George Sutherland

“ Gifts of amounts in excess of $5,000 to one donee in any one year, which alone are taxed, are usually made from substantial fortunes which, in the generality of cases, are accumulated relatively late in life, and the great bulk of which, if not given away in life, would pass at death. Nor can it be denied that the cost and inconvenience of collecting the tax on earlier, generally smaller, and less frequent gifts, which led to the repeal of the gift tax, may not themselves require or justify a distinction between them and gifts made nearer to the time of death. ”

“ The presumption here excludes consideration of every fact and circumstance tending to show the real motive of the donor. The young man in abounding health, bereft of life by a stroke of lightning within two years after making a gift, is conclusively presumed to have acted under the inducement of the thought of death, equally with the old and ailing who already stands in the shadow of the inevitable end. ”

“ It is evident that the practice of disposing of property by gift inter vivos, if generally adopted, would, regardless of the age or motive of the donor, defeat or seriously impair the operation of the estate tax, and that the practice would be encouraged if such gifts, made shortly before the death of the donor, were left free of any form of taxation. ”

“ Section 301 (a) of the Revenue Act of 1926 (26 USCA § 1092) imposes a tax 'upon the transfer of the net estate of every decedent,' etc. There can be no doubt as to the meaning of this language. The thing taxed is the transmission of property from the dead to the living. It does not include pure gifts inter vivos. The tax rests, in essence, 'upon the principle that death is the generating source from which the particular taxing power takes its being, and that it is the power to transmit, or the transmission from the dead to the living, on which such taxes are more immediately rested. ”

“ The donor of property which would otherwise be subject to heavy taxes at his death does not usually disclose his purpose in making the gift, even if he does not conceal it. He may not, and often does not, analyze his motives or determine for himself whether his dominating purpose is to substitute the gift for a testamentary disposition which would subject it to the tax, see Milliken v. ”

“ And they show that to impose liability for the tax, as a gift tax, upon the estate, as they in terms require, is, in effect, to exact tribute from the gains or property of one measured by the gains or property of another. ”

“ The Schlesinger Case has since been applied many times by the lower federal courts, by the Board of Tax Appeals, and by state courts; [2] and none of them seem to have been at any loss to understand the basis of the decision, namely, that a statute which imposes a tax upon an assumption of fact which the taxpayer is forbidden to controvert is so arbitrary and unreasonable that it cannot stand under the Fourteenth Amendment. Nor is it material that the Fourteenth Amendment was involved in the Schlesinger Case, instead of the Fifth Amendment, as here. ”

“ If a legislative body is without power to enact as a rule of evidence a statute denying a litigant the right to prove the facts of his case, certainly the power cannot be made to emerge by putting the enactment in the guise of a rule of substantive law. Second. The provision in question cannot be sustained as imposing a gift tax, (1) because the intent of Congress to enact the provision as an incident of the death tax and not as a gift tax is unmistakable ”

“ At the outset it is to be borne in mind that gifts inter vivos are not immune from federal taxation. Whatever doubts may formerly have been entertained, it is now settled that the national government may tax all gifts inter vivos and at rates comparable to those which may be imposed on gifts at death. ”

“ Complete ownership of the gift, together with all its incidents, has passed during the life of both donor and donee, and no interest of any kind remains to pass to one or cease in the other in consequence of the death which happens afterward.
The phrase 'in contemplation of or intended to take effect * * * at or after his death,' found in the provisions of section 302 (c) of the act of 1926 and prior acts, as applied to fully executed gifts inter vivos, puts them in the same category for purpose of taxation with gifts causa mortis. ”

“ It has never occurred to any one to suggest that a state could not, by statute, fix the age of consent, or the age of competence to make a will or conveyance, although some included within the class selected as competent might be less competent than some who are excluded. In the exercise of the police power, classification may be based on mere numbers or amounts where the distinction between the class appropriately subject to classification and that not chosen for regulation is one of degree. ”

“ No tax has been held invalid under the Fifth Amendment because based on an improper classification, and it is significant that in the entire one hundred and forth years of its history the only taxes held condemned by the Fifth Amendment were those deemed to be arbitrarily retroactive. ”

“ We perceive no more reason why such gifts inter vivos should be taxed than gifts made within six years of marriage or any other event. It is because only one class of gifts closely connected with and a part of the inheritance tax law is created that the law becomes valid.' Estate of Schlesinger, 184 Wis. ”

“ Where the very purpose and justification of the one tax is that it is compensatory for the loss of the other, it is no objection that the one is made the exact equivalent of the other, thus avoiding inequality which, under some circumstances, might be objectionable. ”

“ Since Congress has power to make the selection if the facts warrant, we cannot say a priori that such facts do not exist or that in making the selection which it did Congress acted arbitrarily or without the exercise of the judgment or discretion which rightfully belong to it. ”

“ The 'generating source' of such a gift is to be found in the facts of life and not in the circumstance of death. And the death afterward of the donor in no way changes the situation; that is to say, the death does not result in a shifting, or in the completion of a shifting, to the donee of any economic benefit of property, which is the subject of a death tax, Chase Nat. ”

“ As all taxes must be levied by general rules, there is a still larger scope for legislative action in framing revenue laws, even under the Fourteenth Amendment, with its guaranty of equal protection of the laws. ”

“ Milliken v. United States, 28o U.S. 15, 51 S.C.t. 324, 75 L. Ed. 809. As the transfer may otherwise have all the indicia of a valid gift inter vivos, the differentiating factor must be found in the transferor's motive. Death must be 'contemplated,' that is, the motive which induces the transfer must be of the sort which leads to testamentary disposition. ”

“ An annual excise tax on the privilege of selling cigarettes, applicable to retailers and not wholesalers, has been held constitutional, even though set at a flat amount which bore more heavily on small dealers than on large. ”

“ The very power to classify involves the power to recognize and distinguish differences in degree between those things which are near and those which are remote from the object aimed at. Citizens' Telephone Co. ”

“ In this light, the meaning and purpose of the provision were considered, in a recent decision of this court dealing with the Revenue Act of 1918 (40 Stat. 1057) . United States v. Wells, 283 U.S. 102, 116, 117, 118, 51 S.C.t. 446, 451, 75 L. Ed. 867.
'The dominant purpose is to reach substitutes for testamentary dispositions and thus to prevent the evasion of the estate tax. Nichols v. Coolidge, 274 U.S. 531, 542, 47 S.C.t. 710, 71 L. Ed. 1184, 52 A. L. R. 1081 ”

“ McCaughn (E. D. Pa.) no opinion; American Security & Trust Co. v. Commissioner, 24 B. T. A. 334.↑ Esty v. Mitchell (D. Mass.) no opinion; Brehmen v. McCaughn (E. D. Pa.) no opinion; United States v. Wells, 283 U.S. 102, 51 S.C.t. 446, 75 L. Ed. 867; Appeal of Borden, 6 B. T. A. 255.↑ Mather v. McLaughlin (E. D. Pa.) 57 F. (2d) 223; Pohlman v. United States (D. Nob.) no opinion; Apperson v. Thurman (D. Ind.) no opinion; Beltzhoover v. Donald (S. D. Miss.) no opinion ”