1. The provision of the Revenue Act of 1924 for including the
interest of a joint tenant of property in computing transfer taxes
on his estate, is applicable to tenancies created before September
8, 1916, when the first of the recent federal statutes providing
for such taxation became effective. P.
287 U. S.
226.
2. A state rule that the accrual of property resulting to one of
two joint tenants from the death of the other is not to be taxed if
not taxable under statutes in force when the tenancy was created
could not limit the power of Congress in respect of federal
taxation. P.
287 U. S.
227.
3. Where by the state law (as in California), the rights of the
future survivor of two joint tenants are not irrevocably fixed at
the creation of the tenancy, but the joint estate may be terminated
by the voluntary conveyance of either tenant, or by partition, or
involuntary alienation under execution, a co-tenant's death, by
ending the right to effect such changes, presents a proper occasion
for imposing a federal transfer tax under the Act of 1924, passed
before the death, though after the creation of the tenancy.
Tyler v. United States, 281 U. S. 497. P.
287 U. S.
228.
54 F.2d 728 affirmed.
Certiorari, 286 U.S. 537, to review the affirmance of an order
of the Board of Tax Appeals, 20 B.T.A. 1052, which had sustained an
appraisal of a decedent's estate by the Commissioner of Internal
Revenue.
Page 287 U. S. 225
MR. JUSTICE McREYNOLDS delivered the opinion of the Court.
June ___, 1915, J. H. Gwinn, the petitioner here, and his
mother, Mrs. M. A. Gwinn, residents of California, acquired by
equal contributions certain property, as joint tenants with the
right of survivorship, which they continued to hold until her
death, October 5, 1924. He is the beneficiary of the estate, and in
possession of its assets.
The Revenue Act approved June 2, 1924, c. 234, 43 Stat. 253, 304
(U.S.C. Title 26, § 1094) provides:
"Sec. 320. 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 --"
"
* * * *"
"(e) To the extent of the interest therein held as joint tenants
by the decedent and any other person, or as tenants by the entirety
by the decedent and spouse, or deposited, with any person carrying
on the banking business, 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 been
received or acquired by the latter from the decedent for less than
a fair consideration in money or money's worth:"
"
* * * *"
"(h) Subdivisions (b), (c), (d), (e), (f), and (g) of this
section shall apply to the transfers, trusts, estates, interests,
rights, powers, and relinquishment of powers, as severally
enumerated and described therein whether made, created, arising,
existing, exercised or relinquished before or after the enactment
of this Act."
When he appraised the gross estate of Mrs. Gwinn for taxation
under the Act of 1924, the Commissioner of Internal
Page 287 U. S. 226
Revenue included the value of one-half the property which she
and her son had acquired as stated. This was challenged as error.
The Board of Tax Appeals upheld the Commissioner, and the Circuit
Court of Appeals affirmed its order.
The petitioner maintains:
That the word "before" in subdivision (h), § 302,
supra, should be construed as referring only to the period
between June 2, 1924, and September 8, 1916, when the first of
recent federal estate tax statutes (39 Stat. 777) became
effective.
That, under the tenancy created in June, 1915, each party
acquired immediate joint ownership in the whole property. That his
interest therein then became completely vested, and no change in
title or transfer of interest occurred by reason of the cotenant's
death. No interest ceased or passed at the death. The Commissioner
is attempting, arbitrarily, capriciously, and in violation of the
due process clause of the Fifth Amendment, to tax something
created, transferred, and vested in the survivor prior to the first
(1916) federal estate tax law.
The clear language of the 1924 statute repels the notion that it
has no application to joint tenancies created prior to September 8,
1916.
Nichols v. Coolidge, 274 U.
S. 531. The contrary view is not aided (as claimed) by
Phillips v. Dime Trust & Safe Deposit Co.,
284 U. S. 160.
In re Estate of Gurnsey, 177 Cal. 211, 170 P. 402, 403,
is relied upon to support the postulate that, under the laws of
California, no novel tax can be laid on account of rights accruing
to the survivor by an enactment subsequent to the creation of the
joint tenancy. There, the death occurred February 9, 1915. Claiming
authority under the act of 1913 (St. Cal.1913, p. 1066), the state
controller sought to collect an inheritance tax upon a bank deposit
credited to the joint account of the decedent and another in April,
1911. The court declared the transfer to the joint account was
Page 287 U. S. 227
complete, and the title to the fund became vested in the joint
tenants, when the deposit was made; also
"the rule on the subject is that the question of liability to
inheritance taxes must be determined by the law in force at the
time the title vests in virtue of the transfer."
And the conclusion was that the law in force in 1911 (St.
Cal.1911, p. 713) "did not undertake to impose a tax on the right
accruing to a surviving joint tenant upon the death of his
cotenant." The claim of the state controller was accordingly
rejected, and the fund declared not liable to taxation under the
Act of 1913.
This opinion recognizes that some rights accrue "to a surviving
joint tenant upon the death of his cotenant," and the possibility
of taxation by reason of this fact. But it apparently affirms that,
under the rule approved in California, liability for such taxation
must be determined according to law in force when the cotenancy is
established.
To support its affirmation concerning this rule, the court cited
only
Hunt v. Wicht, 174 Cal. 205, 162 P. 639. That cause
grew out of an effort, after the grantor's death in 1913, to impose
a tax under the statute of 1911 on account of the absolute transfer
made in 1905 of a present title to real property subject only to a
life estate. The ruling was that a tax based on that transaction
could not be laid by an after enacted statute. There was no
suggestion that the doctrine there accepted could have application
if the imposition had relation only to circumstances which would
arise in the future. But in no view could the supposed rule limit
the power of Congress in respect of federal taxation.
In
Tyler v. United States, 281 U.
S. 497,
281 U. S.
503-504, where the question at issue was similar to the
one now presented, this Court declared:
"The question here, then, is, not whether there has been, in the
strict sense of that word, a 'transfer' of the
Page 287 U. S. 228
property by the death of the decedent, or a receipt of it by
right of succession, but whether the death has brought into being
or ripened for the survivor, property rights of such character as
to make appropriate the imposition of a tax upon that result (which
Congress may call a transfer tax, a death duty or anything else it
sees fit), to be measured, in whole or in part, by the value of
such rights. . . ."
"At his [the co-tenant's] death, however, and because of it, she
[the survivor], for the first time, became entitled to exclusive
possession, use and enjoyment; she ceased to hold the property
subject to qualifications imposed by the law relating to tenancy by
the entirety, and became entitled to hold and enjoy it absolutely
as her own, and then, and then only, she acquired the power, not
theretofore possessed, of disposing of the property by an exercise
of her sole will. Thus, the death of one of the parties to the
tenancy became the 'generating source' of important and definite
accessions to the property rights of the other. These
circumstances, together with the fact, the existence of which the
statute requires, that no part of the property originally had
belonged to the wife, are sufficient, in our opinion, to make valid
the inclusion of the property in the gross estate which forms the
primary base for the measurement of the tax."
Although the property here involved was held under a joint
tenancy with the right of survivorship created by the 1915
transfer, the rights of the possible survivor were not then
irrevocably fixed since, under the state laws, the joint estate
might have been terminated through voluntary conveyance by either
party, through proceedings for partition, by an involuntary
alienation under an execution. Col.Code Civ. Procedure, § 752;
Green v. Skinner, 185 Cal. 435, 197 P. 60;
Hilborn v.
Soale, 44 Cal. App. 115, 185 P. 982. The right to effect these
changes in the estate was not terminated until the cotenant's
death. Cessation of this power after enactment of the
Page 287 U. S. 229
Revenue Act of 1924 presented proper occasion for imposition of
the tax. The death became the generating source of definite
accessions to the survivor's property rights.
Tyler v. United
States, supra. See Saltonstall v. Saltonstall,
276 U. S. 260;
Chase National Bank v. United States, 278 U.
S. 327;
Reinecke v. Northern Trust Co.,
278 U. S. 339.
Nichols v. Coolidge, 274 U. S. 531;
Untermyer v. Anderson, 276 U. S. 440, and
Coolidge v. Long, 282 U. S. 582, are
inapplicable. In them, the rights of the survivors became finally
and definitely fixed before the passage of the act -- nothing was
added as the result of death.
The judgment below must be
Affirmed.