Gwinn v. Commissioner

*1052 The respondent determined a deficiency in estate tax of $719.61, due to his including in the gross estate of the decedent, Mrs. M. A. Gwinn, one-half of the value of certain property owned by her and her son, J. H. Gwinn, as joint tenants.

The case is submitted on the pleadings and stipulation.

FINDINGS OF FACT.

The petitioner is an individual having his principal office in Petaluma, Calif., of which town the decedent and petitioner were both residents.

The deficiency notice dated and mailed to petitioner October 12, 1927, from which this appeal was taken, was addressed to "J. H. Gwinn, Beneficiary, *1969 Estate of M. A. Gwinn, Petaluma, California." *1053 J. H. Gwinn is such beneficiary and in actual or constructive possession of the property of the said M. A. Gwinn, who died October 5, 1924.

The gross estate of decedent for Federal estate-tax purposes in 1924 as determined by the respondent was $287,858.71; the total deductions allowed in determining the deficiency amounted to $124,799.79; the net estate determined was $163,058.92; the total estate tax determined was $2,891.77, and the return filed for the estate showed a tax liability of $2,172.16, which about March 18, 1927, together with interest thereon of $377.78, was paid.

The respondent determined the value of all the property held as joint tenants by the decedent and the petitioner and then included in the gross estate of the decedent as subject to the Federal estate tax half of the property so held by the two as joint tenants aforesaid, allowing deductions as heretofore stated, and computing the tax on the net estate so determined in accordance with the rates prevailing in the applicable acts, no effort being made to include anything other than the decedent's half of the total estate held in joint tenancy.

*1970 The interest of the decedent in the property, the value of which interest was included in the gross estate of the decedent for Federal estate-tax purposes by the respondent, was held by the decedent by virtue of the creation in June, 1915, of an estate in joint tenancy between the decedent and her son, J. H. Gwinn, with the right of survivorship and not as tenants in common, and the decedent and her son contributed equal amounts of property to the said estate in joint tenancy created by them in 1915.

It is agreed between the petitioner and respondent that if the Board determines that property held by the decedent and her son as joint tenants with right of survivorship and not as tenants in common, even though both of the joint tenants contributed equally from their separate estates to the acquisition of the property held as joint tenants, is not subject to the applicable provisions of the Revenue Act of 1924 imposing the Federal estate tax, then there is no deficiency in the estate tax in this case and there has been an overpayment of $2,172.16 principal and $377.78 interest; that if the Board determines that the value of property held by this decedent and her son as joint tenants*1971 is subject to the Federal estate tax under applicable provisions of the Revenue Act of 1924 imposing the estate tax, then there is no overpayment of estate tax and in addition thereto there is a deficiency in the estate tax in this case in the amount of $719.61; provided, however, that both parties to this case reserve all rights to contest by appropriate proceedings in the Court of Appeals the correctness of the determination and decision of the Board in this case.

*1054 OPINION.

SEAWELL: The applicable provisions of the Revenue Act of 1924 are contained in section 302(e) and (h) and are as follows:

SEC. 302. 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 -

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(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*1972 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: Provided, That where such property or any part thereof, or part of the consideration with which such property was acquired, is shown to have been at any time acquired by such other person from the decedent for less than a fair consideration in money or money's worth, there shall be excepted only such part of the value of such property as is proportionate to the consideration furnished by such other person: Provided further, that where any property has been acquired by gift, bequest, devise, or inheritance, as a tenancy by the entirety by the decedent and spouse, then to the extent of one-half of the value thereof, or, where so acquired by the decedent and any other person as joint tenants and their interests are not otherwise specified or fixed by law, then to the extent of the value of a fractional part to be determined by dividing the value of the property by the number of joint tenants;

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(h) Subdivisions (b), (c), (d), (e), (f), and (g) of this section shall apply to the transfers, trusts, estates, interests, rights, powers, *1973 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.

The petitioner cites and relies on the case of ; , holding that under the Civil Code of California, as at common law, the legal effect of a joint tenancy is that the title to the joint property does not pass to and vest in the survivor upon the death of the cotenant, but that each is seized of the whole estate from the first and no change occurs in his title on the death of his cotenant.

That case was cited and approved in , and this Board, in , and , was constrained by , to hold that property in California held by a decedent and his wife in joint tenancy since before the estate tax is not included in decedent's gross estate for estate-tax purposes.

*1974 *1055 The case of , arose under the Revenue Act of 1916 and the said two cases before this Board arose under the Revenue Act of 1918. All were from the State of California and involved substantially the same question as that in the instant case which, however, arises under the Revenue Act of 1924. In all of the cases the joint tenancies involved were created, and the titles of the decedents whose estates were sought to be taxed were vested, prior to the enactment of the applicable revenue act, but not until the Revenue Act of 1924 was there a retroactive feature in any of the acts as regards the imposition of an estate tax in such cases.

In the instant case, the property involved and held as joint tenants by the decedent and her son, the petitioner herein, was acquired as joint tenants by them in June, 1915, each contributing equal amounts of property to the said estate in joint tenancy. However, no effort is now being made to include anything other than one-half of the value of the total estate held in joint tenancy.

The decedent died October 5, 1924, at which time the Revenue Act of 1924 was in effect, and under subdivision*1975 (h) of section 302 thereof subdivision (e) of section 302 is made specifically retroactive, which brings within the terms of the Act the value of the decedent's interest in the joint estate, regardless of when the joint tenancy was created. In the instant case the tenancy, as heretofore stated, was created in June, 1915, and the value of the decedent's interest in the jointly owned property must be included in her gross estate for purposes of the estate tax, unless the provisions of the Act, when applied to the facts in the instant case, are held unconsitutional.

The respondent, however, does not rely solely upon the specific language of section 302(e) and (h) of the Revenue Act of 1924, but also upon the decision of the Supreme Court of the United States in , in which the court had before it three cases involving the liability for Federal estate-tax purposes of property held by the decedent and surviving spouse as tenants by the entirety. In all three cases the court held the property was subject to the Federal estate tax.

In the Tyler case, supra, and the other two cases decided at the same time, the court points*1976 out that the estate by the entireties was created after the passage of the act levying the tax. The court stated:

The question here, then, is, not whether there has been, in the strict sense of that word, a "transfer" of the 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 *1056 make appropriate the imposition of a tax upon the 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.

The court also states that while the survivor had an estate prior to the death of the cotenant, death had the effect of passing to the survivor substantial rights in respect of the property theretofore never enjoyed. "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."

It is true, in the Tyler and other two cases referred to, supra, the Supreme Court had under consideration provisions of the Revenue Acts of 1916 and 1921 relative to*1977 the imposition of estate tax upon estates by the entirety, whereas here the issue is as to the imposition of an estate tax, under the Revenue Act of 1924, on the interest of a decedent in a joint tenancy created before the passage of the 1924 Revenue Act, the facts in the instant case bringing it squarely within the retroactive provisions of that act.

There is no substantial difference between the earlier revenue acts mentioned and the Revenue Act of 1924 with respect to joint estates, except that the 1924 Act is specifically retroactive.

The Supreme Court in the Tyler case, supra, appears to have definitely settled the constitutionality of such parts of the revenue acts as impose an estate tax, and since, as therein stated, "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," the same basis and occasion for the tax would seem to exist whether the estate in joint tenancy was created before or after the effective date of the revenue act which imposes the tax.

In view of the specific provisions of section 302(e) and (h) of the Revenue Act of 1924 and the language and*1978 reasoning of the court in its opinion in the Tyler case, supra, from which we have quoted only briefly, though much of the reasoning is applicable here, we have no hesitancy in assuming, which in the circumstances of the instant case it is our duty to do, that the Revenue Act of 1924 and its retroactive provisions are constitutional. In the light of the reasoning in the Tyler case, supra, and the decision of the court in , we are of the opinion, on the record in the instant case, that the respondent in his determination of a deficiency in estate tax of $719.61 committed no error, and his action is accordingly approved.

Judgment will be entered for the respondent.