 Stat. 279. It now reads as follows: gross “The value of the estate the decedent shall be determined by including the property, value at the time of his death of all real personal, tangible or intangible, situated, except or wherever real property situated outside of the United States— “(c) contemplation of, talcing Transfers or effect at death. any
“To the extent of
interest therein of which the decedent has
any
transfer, by
otherwise,
at
time
a
contemplation
made
trust or
possession
enjoyment
of or intended to take effect in
or
or
at
after
death,
any
by
his
or
transfer,
which he has at
time made a
otherwise,
any
or
period
under which he has retained
his
or
for
for
life
any
period
ascertainable without
to his death or
reference
(1)
possession
which does not in
end
his death
the
or
fact
before
enjoyment of,
right
from,
property,
or the
to the income
the
or
(2)
right,
conjunction
any person,
either
alone or
designate
persons
possess
enjoy
who shall
or
or
therefrom;
except
income
in case of a bona fide sale for an ade-
quate
money money’s
and full consideration in
or
worth. . . .”
by
The italicized words are the additions made
the amendments of
(c)
1931 and 1932 to 302
of the Revenue
of 1926. See Hassett
Act
§
Welch,
v.
phrase
Trust Burnet, Mc- 783; S. 283 U. 782; Morsman S.U. Heiner, 281 May v. Burnet, 784; S. U. Cormick change appointment power A 238. reserved U. S. corpus. testamentary power over sense,
is, in Co., at Porter v. supra, 345; v. Northern Trust Reinecke Commissioner, States, brought doubt 283 U.
Klein
United
phrase
of the
meaning
conception
into
above
A
and on condi-
That
for life
question.
trust was
It was
simple.
A
A in fee
survive the donor to
tion
“brought
larger
death of the donor that
from the
. . and
its transmission
being
into
.
effected
upholding
living,”
to the
this Court said
dead
construed
four
property.
tax on the trust
This was
*20
death
of the Court
to mean that
the donor’s
members
complete until
“operating upon
gift
his
inter vivos not
death,
opera-
which calls the
into
his
is the event
statute
Stone, dissenting
tion.” Mr.
in the later case
Justice
Co.,
Helvering
supra,
v. St.
46. The two
Louis Trust
positions,
only power
one
in the settlor at the time
that
from him
property
death to cause the
to be transferred
by
will
or
by
another
or
descent
to select beneficiaries
through appointment
brought
property formerly
the
transferred within
reach of the words “intended to
possession
take
in
enjoyment
effect
or
at or after his
death,”
concept,
that,
and the other
in addi-
Reinecke
tion, every possibility of reversion of the transferred inter-
est to the
by
instrument,
settlor must be barred
the trust
Co.,
in
ground Helvering
the dissenter’s
v. St.
Trust
Louis
fully
opin-
in
majority
dissenting
were
discussed
and
Hallock,
Helvering
ions in
v.
position accepted interpretation by as the us sound I and that in adhere to view for the reasons stated opinion Helvering Court’s in Eisenstein, Hallock. Cf. Higher Learning Estate Taxes and the Supreme Court, 3 Tax Law interpretation Rev. 395. That has gained from strength the fact Congress has not repudiated it as inconsistent with the legislative purpose judgments by other this Court applying principles of the Hallock case accordance with this statement. Fidelity-Philadelphia Trust Co. v. Rothen sies, 108; Field, 324 U. Commissioner v. Estate of 324 U. enjoyment S. 113. Possession or property as applied heretofore has meant from standpoint taxability of the estate, transferor’s least, at death of perfects the transferor right of the transferee and cuts any possibility off of reverter to the transferor left the instruments of transfer. If the transferor Allen, 545, 546, Fidelity-Philadelphia 273 U. S. Trust Co. v. Rothensies, 108, 110-11, death, 324 U. S. or the transfer at now as precise, seems to me more seems immaterial. See Int. Rev. Code 810; Helvering Co., dissent in 39, 46-47; St. Louis Trust 296 U. S. Co., 339, Reinecke v. Northern Trust 278 U. S. It was said contemplation death, of a transfer “It is thus an enactment of, integral of, part legislative aid and an scheme of taxation States, of transfers 15, 23; at death.” Milliken United 283 U. S. Donnan, Heiner v. cf. dissent at 334. In either case transfer of an interest intended to take effect possession enjoyment or at after death is taxed. If taxed privilege death, an excise on the of transfer at the transferee has *21 subject (b). taken to the tax. Int. Rev. Code 827 It is a means checking of States, tax avoidance. Milliken v. Cf. United 283 U. S. 15, Helvering Bullard, 297, 20. See 303 U. S. an estate tax said, on pp. 301-2, a trust that retained a life estate. We there “A authority Congress further vindication of the exaction is the of testamentary, power treat as transfers with of in- reservation a or an Wiener, 340, 352; terest the donor.” Fernandez v. See 326 U. S. Donnan, cf. Heiner v. 285 U. S. 331-32.
657 purchase, property by by inheritance or reacquired Resolution other factors would enter. Before the Joint of a life estate was even the reservation insufficient preserve possession enjoyment in the transferor as “pos- nothing passed at his death. When words such as in a a enjoyment” session or used section of revenue stat- many possible ambiguities ute with their of shades meaning given through have been definition the course a legislation litigation, change of courts should By be the Resolution such or that avoided.3 reservation an power appointment was also made source tax. Prior cases have trust instruments where the involved specifically remainders, settlor reserved reverters or con In tingent powers appointment. these cases the value corpus death at of the entire trusts was taxed. contingency This was because in there was a each case through completed gifts corpus which the entire might beneficiaries fail before the death of the settlor with the result would again the settlor control In I corpus.'4 circumstances, transfer of the such take it as settled that is taxable on the event (c). of the settlor’s death under 810 and 811 Cf. 324 §§ U. at 111. present Spiegel
The trust instruments in the cases of the specifically provide and Church estates do not for such possibility regaining of reverter or for control of the devolution of the property. issue raised these possibility springing cases is whether like of reverter not from by operation the instrument but of law through the failure of all beneficiaries named the trust instru- Deposit Stead, National Co. v. 67. Safe 4Helvering Hallock, 106; Fidelity-Philadelphia Trust U. S. Rothensies, 108; Co. v. Field, U. S. Commissioner Estate of 113; States, U. S. Goldstone United U. S.
658 All effect. named beneficiaries ment shall have same without might in two trusts die before the settlors these Thus, depending upon controlling surviving issue. repossess law, might state the settlors the estates.5 lay problem, helpful To bare the heart of the it seems put phases possible in- congressional aside certain of statutory possible meaning, tention and as not involved or heretofore decided for sound reasons. purpose
A. It was Congress any of at time dealing in with the inclusion of property transfers of value, trust to have the death, whole at the donor’s total of all gifts during life, made included the settlor’s
5Since the state law rights defines and creates interests taxing only and the say federal statutes which of these rights and interests taxed, created state law shall be the law of Illinois controls the Helvering Stuart, construction of this trust. v. 154, 161-63; Commissioner, 317 U. S. Blair v. 5, 300 S.U. 9-10. Spiegel only trustee case could act in the interest of the beneficiaries the trust.
It
is well
jurisdictions
established in
as in
Illinois
other
that a
express authority
trustee in the
absence
cannot deal on his own
any part
behalf
property.
of the trust
Doner v. Phoenix Joint
City,
106,
20; Kinney
Stock Land Bank Kansas
381 Ill.
45 N. E. 2d
Lindgren,
415,
City Chicago
471;
373 Ill.
26 N. E. 2d
v. Tribune
Co.,
242,
757;
determining
powers
248 Ill.
N. E.
grantor
trustee reference must be
to the
had
intention of the
Crow,
as manifested in the whole trust
instrument. Crow v.
241,
877;
Co.,
366,
Ill.
E.
180 N.
Bear Millikin Trust
336 Ill.
349;
Savings
Wanner,
168 N. E.
App.
Harris Trust &
Bank v.
326 Ill.
307,
though
2d
N. E.
860. Even
a trustee
been
has
vested with
power
management
full
and discretion as to the
of the trust he is
subject
equity court,
still
to the control of the
and this discretion
cannot be exercised
the trustee so as to defeat the
or to
trust
deprive
que
City
Maguire
cestui
trust
of its benefits.
Macomb,
682;
Jones,
293 Ill.
127 N. E.
Jones v.
124 Ill.
Northern supra, Trust 347-48. Before the amend- ment of 19317 the of an retention estate for life in the subject settlor did not the trust to estate tax where the remainder was by taken regard beneficiaries without to by future action the settlor.8
B. The Joint Resolution of 1931 change made no the language of the subsection of the relating estate tax to the inclusion in estates of interests trusts intended to possession take effect in or enjoyment at or after death. Neither the resolution nor the discussion on the floor of either house suggested a change the words of the section to define what an by is meant interest intended to take effect after death. Congress aimed at the retention of life interests, not at Court’s deter- minations of the meaning “possession enjoyment.” or Those words were left untouched and an addition was made providing for the inclusion in the estate of interests where the settlor possession had retained the enjoy- or ment of the property right or a power income or the designate the beneficiaries. 1, supra. See note There- fore the words relating to intention, death, possession or enjoyment have the same now meaning they as did
6This statement does not refer to exemp the items of deduction or by tion covered gifts Int. Rev. Code 812 but to the value of § by covered 812 that also are not covered § 746 Stat. 1516.
8 May Heiner, Co., v. Burnet v. Trust 238; Northern 281 U. S. Burnet, 782; Morsman v. 783;
283 U. S. McCormick v.
Burnet,
before as written when statute, Heiner that May trine cover reservations down, did not was,handed that case legislatively designation powers life interests Resolution. of the Joint the words by adding changed Hal Hallock, When Helvering supra. in accord See dis May v. Heiner the doctrine of refers to lock there May Heiner the doctrine of Congress, it is carded meant. that was a life interest might reserve that a settlor I that the it, read say imply, did not or Hallock Reinecke supported by is doctrine, which v. Heiner Allen, enjoyment” “possession as when Shukert by the Resolution. changed a donor was passes from pass from something must had held that These cases *24 on by Hallock wrought difference only the settlor. apply was to enjoyment concept possession this the remainder enlargement rule that the Klein to the from the dead a did effect transmission living. that might legislated have so Congress that
Assuming all who died apply words would to the estates the added Resolution, Congress defi- Joint passage of the after the amendments intention that manifested an nitely Reso- prior to the apply trusts created were not to thereto. subsequently die might the settlor though lution and, think, I thoroughly is whole matter discussed This Welch, and I 303 U. unanswerably Hassett however, Attention, argument. add to the nothing can put property” enjoyment of . . . the Why “possession or Congress as if section I do not know. It reads the amendment to the enjoyment of the possession or make it clear that intended to followed result would have for taxation. Such was a basis probably why no cases have original language. is That from the of these on the use that have turned called to our attention been words in the amendment. the statements on the floor be called to
should Ways and Means the Committee on by House members of Mr. passage of the Joint Resolution.10 at the time of the a answering ques- Committee, Chairman of the Hawley, provides “It said, of the Resolution tion as to nature be used to evade no method shall that hereafter such tax.” stated: Mr. Garner of the Committee same after- Ways Committee on and Means this “The reported meeting unanimously had noon it retro- just passed. We did not make resolution afraid that for the reason that we were active I hope would not to it. But do agree Senate Seventy-second matter is in the when this considered that will make Congress pass we able to bill may be it retroactive.” “I question, reiterated, strong to a
And answer he have Congress the next will it retroactive.” hopes make Congress any subsequent never took action and meaning of “intended to take interpretation Court’s in possession enjoyment” remained the same. effect Joint Resolution The addition the section made vivos, gifts made certain future inter which would there- tax, subject tofore have been free of estate to such a tax. corollary B, C. As a section it is clear foregoing Congress to me also that the Joint Resolution made *25 purpose bringing in the statute for change no use of merely trusts into an estate because the actual que or its income the cestui the estate Allen, postponed until death of the donor. Shukert supra. impossible upon Spiegel for me to look
D. It is akin closely trust as to a will. The decisive or Church 10 Cong. Rec. 7198-99. any at time changed may a will be is that
difference any power trusts obliterated life, while these during Only modify the devolution. change or the settlors to put control, might their wholly beyond death, chances during Further, again in their hands. disposition for the benefit handle the trusts the settlors must life they not free to do They were of all beneficiaries. course, of a will. Of have been the case pleased as would objects provision similar if the had made settlor the result death, in effect at bounty by will, of his same; if, Spiegel or would have been the the takers his children the same annually given father had case, the would position earned, the trust their economic sums that the children could year same for that but have been the income certainty to their annual not look forward trust, the beneficiaries’ from the trust. Without the settlor. subject have been to the wish of income would a father’s illustration to show that argument It needs no an from very thing different gift from his income is a child. gift principal irrevocable cases, the dif- present the issue in these Returning to and its Helvering and v. Hallock ference between them arises possibility is here the of reverter progeny that possibility law in them the arises operation of whereas I That difference do not out the terms of the trust. taxability under 810 and § think is material as to interpretations of the sec- (c). Granting early that have determined might logically tions this Court did not interfere with the possibilities remote of reverter enjoyment complete possession beneficiaries’ expe- donor, the balance of gift during the lifetime of Hallock, tips precedent, Helvering rience since important, is way my judgment. scale the other It justified pushing we are not though decisive, since extreme, its this conclusion is a every logical rule to *26 know it rule. Since we the Hallock logical outgrowth gifts an estate tax on Congress put purpose is the interpretation death, after the take effect at or intended to accomplish the enough be broad words should of those effect,” take in that effectually. “Intended to purpose intention abide of an meaning has for me view, trust. of the terms of the legal result by possibilities of interpretation has I that this recognize of techni- employment through in result variation phrase may law. The addition a calities completed or an incom- difference between a make the of the settlor To make the intention pleted gift. Nor am difficulties. equal
determinative factor creates I joined, in which effort, I unmindful of this Court’s harmonizing principle find a Hallock case to In that case (c). engendered the difficulties estate against lies an that a tax principle applied larger brings grantor of the when the death accomplish This does beneficiary. for the being into of federal of the section interpretation in the uniformity its more. It leaves attempted nothing Hallock law. upon state dependent particular trusts
application to himself of has divested of when a settlor determination We are of a trust.11 in the res every possible interest Stuart, 154, 161-62: Helvering v. S.U. revesting of possibility Congress fixes a tax on the “When implication,’ ‘necessarj’’ income, property or the distribution state possibility to be determined think, is is that we according trusts, alike, deeds, take wills and under law. Grantees or distribute power to transfer of the state law. to the rule Congress local law. . . . essentially matter of is assets of a trust of trust receipt distributions event, or is the an has selected law, by local normally brought about grantor, by or to a funds may Whether event occur. levied if that a tax to be and has directed interpretation upon depends may may not occur that event *27 with a dealing Congress fully competent statute and is to any misunderstanding may correct we have of the congressional intention.
(2) foregoing The leads Spiegel conclusion case that must, pay this estate a federal estate tax on res, the trust Illinois, res unless that under the law of passed would have to the heirs at law or legatees of the last descendant of the If settlor. under Illinois law the estate returned to the settlor on his surviving descendants, all his possibilities the tax is due. The this happening in this case are extremely remote but a trust might by have been a young created son for an mother aged pay her the income life and at the settlor’s death pay principal. her the Appeals (159
The Court of 259) concluded F. 2d at that “If none of the beneficiaries settlor, survived the and that awas then possibility, failed, the trust the trustees would hold the bare naked title to the corpus as resulting trustees for the settlor.” There is no Illinois case holding squarely on this point, and in the absence a by such determination a state court we do not inter fere with a reasonable decision of the em circuit which Stuart, braces Illinois. Helvering v. 154, 164; MacGregor v. Co., State Mutual Assurance S.U. Life 280. The by rule followed Appeals the Court of accords generally with that accepted. Restatement, 411; Trusts § Scott, §411; Trusts Bogert, Trusts and Trustees 468; Morse, § Harris Trust & Savings Bank v. 238 Ill. App. Brant, Lill v. 232; App. 6 Ill. 366, 376.12 placed upon the terms of rights the instrument state law. Once law, they may are obtained local called, whatever rights be these subject are taxability.” to the federal definition of 12The Illinois Trusts, Annotations to the Restatement of the Law of 411, says that the rule of the law,” Restatement “states the but no case has been found where the corpus upon trustee holds the a taxpayer upon language wherein the relies cases was construed to create wills order vested remainders. cases, however, firmly
These do not overturn settled principle that an a express trust for lack of where fails beneficiary, resulting trust favor of the settlor arises by operation of law.13 property To vest under a will or deed is desirable. To vest property may under trust not be. It is more reasonable to return trust to the settlor on failure of than to it go have to the heirs of beneficiary. a reading
From of the trust involved in instrument *28 the instant case, it is manifest that the settlor did not grant power intend to his children the dispose to of their respective they predecease shares should the settlor with- resulting trust for the settlor because of the of failure the inter vivos Restatement, Trusts, (b). trust. See Ill. Anno. comment § In view of the surrounding theory uncertainties that the burden proof of taxpayer is on the to show that the Commissioner of Internal Revenue is in applicable error as to the law to an assessment of a deficiency, depend upon theory support judg I do not that to Appeals. Helvering Leonard, ment of the of Court See 310 U. S. 80; Helvering Fitch, 149; Helvering Stuart, 309 U. S. cf. 154, dissent, 172; Paul, Taxation,
U. S. Federal Estate and Gift 14.47, Supp.; n. 4 Mertens, and 1946 of Law Federal Income Taxation 285-86. Carter, In Chater this Court considered the following language whereby inter “The an vivos trust was created. during paid
trust for Lottie Lee is to cause the dividends to be to her years living January the three from if 1st next and she shall then be que to transfer the shares to her.” The cestui trust died before the expiration three-year period question of the and the arose as que the heir of of the settlor whether the cestui trust the estate unnecessary corpus. was to receive the This Court considered it words, meaning “to is sometimes done to avoid strain as intestacy that when wills are to be construed.” It concluded having failed, corpus “to him trust the trustee must redeliver the words, resulting from whom In there is a trust it came. other the donor.” beneficiaries specifically settlor named as
out issue. The That he grandchildren. of the trust his children bene- to these two classes of intended to restrict the trust the instrument by provision ficiaries is evidenced issue death of a child without that in the event of the shares of the share was to be added that child’s trustee- children. His retention of the surviving settlor’s power disposition to ship grant and failure to negative any in his lifetime intention his children of a reversion of possibility exclude the the settlor to the trust to himself. appears in the of the Court of
No error conclusion point. Appeals on this Church case must be
(3) Finally, the situation by York with. The was created New dealt Jersey. resident New resident of New York who died a New of three trustees were at all times residents of Two were York where the stocks and accounts the trust Ime, would assume that kept. From what is before possibility law would the New York control pro- of an the settlor. This retention interest Spiegel duces a variant from the case. The determina- New York law will be made a circuit tion of This, I is not think, sig- does not include state. *29 in determining nificant the course be followed. to Appeals As the Court of the Third made Circuit authority rule, its decision on the of the Dobson 161 F. Welch, 11, 2d it did not consider the effect of Hassett v. stands, my opinion, U. As v. Heiner S. 303. prior trusts, trust, passage like the Church created to the 3, Resolution of not includ- 1931, of the Joint March are able estate of a settlor for federal tax gross purposes possibility unless there is a to the of reverter by operation settlor of the state To controlling law. I question, judgment determine this would vacate the of Third remand to Circuit and the case that court to determine state law. Commissioner;
I v. I Spiegel affirm would 3, would No. 5, v.
vacate No. Commissioner Church. Frankfurter, dissenting.* Mr. Justice portions By fitting together my agreement with my part with a dissenting disagreement concurrence and my of comprehensive dissenting opinions brother Burton, I views substantially, my could of these indicate, Joseph’s make a together such would piecing cases. But repetition risk Therefore, at the of some coat. even a by others, what has been said self-contained statement clarity. on make for the basic issues of these cases will disharmony is of views Particularly this desirable where upsetting of which supports common result —a result is invited. Congress almost I. made 3,No. the decedent a settle Spiegel case,
In the he no interest for ment terms of which reserved by the is the form the set himself, suggested and it attempted evasion of the estate- disguised tlement an estate is found tax of the decedent’s corpus law. Helvering tax on the basis subject be the estate Hallock, by Fidelity- supplemented 309 U. S. Rothensies, U. Philadelphia Trust Co. Field, 113, and Gold
Commissioner Estate of States, On that basis stone v. United U. S. 687. if is due to the possibility,
is now decided that there law, how operation of the instrument or terms return set- remote, settled may ever Commissioner, is also a from Spiegel Estate dissent *[This post, p. 701.] *30 property must included tlor, the entire trust be Thus, tax. gross purposes estate for the federal estate may by liability Court's decision tax be incurred under the discovery gossamer possession enjoy- of a thread of or value. Nevertheless the entire trust ment, which has no as if corpus gross is in the estate and taxed included possession enjoyment of the really the settlor had or unanticipated property. only a result not creates Such hardship taxpayers; interpre- also an unrealistic is (c) Code. Since tation of 811 of the Internal Revenue § judicial duty interpretation an unrealistic is not such I is, compelled its avoidance am whereas conclude an Spiegel did not transfer interest “intended in possession enjoyment to take effect at or after death” (c) corpus within the meaning him in part gross settled his lifetime was no of his estate. brought
This case is under the decisions of Hallock and the three subsequent only by disregard cases the vital between the interest differences created Spiegel indenture and the this Court arrangements before upon placed. the four cases which is reliance
1. In 1920, Spiegel transferred securities to himself and person paid another co-trustees, the income to be equally Spiegel’s during three named children his life- If any settlor, time. of the children before the died the share of that if go issue, any, child to his otherwise to the settlor’s other children. The instrument provided upon further that death corpus, the settlor’s together any accumulated should be income, divided said “equally among my (3) children, any three and if my died, said shall have leaving any children child or surviving, children then the child or children of such deceased child of mine shall receive the share” of the trust parent to which his or her would have been entitled. *31 leaving If three children died without any the settlor’s of remain children, go that share was to to the two surviving Spiegel When the trust was established ing children. years old, aged 25,
was 47 and his three were children twenty and 13. At his death later the children years living grandchildren. and three were still there were a re- Upon assumption that would been the there have by operation Illinois law in event Spiegel verter predeceased leaving that all him without his children contingency “surviving children,” the value this remote $4,000.1 worth mathematically was determined to be Helvering supra, 2. In each of series, Hallock the several donors estate to giving created trust an property another but that would revert to providing predeceased the donor if the donee him. The donor’s estab- operative death in each case was the fact which the donor complete lished final and dominion as between instruments. according the donee to the terms of the were, com- was, Until the former’s death the donor as it enjoyment for the ultimate use and peting the donee form property. particular of the We there held that the conveyancing words is immaterial if the net effect will in a who property is that revest donor transferred Except of Illinois contingency survives the donee. on practical affairs law so remote as to be nonexistent in the His life, property Spiegel. would never revert to children finally death no doubt would determine which enjoyment would have the ultimate grandchildren real corpus upon children, trust settled his but him as a property could never come back to world the contingencies windfall. His death did not determine Appeals for the did not determine The Court of Seventh Circuit grandchild parent his also had to survive whether a who survived right principal to have the to his share the settlor-decedent go to his estate. merely defini- he benefit. His death
from which could quan- of beneficiaries fixed the tively closed class tum of each child’s share. opinion concurring
Contrary suggestion in the accepted by opin- the majority case—a suggestion Spiegel find Appeals Court did not ion—the all provided had retained an interest because he in the contingencies. It included settled every on gross theory carries *32 own failure of through were the seed its destruction said, resulting trust. It trust, thereby generating the a and that settlor, “If of the survived the none beneficiaries failed, the and the trustees possibility, was a then trust corpus resulting the the hold bare naked title to as would 2d at But for the F. 259. trustees settlor.” the swept have into argument gross mode of would any Spiegel’s in fee children conveyance any failure of trust for in 1920 since the the conceivable presumably property would not turn the trust reason the outright gift an trustees. into a comprehensive arrangement indenture is The trust take offspring for children and their care the their mortality among children and contingencies the Spiegel such as made the offspring. Provisions were an arrangement kind of made precisely by case are by which for his and children’s children ancestor children a view to the contin- upon them with property he settles interest gencies and reserves no generations of successive except in the settlor Nothing in himself. was reserved may reserved. notions about seisin have what feudal in tax pertinent more But feudal notions of seisin are no tax than they imposition of an estate when lead to cases very from it. At they lead basis away when these of the Hallock case was the insistence decision from the law of derive “unwitty diversities of [d] of a necessity to the continuous concepts medieval application in the peculiarly are irrelevant seisin. . . . intangible directed toward largely now so of tax measures Hallock, p. 118. The supra at Helvering v. wealth.” interest present settlor’s remoteness of the metaphysical by the clearly is shown at time the trust was created event that unlikely depended upon highly fact that conveyance time of the in existence at the all the children remote Even this die and would die childless. would And the settlor died. evaporated long before possibility is of the statute tenable construction certainly only of the sort there have been transfer only that not must must also interest (c) but the settlor’s designated §811 Miller, death. Cf. Estate up to the time of his persist Materials on Griswold, Cases and 138; T. see B. A. 145 (1940). Federal Taxation Court invoked bear later decisions three Spiegel presented to the situation
no resemblance made. ruling now justification no give case Rothensies, supra, Trust Co. v. Fidelity-Philadelphia In life settlor, in the provided for a life estate the settlement settlor and a reversion daughters, two estates in the *33 Respond- Brief for had issue. See daughters unless the Rothensies, Co. v. Fidelity-Philadelphia Trust ent, p. 8, 693, States, 687, U. Goldstone United supra; the which cut off grandchildren n. 3. The birth of the the after the death of did occur until interest settlor’s is to be deter- taxability therefore, the Since, settlor. of the trust the value death, it followed that mined at The in estate. gross was to be included property be al- should whether deduction controversy was sole interests daughters’ life mother’s and for the lowed Likewise in unborn children.2 contingent gift for a the settlor it was conceded Field case the Estate of right interest —the a substantial until death retained of whether question “limited to the grant of certiorari was The time of decedent’s trust at the corpus entire value of reduce or cancel the interest of life tenants and a reversion corpus of if these In to himself he survived tenants. controversy the Estate Field case too the concerned the basis on which the was to be assessed—whether the value of the life tenancies was to be deducted from corpus. The case was in Goldstone effect another case, being payable upon Hallock the insurance the do- nor’s death to the wife but with a reserved right predeceased if donor she him. birth grandchildren Spiegel’s destroys lifetime
all just resemblance between his case and the cases dis- reading cussed. On least favorable of the trust whereby the would grandchildren have to instrument — only parents survive not their but also the settlor —the possibility that the would regain property settlor extremely tenuous. Reading the trust instrument customary and not in spirit, grandchildren a hostile merely parents would have to their survive not the settlor for their interest become indefeasible. Thus the remote contingency reacquisition by the settlor vanishes.3 sure,
To be Fidelity-Philadelphia both the Trust Co. and the Estate Field generality cases there is gross death should have been included in the decedent’s estate.” Fidelity-Philadelphia Rothensies, 108, Trust Co. v. 110. U. S. Field, The same is true Commissioner v. Estate Church, In No. Commissioner it is even clearer that events subsequent possibility to the creation of removed whatever the trust previously of reverter had existed even if one assumes that when regain the trust was created the settlor if chil would dren or him. The trust his brothers and sisters did not survive provided corpus go indenture that the was to to the issue of deceased sisters, there brothers and sisters if he survived his brothers and but *34 anyone requirement nowas that the children survive to take. Un going import conveyances into less we are notions of tortious arrangements, subsequent modern birth of the children trust the language about regarding indifference remoteness uncertainty “reversionary decedent’s interest.” But in both cases as we have seen there was no question that the trust instrument purposely itself reserved settlor an interest which its context was substantial.
The talk of uncertainty and merely way remoteness was of indicating that where the settlor himself had reserved an interest only by terminable his death, it was not for the law to make nice calculations as to the chance he was giving himself to regain property. In these two thought cases settlor the reserved interest had significance law gave significance course the monetary value. Spiegel designed to retain contrariwise and his nothing prop- estate should not be held to include of which he divested himself erty many years before his death.
4. But even gossamer thread which binds the majority together in subjecting Spiegel corpus trust to an estate tax is visible only eye. to their mind’s gossamer thread is the possibility remote that at time of Spiegel’s death there would abe reverter of the property possibility depends him. But that en- tirely upon its recognition by law Illinois. It is at best a dubious assumption that such a reverter exists under Illinois law. My brother argument Burton’s disproof is not lightly to be dismissed. best, however, At this Court’s guess Illinois law would enforce such may displaced a reverter be day after tomorrow Supreme the Illinois rejection Court’s authoritative If guess. tax liability hang by is to a gossamer thread, ought the Court to be sure that the thread is only there. Since definitively the courts of Illinois can any possibility of his brothers and sisters removed that the reject May Heiner, would come back to the settlor. I do not Since regard causing I do not the retention of the life estate as the estate to be taxed.
674 it would seem to me common sense this, inform us about appropriate adjudication from them if some to secure an Judgment Act, Illinois, procedure Declaratory like theory, justify is available.4 To at all Court’s to remand disposing of the case would be rational mode Circuit order Appeals it to the Court of the Seventh procedure a to allow that court to decide whether fact ruling upon point under Illinois law for a is available is made the basis of this Court’s of Illinois law which assumption the correctness of this Court’s decision, since Thompson Magnolia Cf. Petro is at best doubtful. Service, Co., Spector 478, 483-484; leum 309 U. S. Motor McLaughlin, 101. A determination so Inc. 323 U. S. conclusively actually fix the interests held made would by parties to the instrument at the same time consequences leave to the federal courts the tax these Commissioner, 5, 9-14; interests. Blair 300 U. S. Helvering, 291 Freuler v. U.
II. case, 5, The of the Church No. extends far reach beyond proper construction of tax It statute.5 appropriate attitude of this Court concerns toward long-standing by a series of unanimous decisions this that, respect than it involves the by Court. More owed expressed Congress. this Court to the intention of 4 (Added May Smith-Hurd, Ann., 110, Ill. See Stat. Title 181.1. § 16, 1945.) 5 (c) portion which now 811 we are concerned § continuously 1916, has been on the statute books since when the 1916, 202 first federal estate-tax law was enacted. Revenue Act § (b), 777; 1918, (c), 1097; 39 Revenue Act of 40 Stat. Stat. §402 1924, 1921, (c), 278; Act of Revenue Act of 402 42 Stat. Revenue § (c), 70, (c), 304; 44 Revenue Act of Stat. Stat. § § 1516; by 3, 1931, 46 amended Joint Resolution of March Stat. 278; (a), Int. Rev. Code Revenue Act of 47 Stat. (c). §811 eighteen More than matter is this.
The short of the
found that
ruling
unanimous
by
Court
years ago corpus trans-
subject a trust
did
mean to
Congress
im-
tax
to the
decedent
his lifetime
ferred
merely because
Revenue Act of 1918
posed
himself for life.
the income to
settlor had reserved
Heiner,
opportunity,
238. At the earliest
*36
presenting
variations but
having minor
three cases
Treasury invited the Court’s reconsidera-
issue,
same
had the
having
after
Court,
But the
tion of its decision.
arguments by
and
counsel
briefs
comprehensive
benefit
ad-
unanimously
matters,
in fiscal
specially competent
v. Northern
May
v. Heiner. Burnet
in
ruling
its
hered to
Burnet,
Co.,
782; Morsman
v.
283 U. S.
Trust
S.U.
Burnet,
deci-
These
783; McCormick
circumstances, as Heiner, value, contemporaneous only to have is no Court are assured present decisions wisest permanence. greater the fact be to should called fairness,
In attention down, and laying Court’s decisions joining Justice Mr. Chief ruling, to, the adhering Heiner and Brandéis, Holmes, Mr. Justice Justice Hughes, Mr. which the argument were denied Mr. Justice Stone fair But it is also urged upon us. has now Government not of its own out that it has point to the Government four decisions Court to overrule the accord asked the case only was after years ago. It eighteen rendered was questions series of reargument was ordered upon the con- doubt Court which shed formulated Heiner, May the Government vitality of tinued Sup. cast into limbo. 68 suggested that the decision be universal, “a inexo Ct. 1524. No doubt stare decisis is not Brandeis, dissenting Washington J., rable command.” ait Co., 238. But neither is v. Dawson & 264 U. very In Hallock case of the dead hand. doctrine said, cases the Court “We upon heavily relied so these important an social recognize that stare decisis embodies continuity law, an policy. represents It element of satisfy need reasonable psychologic and is rooted at 119. one of the most expectations.” And expressed on reliances stare decisis for decision recent allegiance principle, firmness as to manifest with such hoc We are not deal argument.6 not utilization of an ad power ruling cramps here with a which of Govern ing adjudica with a ment; dealing we are not constitutional experience proved parochial which have tion time spacious instead of a view of the Constitution and which by the waiting thus calls for self-correction Court without *37 States, v. United S. 112-113. “But See Screws U. beyond problem is of decisis. The construction stare given which has 20 in the Classic case formulated a rule law § important field. the basis of federal enforcement this become adopted in formulated after mature con The rule that case was day only. good We sideration. It should be for more than one comparable to Mahnich Southern do have here a situation not Co., decision demonstrated where we overruled a S. S. U. preceded with what and sport in the law and inconsistent to be a hasty product of action followed. The Classic case was not the what preceded. with the cases which It was not out of line or inadvertence. important in this designed governing rule of law to fashion the It interpretations which dealing constitutional field. We are not with wisely flexible history remained throughout of the Court have meaning which the The subject frequent reexamination. and to any involved law’ gave phrase ‘under color case to the Classic unde if it states a rule only statute. Hence a construction of the only Congress change it. We add consequences, can in its sirable meaning instability uncertainty if we revise of the law to the and coming us.” before exigencies of each case of 20 meet the to process for of constitutional amend- the leaden-footed dealing ment. We are with an exercise of this Court’s ample duty Congress to construe what has enacted powers part completely quickly on its to correct misconstruction. powers promptly were invoked in this
Those case. Treasury meaning Because the was dissatisfied with the given by provision, very this Court to the estate-tax day May after reaffirming next the three decisions down, Treasury appealed handed to Con- Heiner were gave sig- true gress Congress relief relief. The today’s nificance of decision the Church not case is respect to be found the Court’s failure stare feel in judges duty decisis. The extent to which should perennial bound is a and the problem, innovate pull past is among judges different different aspects past. is in the same about different judge within the obligated, however, We are to enforce what is Congress power declare. Inevitable difficulties Congress purpose, when has not made clear its but arise when in a purpose is made manifest manner that no according ordinary meaning leaves doubt to the Court, in is English speech, disregarding it, disregard- judicial ing profess the limits of the which we all function to observe. Treasury deeply no doubt was over the concerned
emphatic May reaffirmation of v. Heiner. The relief sought Congress from was formulated fiscal and expert day legal very persuading who had that failed this Court to overrule What relief did Heiner. Treasury Secretary from Did Congress? seek *38 Treasury (c) the ask the Congress rewrite (c) Revenue Act of now of the Internal Rev- §811 Code, Certainly ? May enue so as to sterilize Heiner Not one language not. word was altered of provision compelled Court felt to construe which this Treasury pro- May did in v. Reiner. What
as it a addi- posed Congress granted qualifying was what whereby tion to the v. Heiner statute construed life interest in the settlor reserving trust settlements estate, only in a but gross were to be included decedent’s qualification in the made this case of settlements after Such, after March operative, is, became that inescapable history, in the of the was the light legislative did, Congress did, only thing of what and the it meaning four times felt qualify reading which this Court place upon Congress the mandate of constrained to history is re- imposition the estate tax. Welch, without 303, again counted Hassett v. dissenting history voice. This is so crucial to exer- judicial process case, that it bears cise repetition. 3, 1931, of March
When the Joint Resolution adopted, only prospective it was clear that it was to be sponsors specifically effect. Its declared: “Entirely apart may from the that be ex- refunds pected result, anticipated many it tois be persons proceed will to execute trusts or other varie- they ties of transfers under will be enabled to which escape upon property. tax their It is of greatest importance therefore that this situa- opportunity tion be corrected and that this obvious be is purpose for tax avoidance removed. It for that joint proposed.” resolution is Cong. 7198 and 7078. Rec.
And good making there was reason for not it retroactive: did
“We not make retroactive the reason that we were afraid that agree the Senate would not I hope to it. But do that when this matter is con- Seventy-second Congress sidered we be may pass able to a bill that will make it retroactive.” Rec. 7199. Cong.
679 by charge floor of the These statements on the those they as as had controlling, though Resolution are much a were Report, they in Committee been submitted purpose explanation of the authoritative Resolution’s In Representative Schafer Wis- meaning. fact, sponsors explained had consin stated that unless the object, preventing acceptance bill he would thus its as Cong. a resolution. 74 Rec. 7198. by Congress
When the section was reenacted the 72d 1932, it remained (a) 803 Revenue Act § pre-lkfay in the v. with the Joint Reso- language Heiner 3, 1931, slightly lution of March added different interpreted This phrasing. 47 Stat. 279. section was applying a Court as not by in 1938 unanimous a life created in Hassett v. reserved Welch, by filed the Govern- U. S. 303. briefs 303 in that case contained much the same again ment contrary On now found to demand result.7 data Bullard, v. day Helvering same this Court also decided applicable U. which held the Joint Resolution 297, 303 S. passage to reserved life estates created after quoted language from It same Matter Resolution. major- Keeney, 281, 287, quoted Y. 194 N. now appreciated the indicating thus that it tax-avoidance ity, interpreted problem (a) and would have 803 retroac- it to tax tively Congress had indicated that intended March It 3, estates created before 1931.8 reserved life 7 Welch, seq., Petitioner, pp. 20 et in Hassett v. See Brief for S. 303. U. v. Heiner and the three cases The Court made it clear statutory, following resolving rather a constitu it it was than that May Heiner, 238, 244-245; Burnet v. tional, question. Burnet, Co., 783; Morsman 782, Northern Trust S. U. Burnet, 784-785. 283 U. McCormick 783-784; S.
U. merely con Court had Congress Nor was left in doubt being qualify. Congress asked was then strued the statute which Supreme asked, York “Was the House, Mr. Black of New In the Welch, especially say is difficult Hassett supra, only language the Court considered added the Joint Resolution and not the section in its entirety, phrased way: before it in since issue this' *40 302 petitioners “The ask us to hold that § (c) by Act of 1926 as amended the Joint Revenue Congress 3, 1931, Resolution of of March 803§ in the (a) of the Revenue Act includes decedent, estate of a for estate gross tax, which, adoption amendments, before the was irrevocably transferred with reservation of a life to . . . .” 303 S. at 304. the transferor U. May authoritative, If v. as accepted Heiner had not been pointless it would have been that the amend decide did (c) ment of the Revenue Act of 1926 not operate in retroactively. Hand, J., See Learned Helver Proctor, ing Cir.). (C. 140 F. 2d A. 2d v.May Of course the did not attack Heiner Government Welch, in supra. Hassett v. been rebuffed three Having by overruling times this Court in efforts to its secure its having nullify to Congress effect, resorted its in whole claim the Government Hassett Welch was had, were, Congress May overruled v. Heiner by 3, 1931, only prospec- the Resolution of March tively, retrospectively. but That construction of the rejected Resolution of 1931 had to in light be of the legislative history of the unanimity Resolution. The question, Court decision based on a constitutional or a discussion of sponsor legislation, the statute?” To which a Mr. Garner Texas, replied, itself, “It on the statute and was not consti- Cong. tutional.” Rec. 7199. Indeed it is difficult to assume that by constitutionality the Court was affected notions of in view of the fact that when the courts of the State of New York held similar apply rejected estate, words to to a reserved life this Court process contention that the law offended the due clause of the Four- Keeney York, v. New teenth Amendment. S. 525. U. in Court’s decision Hassett Welch confirms the inevitability of the decision. And the considerations that led the Government not May to attack Heiner Has sett v. Welch likewise led the Government not to ask the Court to overrule May v. Heiner in litigation this until propelled to do so reargument. Court’s order for These considerations were of the nature, except same re enforced another respect decade’s v. Heiner by the Treasury the actual administration of the revenue law.
Congress has made no change this section since 1932 and the identical language was carried over 811§as (c) of the Internal Revenue Code in 1939. There has been no amendment to this language the Code. Al- though sponsors of the Joint Resolution the House expressed hope the next Congress would make provisions Resolution’s retroactive, nothing of the *41 sort was done. See Cong. 7199, partially quoted Rec. p.
ante at 678. Nor did Treasury the any remind sub- sequent Congress of this unfinished business, despite the fact that it urged provisions amendment of other estate-tax law.9
9See, g., Hearings e. before Ways Committee on and Means on Revision, 1932, Revenue Cong., 7, 42-43; Hearings 72d 1st Sess.
before Committee on 1932, Finance on the Revenue Act of 72d Cong., 33, 51; Cong. 1st 5787; Hearings Sess. Rec. before Com Ways on Act, 1936, Cong., mittee and Means on the Revenue 74th 2d 624; Hearings Ways Sess. before the Committee on on and Means 1938, Revision of Cong., 108; Hearings Revenue Laws 75th 3d Sess.
before the 1938, Finance Committee on the of Revenue Act 75th Cong., 692-93; Hearings Ways 3d Sess. before the Committee on and 1941, Cong., 74-75; Means on Revenue Revision of 77th 1st Sess. Hearings 1941, before the Finance Committee on the Revenue Act Cong., 37; 77th Proposed 1st Sess. Data on Bill of 1942 Revenue Ways Treasury Submitted to the Committee on and Means the Department and the Staff of the Joint Committee on Internal Rev (1942), Hearings enue Taxation 363-65 before the Committee on Ways 1942, Cong., and Means on Revenue Revision of 77th 2d impressive past decade, in an
The Court during history given legislative has effect to body decisions, story than the far less compelling under circumstances cases body the massive collected here summarized. See p. in in the face of the Appendix A, post, Moreover, 687. overruling an legislative history above, set out even precise was decided not five cases which this issue would subsequent hand. For give this Court a free actions meaning announced Congress make part four as much Heiner reaffirmed times if wording of the statute as it had been written 1277, express Note, terms. Harv. L. Rev. See interpretation certainly An that “came a bombshell” like Congress. had Its failure to alter the the attention of accepted interpretation. language indicates that Appendix B, post, p. the cases 690. Due See collected precludes it regard ignoring for this Court’s function from explicit legislative “yield intention even results more consonant fairness and reason.” Anderson Wil- son, 20, 27; see The Nature of the Cardozo, Treasury 14 (1921). Judicial What could Process do not induce the House to the Senate would because years later, not vote for not now, eighteen it we should bring pass simply because our this case action does depend upon body’s concurrence. 7, 91-92, Hearings 94; on Sess. Revised before Committee Ways Cong., and Means on Revenue Revision of 78th 1st 7; Hearings on Sess. Revised before Finance Committee Cong., 46; Revenue Act of Federal Estate 78th 1st Sess. *42 Taxes, Proposal Integration for and Gift A for and Correlation Study by Advisory Tax, an prepared with the A Joint Income Treasury by Department Committee to the and Office of Legislative Counsel, cooperation with the of the Division of Tax (1948); of Letter Tax Research and the Bureau Internal Revenue Chairman, Secretary Treasury from the of the to the Com- Under (mim- Ways Means, February 1948, pp. 3, mittee on and Department Treasury). eographed copy by of the furnished No comparable legislative history flouted in was Hel Hallock, It vering 309 U. is one hold thing to that Congress is not either with out charged seeking and reading decisions reach in conflicting which views application principle of a sound steps with taking to meet such decisions. This the meaning is of our hold ing quite the Hallock case.10 It is thing different to opinion The entire text of the Hallock insofar as here relevant why makes clear the situation the Hallock not at case is all similar to that involved the Church case. specific Congressional repudiations
“Nor does want of by Congress implied St. Louis Trust cases serve as an to instruction light reconsider, us not experience, in the of new whether those decisions, conjunction case, Klein for of make dissonance very enveloping require persuasive It would doctrine. circumstances Congressional reexamining debar from its own silence to this Court Congress explain by doctrines. To the cause of non-action when Congress light speculative itself no is into unrealities. sheds to venture Congress may not had its directed to an undesirable have attention decision; St. and there is no indication that to the Louis Trust any had, by way its into a cases it even bill that found committee pigeon-hole. Congress may its so for not have had attention directed any may Treasury stay its of moved the number reasons that have Treasury hardly by certainly can hand. But such inaction through operate controlling practice, acquiescence, administrative as a by estoppel barring Court tantamount to an reexamination par- which had drawn. Various considerations distinctions it liamentary strategy might suggested as be reasons tactics and they only Treasury Congress, but would inaction try quicksand on when we to indicate that we walk be sufficient legal controlling .legislation a find in the absence of corrective principle.” recognized the opinion doctrine 7 of the Hallock
Footnote present to the “has no relevance but stated that reenactment dealing Congressional (1) action problem” because “the fact problems created different problem silent on the with one while controlling acceptance imply cases, does not the St. Louis Trust Louis in the St. Congress cases”; the decisions (2) of those “since (c)”; (3) there Congress cases, has not re-enacted Trust §302 subse- long, construction . . . administrative “. no . . uniform *43 authoritative acquire does not content say statute it has been called to interpreting when a decision Congress engen- and of and has public of the attention Congress, and when after professional controversy, dered merely refused to undo the effect debate, full has not modify only partially. but' has seen fit to of the decision Helvering Griffiths, 371; U. S. United States Co., 773-785; Apex South R. U. S. cf. Buffalo Leader, That Hosiery Co. v. 310 U. S. 487-489. is this case.11 ambiguous give ground
quent of an statute to re-enactments implying legislative adoption of such construction.” As indicated Congress by dissent, pointed text of this the footnote also out that 3,1931, plausibly could be said to have the Joint Resolution of March rejected underlying Louis Trust cases. The table the St. attitude inapposite to just note how are these observations the next shows ruling in story Treasury’s attempt to undo this of the Court’s May followed it. v. Heiner and the cases which Helvering legislation subsequent v. St. Louis Union Bearing May v. Co., 39, compared response with that Trust Heiner, 281 238. U. S. Trust St. Louis May v. Heiner series
Relevant factors cases Eighteen years Age years questioned in- Five 1. terpretation when aban-
doned Weight adjudication
2.
(a)
Unanimous
Court’s division
5-4
(b)
Five times
Times decided
Once
holding
(a) The exact
Congres-
Evidence
None
Congress
explained to
acquiescence
sional
(b) Change
expressly
prospective
made
Difficulty
getting nec-
4.Apparent
reason for None
essary
votes
Congressional
Senate
adherence
questioned
case
opinion
majority
in the Hallock case did not,
explicitly
either
implication,
declare that
*44
longer
Heiner was no
accepted interpretation
of the
pre-1931 part of the
language
(c).
811
When we
spoke of what had been “Congressionally discarded” —a
reference, incidentally, made
argument
to answer the
that
Congress had legislatively recognized the distinction be-
tween the Klein12 and
St.
Louis Trust13 cases—we
just
Congress
meant
what
meant,
that where a settlor
May
created a trust after
3, 1931, which he reserved a
estate, the property
life
transferred would be
included
estate.
It
gross
significant
only
is
that
one14 of
many
judges
circuit
who have dealt with the Hallock
opinion has thought
May
that
it overruled
v. Heiner
interpretation
or that
there announced was to be
Estate,
changed. Commissioner v.
2d
Hall’s
153
172
F.
(C.
Cir.);
Proctor,
A. 2d
Helvering v.
anything said, that forget not law. We do longer was no J., Frankfurter, . U. . . 120 of 309 page note on May v. discarded spoke 'Congressionally unwarranted quite be doctrine;’ but it would Heiner to overrule infer the court meant that that from quite was added 'doctrine,’ and the note that inter- properly it be ... cannot purpose. another legis- was a the amendment preted holding that had Heiner, supra, interpretation that lative it de- Perhaps wrongly wrongly decided. been it is the amendment evidence cided; perhaps say so, did Supreme but Court was; Roberts, It is so. true thought indicate that *45 (309 U. at his no difference S. J. in dissent found Helvering .) . that decision and 127 . between page . . supra, U. S. 39 . Co., v. Louis Union Trust 296 St. v. consistently, May that apparently thought did majority also but the Heiner, supra, fall, must opinion. share not his . S. 106 . . Hallock, supra, v. 309 U.
''Helvering
situation.
quite
concerned
another
was
his wife—
that,
had
if he survived
provided
settlor
him;
went
had
life
remainder
to
who
a
estate —the
went
her.
him, the remainder
but if she survived
to
was
that was the
that,
All
decided
when
that was
form
what was the
intent,
made no difference
the settlor’s
enough
of words used.
that
It
he
an interest
had reserved
death cut off
which
determined;
a
then
upon
himself
condition
If
his
part
estate.
...
made
remainder
.
Heiner,
687 clearly not ours it is power, lift of which independent is Furthermore, if the Commissioner to exercise. U. S. 106 . . . Hallock, supra, 309 Helvering v.
right,
. . .
Welch,
I reverse would Church, 5.No. affirm v. Estate Commissioner Appendix A IN WHICH LEGISLA- THE PAST DECADE DURING
DECISIONS OF OF CONSTRUCTION WAS DECISIVE TIVE HISTORY PROVISION A PARTICULAR STATUTORY 68; Foods, Inc., United 306 S. v. Durkee Famous U. United States 22; Strecker, S. Towery, 324; v. 307 U. S. Kessler States v. U. 148; v. One Maher, United States v. S. United States U. 39; Commissioner, 219; v. 308 U. S. Ford, Model 307 U. S. Sanford 79; v. United Massachusetts, Valvoline Oil Co. v.
Palmer 389; Helvering, S. 141; Haggar 308 U. States, Co. S.U. 401; Board, Kalb S. Labor v. Labor U. Federation American Commissioner, S. Morgan 309 U. Feuerstein, 433; S. 308 U. 251; Bassett, Chicago 309 U. Dock Co. 78; Coal & South New Utility Edison Co. Amalgamated v. Consolidated Workers *46 of Commissioner, 309 v. 261; Trust Co. York, Germantown 309 U. S. 390; Metro-Goldwyn Corp., S. 309 U. 304; Pictures v. S. Sheldon U. 16; Francisco, County 310 S. City U. San v. United States 381; Adkins, United 310 S. v. U. Anthracite Coal Co. Sunshine 534; States Trucking Assns., United 310 U. S. v. American States Rolling Helvering Steel 554; v. Northwest Dickerson, S. v. 310 U. 83; Commissioner, 311 U. S. Neuberger v. Inc., 46; Mills, 311 S.U. Products, Valley 311 U. S. Farm v. Lake Wagon Union Milk Drivers’ Helvering, 311 U. S. 189; v. Helvering Janney, v. 311 U. S. 91; Taft Gilliland, v. 52; Davidowitz, States United v. 312 U. S. 195; Hines 688 Bank, 86; Atlas National 312 U. S. Palmer v. Webster &
312 S.U. 600; Helvering v. Cooper Corp., 156; v. 312 U. S. United States Maguire Commissioner, 1; Enright, 636; v. 313 Hel U. S. 312 U. S. 15; Corp. v. vering Campbell, v. Shamrock Oil & Gas 313 U. S. Board, Phelps Dodge Corp. 313 Sheets, 100; v. Labor 313 S.U. Helvering Co., 313 S. 177; v. Flaccus Oak Leather U. William U. S. Scotia, 270; Sampayo Nova 313 U. S. Baltimore 247; v. Bank of Sales, v. Kepner, 44; Parker Motor Boat v. 314 S. & Ohio R. Co. U. Commissioner, Corp. Inc., 244; Securities v. 314 Textile Mills U. S. Gray Powell, 402; District Columbia 326; v. 314 U. S. 314 S.U. 441; v. Central Illinois Natural Gas Co. Murphy, v. 314 S.U. Thompson, Service, 498; v. 315 U. S. Duncan Illinois Public 314 U. S. v. Holland, 357; 1; Cudahy Packing v. 315 S. United States Co. U. Teamsters, 315 U. S. 807 International Brotherhood Local 561; Lloyd Co., v. 315 S. 521; Co. Melvin U. Stonite Products Co., 685; Miles Cleaner 315 U. S. Labor Board v. Electric Vacuum 698; the use Co., United States to R. 315 U. S. v. Illinois Central 23; Rubber & Woolen Irwin, v. Mishawaka Noland Co. 316 U. S. 203; Kresge Co., Kirschbaum Manufacturing v. 316 U. S. Co. S. S. Investors, Inc., Helvering Walling, 517; v. Cement Co. v. 316 U. S. Properties, Inc. v. 527; Marine Harbor 316 U. S. Manufacturers States, S. 78; v. United 317 U. Co., Braverman Trust 317 U. S. Kawato, parte 49; Riggs Drago, 95; Ex Kumezo v. Del 317 U. S. 135; Hardinsburg Brown, 69; v. 317 U. S. Bank 317 S. State U. 144; Corp., United 317 S. Illinois Finance U. v. Northern Pfister Brown, 200; v. 317 Wayne Pump Co., Parker v. 317 U. S. States Co., 564; Har Paper S. 341; Walling v. 317 U. Jacksonville U. S. Hess, 476; v. Co., United States v. Trust 317 U. S. rison Northern Ziffrin, 424; Monia, Inc. 537; v. 317 U. S. United States U. S. 109; 73; Hoffman, S. States, Palmer v. 318 U. v. S. United 318 U. v. 125; Corp., Robinette v. Shore 318 U. S. Overstreet North 176; Shaughnessy, v. S. Helvering, 184; 318 U. S. Smith U. Security 306; Co., Federal Helvering Transp. S. v. U. Sabine Quaker Co., 218; v. & United States 318 U. S. Adm’r v. Oats Swift Co., 448; Fred Co., 442; Pac. R. 318 U. S. Western 318 U. S. Ecker Jersey 643; Sons, 318 S. v. M. Witmark & U. Fisher Music Co. Commission, 319 Light v. Federal Power & Co. Central Power States, Broadcasting 319 U. S. 61; Co. United National U. S. 561; Lightner, United 190; Schneiderman Boone v. U. 81; Hirabayashi States, 320 U. S. States, 118; United S.U. v. Dotter States, 264; States United v. United 320 U. S. Roberts States, Express v. United weich, 277; Lines Crescent *47 689 401; Colgate-Palmolive-Peet States, 320 S. v. U. Co. United 320 422; Laudani, 543; United States v. U. S. 320 U. S. United States Myers, 561; Trucking v. States, 320 U. S. McLean Co. v. United 67; Trainmen, Enterprise Lodge, 321 U. S. Brotherhood Railroad Toledo, Co., No. 27 v. P. W. 50; & R. 321 B. F. U. S. Goodrich States, 126; v. Bowles, Co. United 321 U. S. Davies Warehouse Co. v. 144; Bowles,
321 v. 321; U. S. Hecht Co. 321 U. S. Cornell Steam States, v. 634; boat Co. United 321 U. S. Labor Board v. Hearst Pvolications, 111; States, 322 U. S. Carolene Products Co. v. United 18; Davis, 111; 323 U. S. Smith v. v. 323 U. S. United States Rosen wasser, 360; Telegraph Lenroot, 323 U. S. Western Union Co. v. 323 490; Hartford-Empire States, 386; v. U. S. Co. United 323 U. S. Cen City Muscatine, 138; tral States Electric Co. v. 324 U. S. Gemsco Walling, 244; States, v. 324 U. S. Canadian Aviator v. United 324 215; Light U. S. v. Connecticut & Co. Federal Power Com Power mission, 515; Phillips, Walling, A. H. 324 U. S. Inc. v. 324 U. S. Brooklyn 490; O’Neil, 697; Sav. Bank v. Federal Trade 324 U. S. Staley Mfg. Co., 746; Ridge v. A. E.
Commission 324 U. S. Jewell America, Corp. v. Coal Local No. United Mine Workers of 161; Elgin, Burley, 711; 325 J. E. R. v. Inter U. S. & Co. 325 U. S. Parker, 60;
state Commerce v. Markham Commission 326 U. S. Cabell, 404; Kelley Commissioner,
v. 326 S. John Co. v. 326 U. 521; Walling, 657; v. Mabee U. S. Roland Electrical Co. 326 U. S. Sansberry, Co., 178; Duggan v. White Plains Pub. 327 v. U. S. 499; Carbone, 633;
327 v. 327 Williams U. S. United States U. S. States, 711;
v. v. A. P. United 327 S. Federal Trade Commission U. Paper Co., 193; Lines, W. Hust v. 328 328 U. S. Moore-McCormack Sheridan, 707; 379; v. v. U. S. United States 329 U. S. Oklahoma Commission, 127; United States Civil Service 330 S. United U. America, 258; States v. United Mine Workers 330 S. United U. States, Carpenters & Joiners America v. United Brotherhood of 446; Stevedores, Porello, 395; v. 330 330 American Inc. U. S. U. S. Mechling, 567; v. 330 S. United Interstate Commerce Commission U. McCullough 709; v. Ogilvie Co., v. Hardware 330 U. S. States Ayrshire Corp. v. United Corp., 96; Collieries Kammerer 331 U. S. 642;
States, Austrian, Jones 132; Williams v. 331 U. S. 331 U. S. Phelan, Fong v. Liberty Co., 524; Tan v. 332 U. S. Haw Glass Sullivan, 323; 6; 334 United States Hilton U. S. U. S. Zazove, City Lines, 573; United States National U. Organizations, Congress 602; Industrial United States U. S. States, 1; Ahrens v. 106; Shapiro v. United U. S.
Clark, 335 S. 188. U.
Appendix B THE UPON THE DECADE RESTING DURING PAST OPINIONS OP A THAT THE REENACTMENT STATUTE RULE PLACED CONSTRUCTION CARRIES GLOSS OP IT BY COURT UPON THIS Rasquin Battery Shimadzu, 5, 14; Storage Co. v. U. S. Electric Hosiery Leader, 310 U. Apex Co. v. S. Humphreys, 54; S. v. 308 U. Helvering Griffiths, 318 U. 469; Dewar, 354; v. S. 313 U. S. Brooks Co., 17; Cementing 331 U. S. Well 371; Walling v. Halliburton Oil 210; Munter, Francis Southern S. U. Commissioner Pacific Co., R. 333 U. S. Co., 445; v. South United States U. S. Buffalo Broadcasting v. Columbia 771; Comm’n cf. Federal Communications 132-133; System California, 132, see Mr. Justice 311 U. S. Black of Pearson, Publishing 306 U. Washingtonian Co. dissenting in dissenting v. United in 42; Justice Girouard see Mr. Chief Stone States, 61, 70. Burton, dissenting.
Mr. Justice important Except of a to the settlor for its reservation during right the settlor’s to the net income of the trust comparable largely life, is deed of trust in this case1 Spiegel to the S. 701. case, trust instrument 335 U. day May, This of between Indenture made the 17th Church, Borough Brooklyn, City Francois of the of and State L. (hereinafter “Settlor”), party of New York sometimes called the Church, Dwight part, the first and Francois L. Church and E. Borough Brooklyn, York, city of New and Charles and State (hereinafter Church, Rochelle, T. York sometimes New New “Trustees”), part. parties called the of the second making pro- is the said Francois L. Church desirous of Whereas may any time of vision for lawful issue which he leave at the his provide in the death as well as an income for himself for life manner forth, hereinafter set
Now, therefore, Church, L. in consideration said Francois receipt paid, of the Dollar whereof sum of One to him in hand acknowledged, acceptance by parties of the hereby is and the said declared, simultaneously part has second herein delivery hereof, sold, assigned, and set transferred execution and sell, hereby assign, over and set over unto the and does transfer speak complete Both for themselves as transfers praesenti. contemplation Neither was made of death. evidence the factual settlor, intent like- comparable Spiegel wise, is to that of the settlor said Church, Dwight Francois L. E. Church and Charles T. Church Trustees, successors, and to following their securities, to wit: (1000) One thousand Dwight Co., shares of stock of Church & corporation organized Maine, under the laws of
To have same, together and to hold moneys with the investments into any power which the exercise of given hereinafter to the or them, trustees law vested in the said described securities proceeds moneys thereof may and such from time to time *49 be converted in hold, manage, trust nevertheless to invest and rein- vest upon the said trust estate the trust herein contained and with powers by herein or upon trustees, law conferred and to accruing collect and receive the paying income therefrom and after from charges expenses said income all properly chargeable against and the income of pay said trust estate to over the net income to the Settlor, Church, during Francois L. the term of his life natural upon the death of the Settlor this trust shall cease and determine and the trustees are pay ordered and directed to transfer and over principal estate, of amount said trust with all increase thereof exist, as it shall then to the child or children of the Settlor then sur- viving any the issue of deceased child or children to take the share per stirpes parent which their would have been entitled to receive living. if
In the event leaving the Settlor should die no lawful issue surviving him then and in that event the trustees are ordered and pay directed to transfer principal over the amount of said trust estate with all increase thereof equal as it shall then exist in shares surviving, any to the brothers and of sisters the Settlor then child or children of a per stirpes deceased brother or sister to take the share parent living. which their would have been entitled to if receive respect hereby Trustees with to such trust are authorized and empowered:
(1) during To retain the trust estate the continuance of the trust in the by same investment in which it was without received them being any resulting loss; liable account for public
(2) private upon To sell at or sale such terms and for price prices together such or and at such time or times and or in parcels may proper such lots or as the Trustees think the securities that the settlor evidence fact, In the affirmative
case. complete and absolute a transfer to make intended Spiegel stronger praesenti This in the case. than is here family only avowedly sought protect not his settlor by trust, no sale or sales shall be made them in the but such held Settlor; by the consent first obtained of the trustees without proceeds be of such sale shall Likewise in the event of a sale the delay unnecessary in securities by without reinvested the trustees approval in securities by or in default of such approved the Settlor of Trustees the laws the State authorized for investment York; New may any
(3) any at time compromise To claim or claims that security any property or or with reference to the trust estate arise thereof; forming part
(4) exchange any for other securities To of the trust securities Dwight Company any reorganization of Church & connection with belonging issuing any company companies securities then or other or trust; to the any
(5) stock, directly by proxy, in manner upon To vote or in their own as' if the trustees held the shares and to the same extent consolidating merging right, including or power to vote favor corpora- other corporations or with each other or into or with into creating corporations, or tions, liquidation for the dissolution indebtedness, mortgages liens and for the and other authorization reorganization corporations deposit securities organization or and to any any protection reorganization committee or committee corporation.
(6) in- apportion in discretion as between To their uncontrolled may proper, any or principal deem losses come and as the trustees of the profits resulting or decrease in the value from the increase may any part of the or which at time form a securities estate, estate, apportion of the trust and also so to the income trust any proceeds upon account any loss in income and received said way interest, dividends, or income, by of stock dividends of whether bonds, debentures, by way cash, stocks or other of the distribution of may any by time corporations whose stocks or securities at securities otherwise, part principal of the trust estate or and also form a of the similarly apportion expenses in of said incurred the administration upon any of securities in with the realization said trust or connection property; (7) attorneys in employ To counsel or at law connection against possibility but also himself his further in disposal corpus of his interest the trust. The any reverter, remoteness of of a possibility arising by operation law, comparable is here to the remoteness alleged possibility of a Spiegel reverter case. Two other features of case, however, separate require consideration.
First. It is the law of New York that must determine here whether possibility reverter, of a either to the settlor or to his estate, arose by operation of law from the deed of trust. As this case up came from New Jersey, Third Circuit, we have no announcement law of New York from the United Appeals States Court of for the Second Circuit which includes New York. Fur- thermore, when the United States Appeals Court of the Third Circuit rendered judgment its favor of the taxpayer, it did express so in upon opinion reliance of the Tax Court and the Court, Tax did turn, elucidate the law of New York.
IWhile rest my conclusion in favor of upon affirmance the absence of the factual intent which, as stated in my dissent the Spiegel case, I required believe is the administration of the if in their discretion the Trustees necessary deem it pay or desirable compen- and to them reasonable expense sation for their services as an of the administration of said trust. any
In the resign event that any Trustees should or for other vacancy reason cease to be a trustee such shall be filled appointment writing by a successor trustee in the Settlor.
In parties witness whereof the hereto have hereunto set their day year hands and seals the first above written. Church,
Francois L. Settlor. Church, Francois L. Dwught Church, E. Church, Charles T. Trustees. *51 694 a substantial Code, the Internal Revenue (c) of
§811 ground affirmance on be made for argument might no York, possibility law New that, under the A law.2 by operation of from this trust reverter arose also be made for affirmance argument might substantial reverter, of a alleged possibility that ground on the case, disregarded should be here in the Spiegel and also non curat lex. on of de minimis the doctrine instant opinion In of the Court in the Second. reversed, however, without case, is judgment below This for its affirmance. any grounds of the above facing Heiner, 238, and overruling May v. is done it the foundation for that has carried with action Welch, The 303 opinion U. S. 303. Court’s Hassett place this which was trust, reversal is to effect of such had position though it 1924, the same as executed 3, 1931, after Resolution of March been executed the Joint the federal 46 That Resolution made Stat. 1516-1517. transferred applicable property tax thereafter reserved to transferor deed of any income possession enjoyment of or the right to the no during his There is from the trust life. would doubt the transfer case but instant if subject have tax deed of trust been the estate had after, before, been executed instead of Resolution 3, legislative history March of that Reso The demonstrates, lution however, that not intended Its carried prospective be retroactive. character also 2 particularly Phillips, respondent cites Fulton Trust Co. 573, 581, Bowers, 558, 559; 218 113 N. 195 N. Y. E. and Matter of App. 548, 912, aff’d, 613, N. Y. E. Div. 186 231 Y. 132 N. S. N. 910; and, presenting testamentary analogous trusts situations or dispositions, Elting, App. 74, Matter 2d 48 N. Y. S. Div. 892, aff’d, 941, McCombs, 123; N. Y. 63 N. E. 2d Matter of App. 894, aff’d, Div. N. Y. 2d 38 N. E. N. Y. 2d 226. *52 of recognition the existence congressional a at least and prior a between making distinction
of some basis for described. type future transfers in 1924—and instant the trust
After the of execution death of 3, March and the certainly between any, if little, 11, on 1939—there December settlor of making disposition further for him to consider reason from the protect his rights reserved order to his were and there 1939, federal estate tax. Between Heiner, its handed down this Court decisions Burnet, supra, 1930; Morsman 14, on April 283 U.
783, 2, on March and companion cases, its two 1931; Welch, supra, Hassett February on 1938. In 28, those of the above which were March decisions rendered before 3, 1931, unequivocally this Court held unanimously applied a federal estate tax was not to be to trust merely of because of a right retention thereunder the settlor to receive income of his during life. The entry by this Court in made each the com- panion cases decided March expressly stated doubt as to the constitutional authority of to Congress enact law which would tax apply retroactively the estate to that already transfers had been made. The action Congress on 3, 1931, March reflected that doubt. The seven Justices who participated in Hassett the case Welch, supra, in 1938, refrained from expressing doubt as to the state the law before March 3, In that case the Court reviewed carefully the legislative history that was material to the case and also the admin- istrative interpretation which had been given to the statute. The Court concluded as (at follows pp. 314- 315):
“In view of other settled rules of statutory con- struction, which teach that a law is presumed, expression absence clear contrary, operate prospectively; that, if doubt exists as to the doubt should be taxing statute, of a
construction we feel bound to taxpayer, resolved in favor of the (a) 1931 and 803 hold Joint Resolution of that the with res- apply only to transfers of the Act of 1932 dates subsequent ervation of life income made adoption respectively. of their view, we not consider the con- “Holding this need applied tention the statutes as to the transfers deprive respondents under their consideration *53 property process due in violation of Fifth without Amendment.” in up 1939, of the death
Thus,
to the time
settlor’s
reason,
Court,
he never
at least
this
given
was
suspect that
which
included in
he had
his
gross
1924 deed of trust would be-added to his
estate for
purposes.3
federal estate tax
presented
May
The issue
in
v.
originally
as
Heiner
solely
statutory interpretation
was
and there
one
were
persuasive
way.
either
arguments
deciding the case
However,
unanimous
this Court in
decision of
that
changed
case
the status of
issue. Thereafter,
that
by this
meaning
statute carried the
ascribed to it
Court.
3
1924,
appears
settlor,
upon
in
It
in the record that
relied
attorney
family
and, assuming
the advice
his
the continuance
attorney
relationship,
subsequent
of such a
such
consultations
express
may
policy in
well have
the settlor’s further
reli
counseled
May
upon
Heiner,
comparable
v.
ance
Such companion expressly per stated the three curiam deci- 2, acceptance This sions of March also has been in some degree by Congress, evidenced the failure of any time, part at to set forth a contrary view on its to the its meaning original language. Congress merely added new language change the effect of that inter- pretation Department for the The Treasury future. regulations practices conformed its to the reasoning v. Heiner. This Court further acceded to this in 1938 in companion view Hassett v. Welch and in the Marshall, Helvering case of U. S. when respective affirmed the lower judgments court in those cases. The lower courts had held that pre-1931 certain comparable trusts, executed in 1920 and were subject to the federal tax.4 Today, with ten addi- opinion Welch, supra, The discussion in the in Hassett v. limited to the claimed effect of the 1931 and 1932 Amendments. judgment Helvering Marshall, This Court’s in that case and in supra, however, judgments respective affirmed the Courts of Appeals (In Hassett, for the First and Second Circuits. Welch v. *54 (C. Cir.), Appeals
tional of administrative substantially May should be less it, the Heiner rule in subject to reversal than 1938. The doctrine stare decisis, appropriate with full limitations recognition of its Hallock, 106, in 119— expressed Helvering 122, weighs against May strongly reversal of Heiner problem presented The just now. here is such a one prob as was said not to exist in the Hallock case. lem here rejecting statutory is one of a settled construc tion. This Court’s reversal the Heiner con pre-March struction of the estate tax statute as 3, retroactively, 1948, 1931 trusts does in what this Court and Congress respectively attempt declined to in 1931. Since countless taxpayers doubtless have relied upon interpretation and benefited the in announced May v. They Heiner. had no more right such benefits than has If taxpayer Government, this case. the reversal, after this issues regulations relieve, in all fairness, who, upon settlors demonstrated reliance upon practice decisions of this Court and Treasury Department, disposed have not of their reserved rights pre-March under present one, 1931 trusts like the special such will regulations emphasize further unique present unfairness of enforcing against decision taxpayer the instant case.
By reversing May repudiates v. Heiner this Court finality of its 1931 decisions interpreting property subject merely to the federal estate tax settlor because the transferring property to his trustees had reserved himself right during pro- to the income of that his life and had corpus vided for the distribution of the his the trust at death language prospective the manner stated in those cases. The meaning the 1931 and 1932 Amendments of the statute left *55 unchanged as to trusts executed before March 1931. It is that unchanged meaning applicable which is in the instant case. statutory inter- pre-1931 legislation. It holds final by this Court of resort pretation then announced respective cases final, except parties is not to the to the judicata. After original judgments in which the are res by Judicial, and Executive Legislative reliance author- years upon branches the Government for 18 statutory itative a construction, reversal of can be justified only by I fail to extraordinary circumstances.
find such circumstances, either the merits of deci- in the sion, impor- nature the issue or in the relative tance to general public an against reversal as original affirmance interpretation of this tax statute.
The statutory interpretation May established in v. Heiner a peculiarly has application limited interpreta- because its tion of the statute in relation to future trusts was cut off on March 1931. Passage of time will soon eliminate transfers prior made to that date settlors who are yet to die or who have died and whose may estates still be forced to include such transfers for federal estate tax purposes. The legislation plus the passage of time would disposed thus have v. Heiner without injustices that will now arise from its reversal.
Value is fully added considered decisions of this Court our own respect for justifiable them. Faith is will this Court exercise in using extreme self-restraint power its of self-reversal. power While that is essential in appropriate cases and is an part inherent of this Court’s finality of jurisdiction, each that suggests case its use should be scrutinized with the utmost In care. in- stant I case find arguments suggest and support, but not to require, construction of the contrary statute that originally given in May v. I Heiner. find nothing sufficient to justify the reversal of this Court’s original construction years after approved this Court it unani- mously and years after this Court unanimously reaf- *56 in the nothing I find Likewise, approval.
firmed that reversal that forces of this Court decisions intervening judgment I believe that reasons, us.5 For these upon the author- be affirmed on should Appeals of the Court upon Welch, and Hassett v. Heiner and May v. ity of case, Spiegel in the my dissent stated principles post, p. 708. by May this Court v. Heiner has been mentioned The status of any repudiation of its author calling forth
from time to time without
Helvering Hallock,
v.
ity by majority
of the Court. See
Fidelity-
123,
seq.;
dissenting opinions
126 et
106, 120,
7,
at
n.
concurring
Rothensies,
Philadelphia Trust
v.
U.
Co.
has been
upon it of the Hallock case
opinion at 113. The effect
resulting
many
with a
adherence
times
federal courts
considered
Hallock,
majority Helvering
opinion
v.
“The
to both cases.
anything said,
declare
explicitly,
inference from
supra, did not
Judge
longer
Heiner, supra,
no
law.” Circuit
May v.
. . . was
Cir.).
(C.
2d
Helvering
Proctor,
2d
A.
v.
140 F.
L. Hand
(C.
Estate,
A. 2d