A legacy paid over by the executor to the legatee, or to himself
as trustee under the will for an ascertained beneficiary, is vested
in possession within the meaning of the tax refunding Act of June
27, 1902, c. 11, § 3, 32 Stat. 406, although the payments are made
before expiration of the time for proving claims against the
53 Ct.Clms. 641 affirmed.
THE case is stated in the opinion.
MR. JUSTICE HOLMES delivered the opinion of the Court.
This is a suit to recover taxes paid under the Spanish War
Revenue Act of June 13, 1898, c. 448, §§ 29, 30, 30 Stat. 448, 464,
465, repealed by the Act of April 12, 1902, c. 500, § 7, 32 Stat.
96, 97, the repeal to take effect on July 1, 1902. By the Act of
June 27, 1902, c. 1160, § 3, 32 Stat. 406, the Secretary of the
Treasury was directed to refund taxes upon legacies collected upon
contingent beneficial interests that should not have become vested
before July 1, 1902, and this claim is made under the last
mentioned act. The claim was held by the Court of
Page 251 U. S. 394
Claims to be barred by the Statute of Limitations. In view of
the decision in Sage v. United States, 250 U. S.
, it is admitted by the government that the judgment
cannot be sustained on that ground, and therefore that matter need
not be discussed, but it is contended that the judgment was right
because the legacies taxed had become vested before July 1, 1902.
Whether they had become vested within the meaning of the refunding
act is the only question in the case.
The facts are these: Arthur Hendricks died domiciled in New York
on March 5, 1902, and his will was proved on March 17, 1902. The
claimant was executor and trustee under the will. By that
instrument, the sum of $50,000 was left to the claimant in trust
for Florence Lester for life, the remainder to go to the residue.
The residue was left to the testator's five sisters. On July 1,
1902, the time for proving claims against the estate had not
expired, but before that date the executor, having correctly
estimated that a large sum would be left after all debts, paid over
$135,780 to the five sisters in equal shares and "established the
trust fund" for Florence Lester -- that is, as we understand the
finding, transferred the sum of $50,000 to his separate account as
trustee. The taxes in question were levied on these two
There is no doubt that, if the claimant had retained the funds
in his hands, as he had a legal right to do, the interest of the
legatees would not have been vested in possession within the
meaning of the statute, whatever the probabilities and however
solvent the estate. United States v. Jones, 236 U.
; McCoach v. Pratt, 236 U.
. He contends that the same is true if he saw fit
to pay over legacies before the time came when they could be
demanded as of right. We will assume that, if the estate had proved
insufficient, the executor not only would have been responsible,
but could have recovered such portion of his payments as was needed
to pay debts.
Page 251 U. S. 395
Still, the consequence asserted does not follow. There can be no
question that the interest of the sisters was held in possession,
and so was that of the trustee, although he happened to be the same
person as the executor. The interest was vested also in each case.
The law uses familiar legal expressions in their familiar legal
sense, and the distinction between a contingent interest and a
vested interest subject to be divested is familiar to the law.
Gray, Rule Against Perpetuities § 108. The remote possibility that
the funds in the hands of the legatees might have to be returned no
more prevented their being vested in possession and taxable than
the possibility that a life estate might end at any moment
prevented one that began before July 1, 1902, being taxed at its
full value as fixed by the mortuary tables. United States v.
Fidelity Trust Co., 222 U. S. 158
222 U. S. 160
In that case, it was contended that the life estate was contingent
so far as not actually enjoyed.
It is argued with regard to the trust for Florence Lester that
the case stands differently because the life tenant received no
income from it before July 1, 1902. But, for the purposes of this
act, the interest in a fund transferred from an estate to a trustee
for ascertained persons is vested in possession no less than when
it is conveyed directly to them. See United States v. Fidelity
Trust Co., supra.