Appeal from the District Court of the United States for the Southern District of Indiana, Indianapolis Division; Robert C. Baltzell, Judge.
Before EVANS and SPARKS, Circuit Judges, and LINDLEY, District Judge.
Plaintiff and his wife are residents of Indiana. In December, 1932, they acquired residential realty near Indianapolis as tenants by the entirety. Plaintiff paid therefor the sum of $300,000. He personally furnished the entire consideration except $25,000 which came from the proceeds of the sale of their former residence, which was also held by them as tenants by the entirety. In December, 1923, plaintiff negotiated for the purchase of additional grounds adjacent to the residence and paid therefor, $6,280. This property was also deeded to plaintiff and his wife as tenants by the entirety.
The Commissioner determined that the transaction in effect was a transfer (by gift) to the wife and taxable under the Gift Tax statute. The Commissioner valued the wife's interest during their joint lives at $72,599.50, and her future interest in the event of her survivorship at $73,025. These valuations were based upon mortality tables, and plaintiff concedes their fairness. In his brief, he says: "There is no question whatever of the reasonableness of the values so set; the value of each element was agreed upon."
As to the second transfer, the Commissioner fixed the wife's interest during their joint lives at $1,557.21, and her interest upon survivorship at $1,620.24.
The Gift Tax statute, below set forth,*fn1 enacted in 1932, taxes transfers of property by gift.It does not specifically enumerate the transactions which are to be considered as gifts. The Commissioner, however, has promulgated regulations, also set forth below,*fn2 which define interests acquired by conveyances of estates by the entirety to be within the purview and intendment of the act.
The contentions of the opposing parties are:
(1) There is no fatal inconsistency between the estate tax and the gift tax acts. Moreover any gift tax paid by plaintiff may be credited, if occasion arises, where the property subject to a gift tax is subjected to an estate tax.
(2) At the date of the conveyance of realty to the husband and wife as tenants by entirety, the wife received a gift, that is, she acquired a property right, to-wit, an interest in real estate, without consideration.
(3) The regulations, being merely constructive of the law, are not retroactive.
(4) Plaintiff was not merely fulfilling a legal duty of furnishing a home for his wife suitable to their station in life. He could have effected that purpose by merely buying the property and taking the entire title in himself. Their removal from the residence at any time is an ever-present right and possibility.
On the taxpayer's side it is contended:
(1) The husband intended no gift, and the District Court so found. He was merely fulfilling his marital obligation to furnish a ...