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U.S. Supreme Court

Estate of Sanford v. Commissioner, 308 U.S. 39 (1939)

Estate of Sanford v. Commissioner of Internal Revenue

No. 34

Argued October 18, 19, 1939

Decided November 6, 1939

308 U.S. 39


1. A gift in trust, with reservation of power in the donor to alter the disposition of the property in any way not beneficial to himself, is incomplete, and does not become subject to gift tax under the Revenue Act of 1924, § 319, so long as the donor retains that power. P. 308 U. S. 41.

2. The federal gift tax is supplementary to the estate tax; the two are in pari materia, and must be construed together. P. 308 U. S. 42.

An important purpose of the gift tax was to prevent, or compensate for, avoidance of death taxes. P. 308 U. S. 44.

3. The gift tax statute does not contemplate two taxes upon gifts not made in contemplation of death, one upon the gift when a trust is created or when the power of revocation, if any, is relinquished, and another on the transfer of the same property at death because the gift previously made was incomplete. P. 308 U. S. 45.

4. Transfers in trust, not taxable as gifts because the donor has reserved power to change the beneficiaries, become subject to death taxes when he dies. P. 308 U. S. 46.

5. Art. I of Treas.Reg. 67, under the Revenue Act of 1924, was not directed at relinquishments of reserved power to select new beneficiaries other than the donor, and did not purport to govern cases of reserved power different from or in addition to the power to revest the title in the donor. P. 308 U. S. 48.

At most, the regulation is ambiguous, and not persuasive in determining the true construction of the statute.

6. Art. III, Reg. 79, amendment of 1936 under the Revenue Act of 1932, which declares that a gift is complete and subject to tax when "the donor has so parted with dominion and control as to leave in him no power to cause the beneficial title to be revested in himself," is, by its terms, applicable only to gifts made after June 6, 1932, and is of significance here only so far as it is declaratory of the correct construction of the 1924 Act. P. 308 U. S. 49.

7. A stipulation purporting to reveal the administrative practice in applying the gift tax law held too vague and indefinite to afford basis for a judicial construction of the statute. P. 308 U. S. 49.

Page 308 U. S. 40

8. A stipulation as to questions of law cannot bind the Court. P. 308 U. S. 51.

9. Administrative practice may be persuasive in determining the construction of a statute of doubtful meaning where the practice does not conflict with other provisions of the statute and is not so inconsistent with decisions of the courts as to produce inconsistency and confusion in the administration of the law. P. 308 U. S. 52.

But the Court does not give effect to an unpublished administrative construction, on which taxpayers have not relied, which conflicts with its own decisions and with a later administrative practice conforming to lower court rulings.

10. The reenactment of the gift tax statute of 1924 by the Revenue Act of 1932 was not a legislative approval of an administrative practice which had not been disclosed by Treasury Regulation, ruling, or decision, and which does not appear to have been established before the adoption of the later Act. P. 308 U. S. 53.

103 F.2d 81 affirmed.

Certiorari, 307 U.S. 618, to review a judgment which sustained a decision of the Board of Tax Appeals affirming a deficiency assessment based on the gift tax provision of the Revenue Act of 1924.

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