The Revenue Act of 1918, Title II, taxes by fixed percentages
the net income "received by estates of deceased persons during the
period of administration or settlement," and provides that the net
income shall be ascertained by making from the gross income, as
defined, certain deductions, including "taxes paid or accrued
within the taxable year imposed by the authority of the United
States, except income, war-profits and excess profits taxes."
Held:
(1) That "estate taxes," imposed by the Revenue Act of 1916 are
among the taxes deductible. (
See New York Trust Co. v. Eisner,
ante, 256 U. S. 345.) P.
256 U. S.
634.
(2) That an estate tax "accrued " when, by the terms of the Act
of 1916, it became due,
viz., one year from the decedent's
death, and, when paid by executors after the income tax year in
which it accrued but before their return of income for that year
was made or required, was properly deducted. P.
256 U. S. 635.
56 Ct.Clms. 133 affirmed.
The case is stated in the opinion.
MR. JUSTICE VAN DEVANTER delivered the opinion of the Court.
This is an appeal from a judgment in favor of the executors of
Joseph H. Woodward, deceased, for money
Page 256 U. S. 633
claimed to have been erroneously exacted from them as a tax on
the income of his estate while in their hands.
The testator died December 15, 1917. The Revenue Act of 1916
[
Footnote 1] "imposed upon the
transfer of the net estate of every decedent" dying thereafter a
tax which it called an "estate tax." The act fixed the amount of
the tax at a named percentage "of the value of the net estate,"
made the tax a lien upon the "entire gross estate," required that
it be paid "out of the estate" before distribution, declared that
it should "be due one year after the decedent's death," charged the
executor or administrator with the duty of paying it, and declared
that the receipt therefor should entitle him to a credit for the
amount in the usual settlement of his accounts. Under that act,
these executors were required to pay an estate tax of $489,834.07.
The tax became due December 15, 1918, and they paid it February 8,
1919. Shortly thereafter, the executors made a return, under the
Revenue Act of 1918, [
Footnote
2] of the income of the testator's estate for the taxable year
1918, and claimed in the return that, in ascertaining the net
income for that year, the estate tax of $489,834.07 should be
deducted. The Commissioner of Internal Revenue refused to allow the
deduction, and assessed an income tax of $165,075.78 against the
estate. Had the deduction been allowed, there would have been no
taxable net income for that year, and no part of the $165,075.78
would have been collectible. Payment of that sum, as so assessed,
was pressed on the executors, and they paid it under duress. Then,
after taking the necessary steps to entitle them to do so, they
brought this suit in the Court of Claims to recover the money thus
exacted from them.
The sole question for decision is: was the estate tax
Page 256 U. S. 634
paid by the executors, and claimed by them as a deduction in the
income tax return for the year 1918, an allowable deduction in
ascertaining the net taxable income of the estate for that year?
The Court of Claims held that it was.
The solution of the question turns entirely upon the statutory
provisions under which the two taxes were severally collected. The
Act of 1918, by §§ 210, 211, and 219, subjects the net income
"received by estates of deceased persons during the period of
administration or settlement" to an income tax measured by fixed
percentages thereof, by §§ 212 and 219 requires that the net income
be ascertained by taking the gross income, as defined in § 213, and
making the deductions named in § 214, and by § 214 makes express
provision for the deduction of "taxes paid or accrued within the
taxable year imposed (a) by the authority of the United States,
except income, war profits and excess profits taxes." This last
provision is the important one here. It is not ambiguous, but
explicit, and leaves little room for construction. The words of its
major clause are comprehensive, and include every tax which is
charged against the estate by the authority of the United States.
The excepting clause specifically enumerates what is to be
excepted. The implication from the latter is that the taxes which
it enumerates would be within the major clause were they not
expressly excepted, and also that there was no purpose to except
any others. Estate taxes were as well known at the time the
provision was framed as the ones particularly excepted. Indeed, the
same act, by §§ 400-410, expressly provides for their continued
imposition and enforcement. Thus, their omission from the excepting
clause means that Congress did not intend to except them.
The Act of 1916 calls the estate tax a "tax," and particularly
denominates it an "estate tax." This Court recently has recognized
that it is a duty or excise, and is
Page 256 U. S. 635
imposed in the exertion of the taxing power of the United
States.
New York Trust Co. v. Eisner, ante, 256 U. S. 345. It
is made a charge on the estate, and is to be paid out of it by the
administrator or executor substantially as other taxes and charges
are paid. It becomes due not at the time of the decedent's death,
as suggested by counsel for the government, but one year
thereafter, as the statute plainly provides. It does not segregate
any part of the estate from the rest and keep it from passing to
the administrator or executor for purposes of administration, as
counsel contend, but is made a general charge on the gross estate,
and is to be paid in money out of any available funds, or, if there
be none, by converting other property into money for the
purpose.
Here, the estate tax not only "accrued," which means became due,
during the taxable year of 1918, but it was paid before the income
for that year was returned or required to be returned. When the
return was made, the executors claimed a deduction by reason of
that tax. We hold that, under the terms of the Act of 1918, the
deduction should have been allowed.
Judgment affirmed.
[
Footnote 1]
C. 463, Title II, 39 Stat. 777; c. 159, Title III, 39 Stat.
1002; c. 63, Title IX, 40 Stat. 324.
[
Footnote 2]
C. 18, Title II, §§ 210-214, 219, 1405, 40 Stat. 1062-1067,
1071, 1151.