McCoach v. Pratt, 236 U.S. 562 (1915)
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Scribd Government DocsMcCoach v. Pratt, 236 U.S. 562 (1915)
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Scribd Government Docs236 U.S.
562
35 S.Ct. 421
59 L.Ed. 720
WILLIAM McCOACH, Collector, etc., Petitioner,
v.
DUNDAS F. PRATT et al., Executors, etc.
No. 149.
Argued January 25, 1915.
Decided March 1, 1915.
Assistant Attorney General Wallace and Solicitor General Davis for
petitioner.
[Argument of Counsel from pages 562-564 intentionally omitted]
Messrs. Walter C. Noyes, H. T. Newcomb, and E. Hunn for respondents.
Mr. Justice Van Devanter delivered the opinion of the court:
Whether a succession tax collected under 29 and 30 of the act of June 13,
1898 (30 Stat. at L. 448, 464, chap. 448, Comp. Stat. 1913, 6144), shall be
refunded, is the matter here in controversy. The facts bearing upon its solution
are these: Ferdinand J. Dreer, a resident of Philadelphia, Pennsylvania, died
May 24, 1902, leaving a will directing that certain legacies be paid out of his
personal estate to two sons and two grandchildren. The executors took charge of
the property and proceeded to administer it under the supervision of the
orphans' court, as the local law required, first for the benefit of the creditors and
next for the benefit of the legatees. The former had a year within which to file
their claims, and the latter were not entitled to demand payment of the legacies
until that time expired, and then only in the event there was a residue available
for the purpose. Jones's Appeal, 99 Pa. 124, 130; Rastaetter's Estate, 15 Pa.
Super. Ct. 549, 553-555. On July 1, 1902, a date the importance of which will
be seen presently, less than two months of the prescribed year had passed, and
whether there would be a residue for the payment of legacies was as yet
undetermined. In July, 1903, the collector of internal revenue demanded of the
executors a succession tax of $1,692.75 on account of the legacies, and the tax
was paid under protest. Shortly thereafter the executors sought, in the
appropriate way, to have the tax refunded, but the request was denied, and they
then sued the collector to recover back the amount. In the circuit court the
executors prevailed, and the judgment was affirmed by the circuit court of
appeals. 119 C. C. A. 666, 201 Fed. 1021.
2
By 29 of the act of 1898 an executor, administrator, or trustee having in
charge a legacy or distributive share, exceeding $10,000 in actual value, arising
from personal property, and passing from a decedent to another by will or
intestate laws, was subjected to a tax graduated according to the value of the
legacy or distributive share; but that section was repealed by the act of April 12,
1902 (32 Stat. at L. 96, chap. 500, Comp.Stat. 1913, 6144), with a
qualification that the repeal should not be effective until July 1 following, and
should not prevent the collection of any tax imposed prior to the latter date.
Next came the act of June 27, 1902 (32 Stat. at L. 406, chap. 1160), the 3d
section of which reads as follows:
'That in all cases where anexecutor, administrator, or trustee shall have paid, or
shall hereafter pay, any tax upon any legacy or distributive share of personal
property under the provisions of the act approved June thirteenth, eighteen
hundred and ninety-eight, entitled, 'An Act to Provide Ways and Means to Meet
War Expenditures, and for Other Purposes,' and amendments thereof, the
Secretary of the Treasury be, and he is hereby, authorized and directed to
refund, out of any money in the Treasury not otherwise appropriated upon
proper application being made to the Commissioner of Internal Revenue, under
such rules and regulations as may be prescribed, so much of said tax as may
have been collected on contingent beneficial interests which shall not have
become vested prior to July first, nineteen hundred and two. And no tax shall
hereafter be assessed or imposed under said act approved June thirteenth,
eighteen hundred and ninety-eight, upon or in respect of any contingent
beneficial interest which shall not become absolutely vested inthe possession or
enjoyment prior to said July first, nineteen hundred and two.'
As the context shows, the word 'vested' in the first sentence has the same
meaning as 'absolutely vested in possession or enjoyment' in the second
(Vanderbilt v. Eidman, 196 U. S. 480, 500, 49 L. ed. 563, 570, 25 Sup. Ct. Rep.
331; United States v. Fidelity Trust Co. 222 U. S. 158, 56 L. ed. 137, 32 Sup.
Ct. Rep. 59); and the words 'contingent' and 'absolutely vested in possession or
enjoyment' are used antithetically and applied to both legacies and distributive
shares. What is meant by 'contingent' is indicated by the phrase with which it is
contrasted and by its application to distributive shares as well as to legacies.
The only sense in which the former are contingentand it is practical rather
than technicalis that they come into being only where, in due course of
administration, the debts of the deceased are ascertained and it is found that a
surplus remains for distribution. It is in this sense that the word is applied to
distributive shares, and, of course, it is applied to legacies in the same way. In
speaking of this section, we said in United States v. Jones, 236 U. S. 106, 59 L.
ed. , 35 Sup. Ct. Rep. 261: 'It deals with legacies and distributive shares
upon the same plane, treats both as 'contingent' interests until they 'become
absolutely vested in possession or enjoyment,' directs that the tax collected
upon contingent interests not so vested prior to July 1, 1902, shall be refunded,
and forbids any further enforcement of the tax as respects interestsremaining
contingent up to that date.' That case related to a tax collected upon distributive
shares in an estate in Pennsylvania. The intestate had died before July 1, 1902,
but the time for presenting claims against the estate had not expired prior to that
date, and therefore what, if any, surplus would remain, was still uncertain, and
the heirs were not, as yet, entitled to a distribution. It was accordingly held that
the distributive shares did not become 'absolutely vested in possession or
enjoyment' before July 1, 1902, but remained contingent in the sense of the
statute, and consequently that the tax should be refunded. The present case
differs from that only in the fact that here the tax was collected upon legacies.
This difference is not material. The refunding act deals with both in the same
way, and the local law subordinates the rights of legatees to those of creditors in
like manner as it does the rights of distributees. It follows that the tax here in
question must be refunded.
5
The case of Hertz v. Woodman, 218 U. S. 205, 54 L. ed. 1001, 30 Sup. Ct.
Rep. 621, is relied upon by the government, as it was in United States v. Jones,
supra, but for reasons there given we think it is not in point here.
Judgment affirmed.
Mr. Justice McReynolds took no part in the consideration and decision of this
case.
