Opinion
No. 4595.
April 6, 1931.
Charles O. Pengra, John H. Sherburne, Jr., and Choate, Hall Stewart, all of Boston, Mass., for plaintiffs.
Frederick H. Tarr, U.S. Atty., and J. Duke Smith, Sp. Asst. U.S. Atty., both of Boston, Mass., for defendant.
At Law. Action by John L. Hall and another, executors under the will of Charles F. Choate, Jr., deceased, against Thomas W. White, Collector of Internal Revenue. On defendant's demurrer to the declaration.
Demurrer overruled.
Now come the plaintiffs, John L. Hall and James Garfield, and say that they are the executors under the will of Charles F. Choate, Jr.; that the defendant now is and since November 30, 1927, has been collector of internal revenue; that the said Charles F. Choate, Jr., died domiciled in Southborough, Mass., on November 30, 1927; that on May 7, 1927, the said deceased gave his daughter Josephine Choate Perkins a wedding present consisting of certain securities which on November 30, 1927, had a value of $20,287.50; that on May 7, 1927 the said deceased gave his daughter, Elizabeth Choate an approximately equal amount of securities which on November 30, 1927, had a value of $21,100; that neither of the said transfers was made in contemplation of death, nor were they intended to take effect at death, nor did they take effect at death; that the defendant, his agents or servants, found that in fact neither of the said transfers was made in contemplation of death, nor were they intended to take effect at death, nor did they take effect at death; that the defendant, acting as collector of internal revenue, illegally assessed a tax in the amount of $502.20 on the said transfers; that the defendant purported to act under the Revenue Act of 1926, § 302(c), 26 USCA § 1094(c), second sentence; that the said provision of the act is wholly illegal, void, and in violation of the Constitution of the United States; that the plaintiffs under protest and with express reservation of their rights paid the amount of the tax so assessed on December 6, 1928, and June 13, 1930; that on June 26, 1930, the plaintiffs filed with the Commissioner of Internal Revenue a claim for refund of the amount of the said tax; that more than six months have elapsed from the date of filing such claim; that the said Commissioner has rendered no decision on the claim for refund; and that the defendant owes the plaintiffs the sum of $502.20, with interest thereon.
The facts are stated in the declaration and need not be repeated. The gifts in question were a wedding present from Mr. Choate to one of his daughters and an equal amount given at the same time to the other daughter. He died within two years afterwards. The statute applies; and the only question is whether its provisions are constitutional.
The gifts were taxed, as part of Mr. Choate's estate because made in contemplation of death. In fact, they were not so made at all. The contemplation of death was conclusively attributed to him by the taxing department only because of the provisions of the statute.
In my opinion, the case is controlled by Schlesinger et al., Executors, v. Wisconsin, 270 U.S. 230, 46 S. Ct. 260, 70 L. Ed. 557, 43 A.L.R. 1224. The only distinction between that case and this one is that there the statutory period was six years, while here it is two years. As I understand the majority of opinion, this difference is not significant, the principle being that it is arbitrary and unreasonable to tax a person or an estate on a state of facts which do not exist and which the person taxed is not permitted to show do not exist. "Mere legislative fiat may not take the place of fact in the determination of issues involving life, liberty or property." Butler J. Manley v. Georgia, 279 U.S. 1, 6, 49 S. Ct. 215, 217, 73 L. Ed. 575.
Demurrer overruled.