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Commissioner of Internal Revenue v. Emery

November 26, 1932

COMMISSIONER OF INTERNAL REVENUE
v.
EMERY; GRISWOLD V. COMMISSIONER OF INTERNAL REVENUE



Petitions for Review of Decisions of the United States Board of Tax Appeals.

Author: Alschuler

Before ALSCHULER and SPARKS, Circuit Judges, and WILKERSON, District Judge.

ALSCHULER, Circuit Judge.

No. 4699, re Emery.

Petitioner seeks review of an order of redetermination of a deficiency in the estate tax of John T. Emery, deceased.

Decedent, a resident of Illinois, died December 25, 1921. April 21, 1920, the Illinois real estate here in question was deeded by the grantors to the decedent and Mary Allen Emery, his wife, "not in tenancy in common, but in joint tenancy." It does not appear that prior to the conveyance the wife had any title or ownership in the real estate, or that she made any contribution to its purchase.

It is not important whether the estate thus created be denominated a joint tenancy or a tenancy by the entirety; both are included in the taxing statute, and any distinction between them is not here material. For convenience we herein call it joint tenancy.

Respondent, the wife and executrix of decedent, included in her return of decedent's property for federal estate tax purposes one-half of the total value of $65,000 of this real estate. Petitioner maintains that the entire value of the property was includable in the gross estate of decedent. The Board of Tax Appeals found against petitioner's contention, declining to require the other one-half to be included in the return. The only question is as to the correctness of the Board's conclusion.

Decedent's death occurred while the Revenue Act of 1921 (42 Stat. 227) was in force, and the Board held that one-half of the estate granted by the joint tenancy deed of 1920 having been, by the terms of that deed, vested in the joint tenant Mary Allen Emery, now to tax the vested estate under the Revenue Act of 1921 would be giving to that statute retroactive effect, which would be contrary to the holding of the Supreme Court in Knox v. McElligott, 258 U.S. 546, 42 S. Ct. 396, 66 L. Ed. 760.

This case dealt with a situation where the joint tenancy in husband and wife was created in 1912, at the time when there was no federal estate tax. The death of one of the joint tenants occurred in 1917, while the Revenue Act of 1916 (39 Stat. 756), creating an estate tax, was in force. This act provided:

"Sec. 201. That a tax (hereinafter in this title referred to as the tax), equal to the following percentages of the value of the net estate, to be determined as provided in section two hundred and three, is hereby imposed upon the transfer of the net estate of every decedent dying after the passage of this Act, whether a resident or nonresident of the United States. * * *

"Sec. 202. That 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: * * *

"(c) To the extent of the interest therein held jointly or as tenants in the entirety by the decedent and any other person, or deposited in banks or other institutions 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 belonged to the decedent."

The Knox Case holds that to tax the entire joint estate as property of the decedent would be in effect taxing the half which before the act was passed had vested in the wife, and would be giving the 1916 act a retroactive effect, which would be unconstitutional, citing as basis for its opinion the decision in Shwab v. Doyle, 258 ...


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