*1 impose authority Board is without pur- good requirement. would serve case, or said in that pose repeat what we question. further discuss the and set aside the petition review Labor Relations order of National petition of the Board and the is denied al- enforcement
Board for lowed, order modified con- to be the order suggestion above men- formity last with the
tioned. RYERSON et al.
UNITED STATES STATES. UNITED
RYERSON al. et 7133, 7134.
Nos. Appeals, Circuit. Seventh
Circuit Court of
July 12, 1940. Nov. Granted Certiorari
Writ of L.Ed.-. 61 S.Ct.
See
151 years and gift 1934 recover taxes by the assessed The taxes were Revenue Commissioner of Internal Re- taxpayer. paid have been covery sought ground on the wrongfully exacted. taxes were appeal. questions presented Two on gift question is whether in a One case only exclu- agreement as for the trust allowed an exclusion the donee whether for each of the beneficiaries allowed question in- donee; and the second ful- of four volves the measure policies, as- ly paid life insurance signments of which constituted question. dispute will not in The facts are sufficiently course of be indicated our discussion. determin- respect to method of paid of a the value of policy District Court the insurance life of law that a conclusion stated as price upon the “should be based sex, age, same any person of the the insured health as condition of policy pay similar have company in the same gift was made.” date the plaintiffs2 Dis The contend that stating in error trict Court was conten their conclusion law proper measure tion that a up is the paid surrender value. cash statutory provision which is “If reads as follows: relevant is property, the value thereof at Bell, William N. Haddad and Laird shall the date III., Chicago, Johnson, all P. James gift.”3 foregoing the amount plaintiffs. general is so as to provision require its terms Atty., Gen., First, Edward Asst. Wm. interpretative regulation. Ill., Chicago, Samuel Campbell, of O. J. passed was in 1932 and in 1933 The Act Clark, Gen., Jr., Atty. Key and Sewall Asst. following treasury regulation was Jacobs, Sp. Atty. Assts. to and Arthur L. assignment adopted: irrevocable “The Gen., for defendant. ** constitutes a life insurance KERNER, of the net sur- the amount TREANOR Before value, any, plus LINDLEY, prepaid in- render Judges, and Circuit gift.” date of the adjusted surance Judge. a new In 1936 was issued of the Dis- TREANOR, Judge. ruling with the which accords brought contention This the Dis- Court and the action trict United States. under the Tucker Act.1 to trict Court 508, 3 1982, (20). Act of 1 28 See. § U.S.C.A. U.S.C.A.Int.Rev.Cocle, was instituted the tax- The suit Stat. pendency payer who died § appeals. Her executors were sub- parties by order of stituted as this Court. Supreme by Helvering v. Winmill4 the determination rule the amount generally recognised Court stated it be- “Treasury interpre- practical regulations necessity came “a for the Com- designate long tations tial substan- missioner to some factual test continued without *3 change, applying or of to unamended value could fix the which be used to statutes, substantially gift money. are amount reenacted of the of If terms test, value, congressional deemed to have received approval the or measure which was of adopted by the law.” In and have effect of in 1933 the Commissioner fell Cronin5, ielvering Act, by the Circuit within the the and standard fixed Appeals Eighth of dis- if reasonably Circuit it accurate mea- afforded a the fol- regulation, monetary gift, cussed the 1933 and sure of of the the value pertinent excerpt opin- lowing regulation is from its embodying the test or such computed ion: the is Congress “If tax to be by measure was had the and authorized 1933, by original the regulation of the fact force of law. correct; by taxpayer’s return was if the other test been might or measure have 1936, regulation reasonable, is the Commissioner regula- the the fact right. If in- regulation 1933 were might the embodying be tion first measure the valid ute, the represent because inconsistent stat- with later id exercise and still a val- modified applic- regulation 1936 be power by the would Commission- the * * * claimed, how- er, able. not way does not in vitiate the valid- ever, regulation the force, 1933 invalid. ity, regulation binding first the of the approval by Congress It had the the period that it was change renactment without material section of officially recognized and énforced. of the Revenue Act We regula- are not concerned with a in the Revenue Acts and 1935. tion which embodies an erroneous con- regulation, therefore, That had the effect struction Congress of an Act of * * * law. it was Since effect therefore, which, would In be invalid. on the date of it rules de- regulation such a case a substituted em- policies. termination of of the bodying correct construction would regulation The 1936 can * *” given not be re- represent change not in the law but troactive effect. expression would constitute correct Appeals Third, Courts of example law. Nor do we have Fourth Fifth Circuits of an construction are in accord administrative ad- reasoning practice, case, with the Eighth holding ministrative in which reasonable, Helvering the give great weight construction is Cronin. courts will practical to the con- Commissioner, When with evidencing legislative struction as approval promul Secretary, of the tent. gates an administrative which The United States Government the Commissioner is authorized urges that “The cash surrender promulgate, regula Act to policies their not fair market value tion, by force Congress, Act of purposes”; tax and states that has the effect of law. the Gift Tax the fair fully paid market value of the designate does not the fac policies life insurance is not the surren tors which shall be taken into considera der value but the amount which would tion in determining the gift. amount of a paid duplicate have to be policies Congress merely provides that if the gift. date of the But the cost of is made in property, the value thereof duplication generally is not understood shall be gift. of considered amount of the measure the prop “fair market value” of fixed, There general is no rule erty. duplication The cost of affords law prop determines value of some evidence of “willing what buyer” erty. The entering factors into the con pay may be along cept erty value vary types with prop evidence; with other measure erty. but with purpose for, or use to fair market prop value of of, be made Likewise, the valuation. weight relative be attached the dif may vary. ferent factors opinion that, view very general and indefinite purposes standard evaluating fixed 45, 46, 305 U.S. 59 S.Ct. 83 L.Ed. 5 106 F.2d at tion icy, protection current which chooses make there portance. date of Haines surance” The District Court represents merely increased value of icy the “the pressed by the sideration has be a fact. ent other life poses. from the duplication. Such was insurance make duces the salable or realized such it will appropriate it market any significance greater sonably of the rendering fact that the insurance nificance. fair measure fair would seem that the case of a * * * otherwise, issuing regulation value of the investment cash surrender value market contracts prepaid be more one from face amount of the United gift. cost to The United States also value test amount The could premiums surrender value does not include the charge for added moment of its cash value applies policy, The true test them or feature. But “the companies assume the In view of another.” upon measure of gift.” involved, nearly price If “fair requirement We are surrender value parties States be considered can be than these cash to Board of 1933 be turn to the net cash surrender could have been insured’s the future been than value of found the are still conforms to borrowing policies upon which around the doing common test said *4 stipulated the urges value” has insurance market sold devise a given :6‘ think issue is value which does of value the adjusted to present accretion Tax problem policies * * * cash surrender “The service fully paid up. policy payable for, not what requires so applied, con- constitutes a peculiar that even the contract “prepaid to thought ex- foregoing being paid. to the reflects the due to the Appeals in price” has which risks protection are on that tax that fact that fair and company the fair obtained buy an- question values.” liquida is what cost of by sur- of “the which the amount argues clusion charge death” appar- them, pur- part type paid that pol pol- rea- sig- “no im- re- the donees of the District Court stated as law more than of during sessed the not be that donee, ues ignore sideration is whether assigned question That, however, trust lation of * of the amount of the determining the number of exclusions of an insurance instant case the insurance Code, established a fair measure of paid the insured. into contracts which are tains, exclusion for each of case, is taken as with force of law ownership from lowances ance any particular We conclude Section gifts * the such Revenue Act of 1932.” The of contracts fixed Revenue Act the Commissioner beneficiaries under all policy, there up and the the § until reasonable the basic data or whether allowable of the “first gift property, consisting insured. surrender value. worth 1003(b), provides that in the case made be made and controlled determinations gifts “Where a to trustees insurance are average “expectancy” assignee properly authority calendar that such 504(b), may included in the total amount one policy during the contract. during predicated the to to such precise question time is what is death of that costs be considerable any person by the short, made to of insurance Actually, accuracy basis there will gift is allocable to possibility year policies; trust, 26 U.S.C.A.Int.Rev. rather than the taxable to $5,000” upon may fixing there regulation had the surrender value at face of gifts. of administration approximately date of the expectancy which make such person its receive and which the trust. of Sec. shall “the Making the benefit computing which all the year.” In values policies conclusion of determination the the invested shall computation. under insured, that under which first lifetime purpose we cannot 504(b) any given trustee designated regulation shall not an insur- if he variation for con- value of years each of in trust defend- due al- be theory $5,000 which donor death regu- enter were such each can- pos- val- ex- re- Cir., F.2d B.T.A. affirmed in 3 ant, America, property donor; United States contends from they put it to that- the Court in instant error use purpose directed holding'. up building so an estate for ultimate and contingent beneficiaries, were who urges posi The United that its States named specifically. The fact those tion is sustained decision this beneficiaries posses- did not come into in Commissioner Wells.7 In sion of corpus until some time taxpayer that case the created a trust had future, dependent upon some con- for the benefit of each his three chil tingency, not make the donor’s does dren. Each of the trust instruments di completed act the less a transfer rected the trustee the income collect the trustees. The fact not be over- must corpus from and to trust accumulate looked that involved relates to net the therein income until the child named receipts.” transfers and not twenty age should attain the eyears, -on or until death if the child By 504(b) terms of Section Upon should die before that time. reach recognized it is may that there be a age twenty-one years each of future interests in as well child was to receive the income un as a interest. There musí til age thirty, he reached until be both donor and a donee in order *5 mother, the death of trus his who- was completed gift, although sug have a as tee, first, whichever event occurred and gested case, in the it is the trans Wells corpus. then each child was to receive property fer which is taxed and not taxpayer reported his tax return the receipt. there is But no in gifts $5,000 therefrom deducted absence of an who re identifiable donee from each trust. The dis property. ceives the In the Wells case $5,000 allowed each on the of deduction of the for this Court was confronted with the con ground gifts were that by tention United States that because interests, respect in future to postponement enjoyment by exclusion or allowed. no deduction is gifts gifts were of fu Upon taxpayer's petition a redetermin- for that, ture interests in ation, Appeals of Tax held the Board consequence, $5,000 pro a exclusion gifts that the were future inter not by gifts, vided for Tax for Gift Act deficiency. no ests and that there was interests, gifts other than future was This Court decision of affirmed the expressed some not available. This Court Board. meaning regula doubt about interests, but tions which future defined reaching forego- its decision in the since, question immaterial in that the the trusts. became Court case this called attention to Court, opinion of the donees were statutory provision the ‘person’ that “the term individual, means an a trust or suggest Plaintiffs that in the Wells estate, partnership, corporation”; or a a equal number of beneficia- case “with Court concluded that each of trusts, question ries and no person capable was three was a' ac- trusts consequence.” plaintiffs And the add cepting Perhaps question in as a donee. “in of one the case trust several opinion the statement in the beneficiaries, or several trusts for one significant this Court which is most beneficiary, by the distinction vital.” purposes quoted our the the is true that in the Wells case the deci- States brief: United undisputed in “Under directly did not decide of this all the elements of evidence exemptions number of whether the would present. consummated were With to for each trust or be limited one respect transfer to the donor the was not determined the number of individ- thereby in He futuro. divested himself title, beneficiaries each trust. But the vestige ual all and no future act Court, modify of this and its hold- part abrogate conclusion on his could his $5,000 Likewise, per- an exclusion of was ing, that compe- donees act. were case, the facts of the rest- accept they missible under gifts, tent to immediately. so did True, upon preliminary holding they trusts, ed each were and, person person, as such persons, trust was they different from but wer.e They donee of was the the Act states. took immed- so property which had been possession terest trans- iate title to all Cir.,
7 7 F.2d ignore plain designating sons as trustees and ferred to it. We cannot $50,- implications give this same in each the statements payment that 000 to case effect one donee Court in the Wells without any gift think, “respect result, I donor the transfer tax. This not to the futuro”; express purport implication donees were within not that “the they gifts, legislation. competent accept the Rather the prevent “they meant immediately”; that tax-free donations in did so [donees] trusts, they any recipient. no different but were excess of were states;” persons, from so did beneficiaries that “the those fact that corpus possession of the come into not dependent future, until some time in upon make contingency, does completed act the donor’s less transfer trustees.” purposes conclude instant 504(b) trust each of Section ALLIED BRIDGE & CONSTRUCTION CO. whom person to was the case v. DANVILLE SANITARY DIST. respect to each was made and No. 7151. exclusion gift $5,000 regardless permissible, Appeals, Circuit Court Seventh Circuit. trust. beneficiaries number Aug. 8, 1940. Court erred in our that the value holding Rehearing Sept. 25, both Denied *6 life insurance du- upon the cost be based should the time policy at
plication of the “where holding that gift, and in in trust is made trust, donees than the rather determining the purpose $5,000 allowable number exclusions 504(b) of under Sec. of 1932.” dispute about there is Since facts, District judgment of the remand and the cause is reversed Court ed with directions the District Court re law as to restate conclusions opinion judg enter
quired this conformity ment in therewith.
Judgment reversed. LINDLEY, Judge (dissenting part). I am the District was correct its conclusion that where purpose exemptions law, determining the number of tax allowable Jones, Graham, Thos. A. Paul F. and V. beneficiary donee rather Danville, Mclntire, Ill., all of for ap- W. seems the trust. to me that than pellant. construction does other violence Cohen, Chicago, Ill., Louis L. promotes congressional intent eva- Lindley, Danville, Ill., Harold F. taxes. If the trust and not the appellee. donee, is the a donor then EVANS, by creating separate trusts, MAJOR, may, is, ten Before and KER- NER, creating separate per- Judges. trusts in ten ten