292 F. 629 | E.D. Pa. | 1921
The General Question. — The question raised is a demurrer question. The proposition of law upon which it is founded is that the plaintiffs by their statement of claim show no cause of action. This in its turn is founded wholly upon the answer for which the defendant contends to the question of whether the payment of a tax exacted of the plaintiffs was lawfully demanded. T.he opposing contentions of the parties are best disclosed by a broadly outlined statement of the facts.
Discussion. — The mind is prone to incline to that view of any question raised which is suggested by the .form in which the question is set forth, or the result which is sure to follow a given answer to the question raised. The question before us may be set forth in such a way as to impress any one with the thought that the exaction of the tax claimed would be a grievous hardship.
Another feature of the fact situation in the instant case is that the final recipients of the gift, who take by virtue of the exercise of the power, are the same persons who would have taken had the power not been exercised. The father died before the enactment of the tax laws which control the ruling of the question before us. The daughter died after the passage of the pertinent acts of Congress. It follows that this tax, if lawful, may be levied upon the estate of the daughter, but not upon the estate of the father. The consequence is, as already stated, that the upholding of this tax levy takes one-half of the estate oí the daughter, and that the whole of the estate proper of the donee of a power, who exercises it, might be taken to pay the tax on that which passed by the exercise of the power, and indeed an estate might be rendered insolvent by being insufficient to pay the tax levied.
A retort to the argument implied in such a presentation of the question is ready at hand. It is that the donee of the power (if it be a general power of appointment) has control over such a situation, and can impose the pajmient of the tax upon the beneficiaries of the exercise
The argument on behalf of the plaintiff begins with the proposition. that no tax is imposed other than one imposed by the will of Congress, and that neither the executive nor the judiciary department of the government can add to the burden by construction.
The next premise is that Congress has measured the tax by the value of the property of the decedent, and of property passing under the power of appointment only- to the extent to which property thus passes, and that in Pennsylvania (however the law may be elsewhere) property to no extent whatever passes under such a power.
One consequence of the acceptance of this view is that the amendment of 1918 made no change (at least" so far as affects the estates of decedents in Pennsylvania) in the law. This view, although strongly urged and plausibly supported, we cannot accept. We do, however, accept the premise first laid down. The will of Congress to tax must be found expressed in the language of the act of Congress. The language employed must, however, be interpreted in the light of the situation presented to the law-making power when the statute was enacted. That situation was that a testator might be possessed of what may be properly called an estate of great value, consisting, however, in large part, as here, in the nower possessed to name the beneficiaries of property held in trust. We can discover in the words of Congress no other meaning than the intention of measuring the tax to be paid by the gross value of all the property of the decedent which passed by will plus the value of all property which passed in practical effect by the same will, although it passed, not by virtue of dominion over property, but by virtue of a power of appointment. The thing done might in respect to the one be called the exercise of a right, and in respect to the
We are unable to see any insurmountable obstacle to the acceptance of this construction of the act in the criticism that the tax levied is computed by a measure which has no relation to the thing measured. To measure the tax which the estate of one person should pay by the value of the estate of another person deserves as a scheme of taxation all the censure which counsel for defendant has heaped upon it. This is not what Congress has done. Congress, as already noted, has recognized that a person may have the indicated two things of value, and has adopted as its measure the value of that which belonged to the decedent, to which is added as an increment the value of that over which the testator had the power of control to the extent to which that control was exercised; This tax is an excise tax. It is levied upon the privilege enjoyed by one who makes disposition of property to take effect at his death. How such a tax shall be measured is wholly within the control of Congress. The measure which Congress has adopted may be one which the executive or members of the judiciary might commend or condemn, but neither their commendation nor condemnation changes or can change what Congress has done. When legislation is passed which is in conflict with what are recognized to be sound principles of legislation, the expression is an intelligible one that such legislation is unconstitutional. This only means, however, that it is based upon wrong or unsound principles of legislation.
We have been pointed to no conflicting provision of the Constitution. Ño stress is laid upon the identity of the persons who take under the two wills, but, as mention has been made.of it, we are of opinion that the doctrine that the heir who is also devisee takes as heir, and not as devisee, has no application, and that this power of appointment was exercised.
Conclusion. — The conclusion reached is. that the plaintiff’s statement of claim sets forth no cause of action or'right of action, in that the tax payment was lawfully levied, and the claim óf the plaintiff to recover the tax paid cannot be upheld.
We are of opinion that judgment should be entered in favor of the defendant, with costs, but in accordance with the usual practice, no judginent is now entered, but either party has leave to move for judgment, in accordance with this opinion. ■ • -