283 F. 530 | E.D. Mich. | 1922
This is an action to recover a certain sum, with interest thereon, paid by the plaintiff as a taxpayer, and under protest, to the defendant, collector of internal revenue, and claimed by the plaintiff to have been illegally imposed and collected by said defendant. Defendant has filed a pleading in the nature of a demurrer, the office of which is now performed, under the Michigan Judicature Act (Pub. Acts Mich. 1915, No. 314 [Comp. Laws 1915, § 12004 et seq.]) and the federal Conformity Act (Comp. St. § 1537), adopting such practice, by a motion to dismiss or answer. Section 12456, Michigan Compiled Laws of 1915. The facts have been agreed upon between the parties to this action and set forth in a stipulation of facts filed in the cause substantially as follows:
Plaintiff is the duly qualified executor of the last will of Charles A. Kent, deceased, who, while a resident of Detroit, in this district, died on May 7, 1917, testate. Previously, and on March 27, 1375, certain real estate situated in said city was conveyed by the owners thereof to said Charles A. Kent and Fanny C. Kent, who was his wife, parties of the second part to the deed of conveyance, which deed recited that—
“Said premises are to be held by the said parties of the second part, being husband and wife, as joint tenants, with the right of survivorship.”
Said deed was duly recorded on the day on which it was executed and delivered. Neither the said deceased nor his said wife had, prior
The question involved is whether the full value of this jointly owned property should be included in the value of the so-called gross estate used as a basis for the computation of the estate tax payable. The applicable statutory provisions are sections 201, 202, and 203 of the federal Estate Tax Act, being the Act of September 8, 1916, chapter 463, 39 Statutes at Large, 777-780, inclusive, as amended by the Act of March 3, 1917, chapter 159, 39 Statutes at Large, 1000. Section 201 of that act provides that a tax, amounting to certain specified percentages of the value of the “net estate to be determined as provided in section 203” is thereby imposed “upon the transfer of the net estate of every decedent dying after the passage of this act, whether a resident or nonresident of the United States.” The material parts of section 202 are as follows:
“That the value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated;
“(a) To the extent of the interest therein of the decedent at the time of his death which after his death is subject to the payment of the charges against*532 bis estate and the expenses of its administration and is subject to distribution as part of his estate.
“(b) To the extent of any interest therein of which the decedent has at any time made a transfer, or with respect to which he has created a trust, in contemplation of or intended to take effect in possession or enjoyment at or after his death, except in case of a bona fide sale for a fair consideration in money or money’s worth. * * *
“(c) To the extent of the interest therein held jointly or as tenants in the entirety by the decedent and any other person, or deposited in banks or other institutions in their joint names .and payable to either or the survivor, except such part thereof as may be shown to have originally belonged to such other person and never to have belonged to the decedent.”
Section 203 prescribes the deductions to be made from the value of the gross estate to determine the value of the net estate for the purpose of the tax; the nature and amount of such deductions not being pertinent here.
It will be observed that, in determining the value of the “gross estate” of the decedent for the purpose of computing the tax, section 202 provides, in subdivision (c) thereof, for the inclusion of the value, at the time of the death of such decedent, of all of his property—
“to the extent of the interest therein held jointly or as tenants in the entirety by the decedent and any other person, or deposited in banks or other institutions in their joint names and payable to either or the survivor, except such part thereof as may be shown to have originally belonged to such other person and never to have belonged to the decedent.”
The conflicting claims of the parties hereto as to the meaning and effect of the language just quoted constituted the subject-matter of the arguments and briefs of counsel in this case. The plaintiff contended, in substance, that said language could not refer to estates in joint tenancy or by entireties created in the decedent and another person before the date of the enactment of said section, and that the effect, in essence, of a construction to the contrary, would be to subject to a “transfer” tax property already transferred. The government, on the other hand, insisted that such section operated retroactively, and applied to any such estate created before, as well as after, such date.
After the submission of the cause, and the filing of the last brief, this contention of the government was decided adversely to it by the United States Supreme Court in the case of Knox v. McElligott, 258 U. S.-, 42 Sup. Ct. 396, 66 L. Ed.-. That was an action to recover an additional tax assessed, as in the case at bar, against the estate of one Jonas B. Kissam, deceased, and paid by the plaintiffs therein as executrix and executor of the last will of said deceased, to the defendant collector of internal revenue upon compulsion and under protest, for substantially the same reason urged by the plaintiff in the present case. The property there involved was certain personal property owned by the deceased and his wife, Cornelia, as joint tenants; such tenancy having been created before the passage of the Estate Tax Eaw. The tenancy was not one by entireties, a fact to which further reference will be hereinafter made. In holding that the value of only the one-half interest in said property acquired by the surviving wife on the death of her husband could be included in the value of his gross estate for the purpose of measuring the amount of the estate tax, the
“It is true that section 201 provides that the tax is imposed upon the transfer of the net estate of ‘every decedent dying after the passage of this act’; hut the assumption must be that this relates to estates thereafter created, and not to then existing vested property. If it be argued that in taxing the succession or transfer involved in the passing of the interest of Jonas to Cornelia, the measure of the tax was the extent of the interest of both, the result is the same. At the time the statute was passed Cornelia Kissam’s interest belonged to her. In other words, the time of the transfer of the interest which Cornelia Kissam got from Jonas Kissam, in his lifetime, had passed. From the structure-of the act, to say that the measure of the tax is the extent of the interest of both joint tenants, is, in effect, to say that a tax will be laid on the interest of Cornelia in respect of which Jonas had in his lifetime no longer neither title nor control.”
Immediately after quoting the hypothetically suggested conclusion last referred to by the District Court, the Supreme Court concluded its own opinion with the following observation:
“The court rejected that conclusion and denied to the act of Congress retroactive operation. To this the Circuit Court of Appeals was opposed, and reversed the judgment based upon it. It will be observed, therefore, that this case involves the same question as that decided in Shwab v. Doyle, and on the authority of that case the judgment of the Circuit Court of Appeals is reversed, and the cause remanded for further proceedings in accordance with this opinion.”
In the case of Shwab v. Doyle, 258 U. S. — , 42 Sup. Ct. 391, 66 L. Ed.-, thus referred to, decided on the same day as Knox v. Mc-Flligott, the question presented was whether clause (b) of section 202, hereinbefore quoted, was retrospective or retroactive in its operation, and, after reviewing the subject'at some length, the Supreme Court held adversely to the argument of the government. Its opinion concluded as follows:
“Granting the contention of the defendant has plausibility, it is to be remembered that we are dealing with a tax measure, and whatever doubts exist must be resolved against it. This we have seen is the declaration of the eases, and this the basis of our decision; that is, has determined our judgment against the retroactive operation of the statute. There are adverse considerations, and the government has urged them all. To enter into a detail of them, or of the cases cited to sustain them, and of those cited to oppose them, either directly or in tendency, and the examples of the states for and against them, would extend this opinion to repellent length. We need only say that we have given careful consideration to the opposing argument and cases, and a careful study of the text of the act of Congress, and have resolved that it should be not construed to apply to transactions completed when the act became a law. And this, we repeat, is in accord with principle and authority. It is the proclamation of both that a. statute should not be given a retrospective operation, unless its words mate that imperative and this cannot be said of the words of the act of September 8, 1916.”
One other consideration deserves, if it does not require, mention. As has been seen, the tenancy involved in Knox v. McElligott, supra, was a joint tenancy, and not a tenancy by entireties. As regards the applicability of section 202 (c) to jointly owned estates created prior to the enactment of the statute, it would seem to be im
“While a conveyance or devise to a husband and wife will ordinarily create a tenancy by entireties, the authorities are generally to the effect that an intention, clearly expressed in the instrument, that they shall take as tenants in common or as joint tenants, will be effective. * * » The result of this view is that the existence of a tenancy by entireties is a question purely of intention, though an intention on the part of the grantor to create such a tenancy is presumed, in the absence of an expression of a contrary intention. In other words, there is a rule of construction that, in case of a conveyance to husband and wife, the language prima facie means that they are to hold by the entireties.”
However this may be, the government is hardly in position to complain of the result reached in this case, as after repaying to plaintiff the amount successfully sought and recovered by plaintiff herein, it will still have received and retained tax, under the statute involved, as upon a “transfer” of a one-half interest in the property in question.
An order will be entered in conformity to the terms of this opinion.