Majority — Black J.
delivered the opinion of the Court.
This case raises questions concerning the interpretation of that part of § 811 (c) of the Internal Revenue Code which for estate tax purposes requires including in a decedent’s gross estate the value of all the property the decedent had transferred by trust or otherwise before his death which was “intended to take effect in possession or enjoyment at or after his death . . . .” Estate of Spiegel v. Commissioner, post, p. 701, involves questions which also depend upon interpretation of that provision of § 811 (c). After argument and consideration of the cases at the October 1947 Term, an order was entered restoring them to the docket and requesting counsel upon reargument particularly to discuss certain questions
This case involves a trust executed in 1924 by Francois Church, then twenty-one years of age, unmarried and childless. He executed the trust in New York in accordance with state law. Church and two brothers were named co-trustees. Certain corporate stocks were transferred to the trust with grant of power to the trustees to hold and sell the stocks and to reinvest the proceeds. Church reserved no power to alter, amend, or revoke, but required the trustees to pay him the income for life. This reservation of life income is the decisive factor here.
At Church’s death (which occurred in 1939) the trust was to terminate and the trust agreement contained some directions for distribution of the trust assets when he died. These directions as to final distribution did not, however, provide for all possible contingencies. If Church died without children and without any of his brothers or sisters, or their children, surviving him, the trust instrument made no provision for disposal of the trust assets. Had this unlikely possibility come to pass (at his death there were living, five brothers, one sister, and ten of their children) the distribution of the trust assets would have been controlled by New York law. It has been the Government’s contention that under New York law had there been no such surviving trust beneficiaries the corpus would have reverted to the decedent’s estate. This possibility of reverter plus the retention by the settlor of the trust income for life, the Government has argued, requires inclusion of the value of the trust property in the decedent’s gross estate under our holding in Helvering v. Hallock, 309 U. S. 106 .
1 The Hallock case considered the “possession or enjoyment” language of § 811 (c) which appeared in § 302 (c) of the 1926 Revenue Act, 44 Stat. 9 , 70, as amended by § 803 (a) of the Revenue Act of 1932, 47 Stat. 169 , 279, 26 U. S. C. § 811 (c).
2 Estate of Cass, 3 T. C. 562 ; Commissioner v. Kellogg, 119 F. 2d 54 , affirming 40 B. T. A. 916 ; Estate of Downe, 2 T. C. 967 ; Estate of Houghton, 2 T. C. 871 ; Estate of Goodyear, 2 T. C. 885 ; Estate of Delany, 1 T. C. 781 .
3 Commissioner v. Bayne’s Estate, 155 F. 2d 475 ; Commissioner v. Bank of California, 155 F. 2d 1 ; Thomas v. Graham, 158 F. 2d 561 ; Beach v. Busey, 156 F. 2d 496 .
Counsel for the two estates have strongly contended in both arguments of these cases that the law of neither New York nor Illinois provides for a possibility of reverter under the circumstances presented. They argue further that even if under the law of those states a possibility of reverter did exist, it would be an unjustifiable extension of the Hallock rule to hold that such a possibility requires inclusion of the value of a trust corpus in a decedent’s estate. The respondent in this case pointed out the extreme improbability that the decedent would have outlived all his brothers, his sister, and their ten children. He argues that the happening of such a contingency was so remote, the money value of such a reversionary interest was so infinitesimal, that it would be entirely unreasonable to hold that the Hallock rule requires an estate tax because of such a contingency. But see Fidelity-Philadelphia Trust Co. v. Rothensies, 324 U. S. 108 , 112.
Arguments and consideration of this and the Spiegel case brought prominently into focus sharp divisions among courts, judges and legal commentators, as to the intended scope and effect of our Hallock decision, particularly whether our holding and opinion in that case are so incompatible with the holding and opinion in May v. Heiner, 281 U. S. 238 , that the latter can no longer be accepted as a controlling interpretation of the “possession or enjoyment” provision of §811 (c).[4] May v. Heiner held that the corpus of a trust transfer need not
4 Cf. Estate of Hughes, 44 B. T. A. 1196 , with Estate of Bradley, 1 T. C. 518 , affirmed sub nom. Helvering v. Washington Trust Co., 140 F. 2d 87 . See New York Trust Co. v. United States, 100 Ct. Cl. 311 , 51 F. Supp. 733 . Cf. Montgomery, Federal Taxes — Estates, Trusts and Gifts, 461-462, 480-482 (1946) with Paul, Federal Estate and Gift Taxation, 1946 Supp. §§ 7.15, 7.23. See also Note, Inter *637 Vivos Transfers and the Federal Estate Tax, 49 Yale L. J. 1118 (1940); Eisenstein, Estate Taxes and the Higher Learning of the Supreme Court, 3 Tax L. Rev. 395 (1948).
The “possession or enjoyment” provision appearing in § 811 (c) seems to have originated in a Pennsylvania inheritance tax law in 1826.[5] As early as 1884 the Supreme Court of Pennsylvania held that where a legal transfer of property was made which carried with it a right of possession with a reservation by the grantor of income and profits from the property for his life, the transfer was not intended to take effect in enjoyment until the grantor’s death: “One certainly cannot be considered, as in the actual enjoyment of an estate, who has no right to the profits or incomes arising or accruing therefrom.” Reish, Adm’r v. Commonwealth, 106 Pa. 621 , 526. That court further held that the “possession or enjoyment” clause did not involve a mere technical question of title, but that the law imposed the death tax unless one had parted
5 Note, Origin of the Phrase, “Intended To Take Effect in Possession or Enjoyment At or After . . . Death” (§811 (e), Internal Revenue Code), 56 Yale L. J. 176 (1946).
Most of the states have included the Pennsylvania-originated “possession or enjoyment” clause in death tax statutes, and with what appears to be complete unanimity, they have up to this day, despite May v. Heiner, substantially agreed with this 1884 Pennsylvania Supreme Court interpretation.[6] Congress used the “possession or enjoyment” clause in‘death tax legislation in 1862, 1864, and 1898. 12 Stat. 432 , 485; 13 Stat. 223 , 285; 30 Stat. 448 , 464. In referring to the provision in the 1898 Act, this Court said that it made “the liability for taxation depend, not upon the mere vesting in a technical sense of title to the gift, but upon the actual possession or enjoyment thereof.” Vanderbilt v. Eidman, 196 U. S. 480 , 493. And five years before the 1916 estate tax statute incorporated the “possession or enjoyment” clause to frustrate estate tax evasions, 39 Stat. 756 , 780, this Court had affirmed a judgment of the New York Court of Appeals sustaining the constitutionality of its state inheritance tax in an opinion which said: “It is true that an ingenious mind may devise other means of avoiding an inheritance tax, but the one commonly used is a transfer with reservation of a life estate.” Matter of Keeney, 194 N. Y. 281 , 287, 87 N. E. 428 , 429; Keeney v. New York, 222 U. S. 525 . And see Helvering v. Bullard, 303 U. S. 297 , 302,
6 See cases collected in 49 A. L. R. 878 -892; 67 A. L. R. 1250 -1254; 100 A. L. R. 1246 -1254. See also Rottschaefer, Taxation of Transfers Taking Effect in Possession at Grantor’s Death, 26 Iowa L. Rev. 514 (1941); Oliver, Property Rationalism and Tax Pragmatism, 20 Tex. L. Rev. 675 , 704-709 (1942).
From the first estate tax law in 1916 until May v. Heiner, supra, was decided in 1930, trust transfers which were designed to distribute the corpus at the settlor’s death and which reserved a life income to the settlor had always been treated by the Treasury Department as transfers “intended to take effect in possession or enjoyment at . . . his death.” The regulations had so provided and millions of dollars had been collected from taxpayers on this basis. See e. g., T. D. 2910, 21 Treas. Dec. 771 (1919); and see 74 Cong. Rec. 7078, 7198-7199 (March 3, 1931). This principle of estate tax law was so well settled in 1928, that the United States Court of Appeals decided May v. Heiner in favor of the Government in a one-sentence per curiam opinion. 32 F. 2d 1017 . Nevertheless, March 2, 1931, this Court followed May v. Heiner in three cases in per curiam opinions, thus upsetting the century-old historic meaning and the long standing Treasury interpretation of the “possession or enjoyment” clause. Burnet v. Northern Trust Co., 283 U. S. 782 ; Morsman v. Burnet, 283 U. S. 783 ; McCormick v. Burnet, 283 U.S. 784 .
March 3, 1931, the next day after the three per curiam opinions were rendered, Acting Secretary of the Treasury Ogden Mills wrote a letter to the Speaker of the House explaining the holdings in May v. Heiner and the three cases decided the day before. He pointed out the disastrous effects they would have on the estate tax law and urged that Congress “in order to prevent tax evasion,” immediately “correct this situation” brought about by May v. Heiner and the other cases. 74 Cong. Rec. 7198, 7199 (1931). He expressed fear that without such action the Government would suffer “a loss in excess of one-third of the revenue derived from the Federal estate tax, with
February 28, 1938, this Court held that neither passage of the resolution nor its later inclusion in the 1932 Revenue Act was intended to apply to trusts created before its passage. Hassett v. Welch, Helvering v. Marshall, 303 U. S. 303 . Accordingly, if the corpus of the Church trust executed in 1924 is to be included in the settlor’s estate without this Court’s involvement in the intricacies of state property law, it must be done by virtue of the possession and enjoyment section as it stood without the language added by the joint resolution.
Crucial to the Court’s holding in May v. Heiner was its finding that no interest in the corpus passed at the settlor’s death because legal title had passed from the settlor irrevocably when the trust was executed; for this reason the
7 “(c) To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after his death, including a transfer under which the transferor has retained for his life or any period not ending before his death (1) the possession or enjoyment of, or the income from, the property or (2) the right to designate the persons who shall possess or enjoy the property or the income therefrom . . . The italics are added to indicate the additions made by the amendments to § 302 (c) of the Revenue Act of 1926. Joint Resolution of March 3, 1931, 46 Stat. 1516 -1517.
The effect of the Court’s interpretation of this estate tax section was to permit a person to relieve his estate from the tax by conveying its legal title to trustees whom he selected, with an agreement that they manage the estate during his life, pay to him all income and profits from the property during his life, and deliver it to his
8 The May v. Heiner trust provided for the income to go to Barney-May during his lifetime, after his death to his wife, Pauline May, the grantor, and upon her death the corpus was to be distributed to the grantor’s four children. The Court said that the record failed clearly to disclose whether Mrs. May survived her husband, but held this was of no special importance.
9 The Court also quoted from and relied heavily on Reinecke v. Northern Trust Co., 278 U. S. 339 , 345. This Court there held that the corpus of two trusts that reserved a life income to the grantor plus a power to revoke should have been included in the decedent’s estate. The corpus of five other trusts were held not includable. These five trusts did not reserve a power in the grantor alone to revoke, nor did they reserve a life estate to the grantor, but they provided for accumulation of that income during the settlor’s life, and at his death it was to go to the beneficiaries, subject to prior use by the beneficiaries as directed by the settlor. Thus, this case did not directly support the May v. Heiner holding. Nor is May v. Heiner supported by Shukert v. Allen, 273 U. S. 545 , as shown by reference to Shukert v. Allen in the Reinecke opinion at p. 347.
One year after May v. Heiner, this Court decided Klein v. United States, supra. There the grantor made a deed conveying property to his wife for her life with provisions that if she survived him she should “by virtue of this conveyance take, have, and hold the said lands in fee simple,” but the fee was to “remain vested in” him should his wife die first. This Court pointed out that in general and under the law of Illinois where the deed was made, vesting of title in the grantee “depended upon the condition precedent that the death of the grantor happen before that of the grantee.” Thus, since it was found that under Illinois law -legal title to the land had been retained by the husband, it was held that the value of the land should be included in his gross estate under the “possession or enjoyment” section. The Court did not cite May v. Heiner.
In 1935, this Court decided Helvering v. St. Louis Trust Co., 296 U. S. 39 , and Becker v. St. Louis Trust Co., 296 U. S. 48 . In each of these cases the Court again, as in May v. Heiner, delved into the question of legal title under rather subtle property law concepts and decided that the legal title of the trust properties there,
Helvering v. Hallock was decided in 1940. Three separate trusts were considered in the Hallock case. These three trusts as those considered in the St. Louis Trust and Becker cases, had been executed with provisions for reversion of the trust properties to the grantors should the grantors outlive the beneficiaries. The trusts had been executed in 1917, 1919, and 1925. In the Hallock case this Court was again asked to limit the effect of § 811 (c) by emphasis upon the formal passage of legal title. By such concentration on elusive legal title, the Court was invited to lose sight of the plain fact that complete enjoyment had been postponed. We declined to limit the effectiveness of the possession or enjoyment provision of § 811 (c) by attempting to define the nature of the interest which the decedent retained after his inter vivos transfer. We called attention to the snares which inevitably await an attempt to restrict estate tax liability on the “niceties of the art of conveyancing” at p. 117. We declared that the statute now under consideration “taxes not merely those interests which are deemed to pass at death according to refined technicalities of the law of property. It also taxes inter vivos transfers that are too much akin to testamentary dispositions not to be subjected to the same excise,” p. 112, and inter vivos gifts “resorted to, as a substitute for a will, in making dispositions of property operative at death,” p. 114.
As pointed out by the dissent in Hallock, we there directly and unequivocally rejected the only support that could possibly suffice for the holdings in May v. Heiner. That support was the Court’s conclusion in May v. Heiner
Moreover, the Hallock case, p. 114, stands plainly for the principle that “In determining whether a taxable transfer becomes complete only at death we look to substance, not to form . . . However we label the device [if] it is but a means by which the gift is rendered incomplete until the donor’s death” the “possession or enjoyment” provision applies.
How is it possible to call this trust transfer “complete” except by invoking a fiction? Church was sole owner of the stocks before the transfer. Probably their greatest property value to Church was his continuing right to get their income. After legal title to the stocks was transferred, somebody still owned a property right in the stock income. That property right did not pass to the trust beneficiaries when the trust was executed; it remained in Church until he died. He made no “complete” gift effective before that date, unless we view the trust transfer as a “complete” gift to the trustees. But Church gave the trustees nothing, either partially or completely. He transferred no right to them to get and spend the stock income. And under the teaching of the Hallock case, quite in contrast to that of May v. Heiner, passage of the mere technical legal title to a trustee is not necessarily crucial in determining whether and when a gift becomes “complete” for estate tax purposes. Looking to substance and not merely to form,
Thus, what we said in Hallock was not only a repudiation of the reasoning which was advanced to support the two cases (St. Louis Trust and Becker) that Hallock overruled, but also a complete rejection of the rationale of May v. Heiner on which the two former cases had relied. Hallock thereby returned to the interpretation of the “possession or enjoyment” section under which an estate tax cannot be avoided by any trust transfer except by a bona fide transfer in which the settlor, absolutely, unequivocally, irrevocably, and without possible reservations, parts with all of his title and all of his possession and all of his enjoyment of the transferred property. After such a transfer has been made, the settlor must be left with no present legal title in the property, no possible reversionary interest in that title, and no right to possess or to enjoy the property then or thereafter.
It is strongly urged that we continue to regard May v. Heiner as controlling and leave its final repudiation to Congress. Little effort is made to defend the May v. Heiner interpretation of “possession or enjoyment” on the ground that it truly reflects the congressional purpose, nor do we think it possible to attribute such a purpose to Congress. There is no persuasive argument, if any at all, that trusts reserving life estates with remainders over at grantors’ deaths are not satisfactory and effective substitutes for wills. In fact, the purpose of this settlor as expressed in his trust papers was to make “provision for any lawful issue” he might “leave at the time of his death as well as provide an income for himself for life.” This paper, labeled a trust, but providing for all the substantial purposes of a will, was intended to and did postpone until the settlor’s death the right of his relatives to possess and enjoy his property. There may be trust instruments that fall more clearly within the class intended to be treated as substitutes for wills by the “possession or enjoyment” clause, but we doubt it.
What was said in the Hallock opinion on the question of stare decisis would appear to be a sufficient answer to that contention here. The Hallock opinion also answers the argument as to recent Treasury regulations, all of which were made by the Treasury under compulsion of this Court’s cases. Furthermore, the history of the struggle of the Treasury to subject such transfers as this to the estate tax law, a history shown in part in the Hassett v. Welch opinion, has served to spotlight the abiding conviction of the Treasury that the May v. Heiner statutory interpretation should be rejected. In view of the struggle of the Treasury in this tax field, the variant judicial and Tax Court opinions, our opinion in the Hallock case and others which followed, it is not easy to believe that taxpayers who executed trusts prior to the 1931 joint resolution felt secure in a belief that May v. Heiner gave them a vested interest in protection from estate taxes under trust transfers such as this one. And so far as this trust is concerned, Treasury regulations required the value of its corpus to be included in the gross estate when it was
Moreover, the May v. Heiner doctrine has been repudiated by the Congress and repeatedly challenged by the Treasury. It certainly is not an overstatement to say that this Court’s Hallock opinion and holding treated May v. Heiner with scant respect. We said Congress had “displaced” the May v. Heiner construction of § 811 (c); in overruling the St. Louis Trust cases we pointed out that those cases had relied in part on the “Congressionally discarded May v. Heiner doctrine”; we thought Congress “had in principle already rejected the general attitude underlying” the May v. Heiner and St. Louis Trust cases; and finally our Hallock opinion demolished the only reasoning ever advanced to support the May v. Heiner holding. And in the Hallock case, trusts created in 1917, 1919, and 1925 were held subject to the estate tax under the provisions included in § 811 (c). What we said and did about May v. Heiner in the Hallock case took place in 1940, two years after Hassett v. Welch had held that the 1931 and 1932 amendments could not be applied to trusts created before 1931. Certainly, May v. Heiner cannot be granted the sanctuary of stare decisis on the ground that it has had a long and tranquil history free from troubles and challenges.
Nor does the joint resolution or the opinion in the Hassett v. Welch and Helvering v. Marshall cases, decided together, support an argument that the May v. Heiner doctrine be left undisturbed. It would be impossible to say that Congress in 1931 intended to accept and ratify decisions that hit the Congress like a “bombshell.”[10]
10 A May 22, 1931, bulletin of the Treasury Department indicates a strong reason for the Treasury Department’s construction of the resolution as inapplicable to pre-1931 trust transfers. T. D. 4314, X-l, Cum. Bull. 450-451 (1931). That reason was obviously a fear that this Court might hold that the tax could not constitutionally *649 be applied to trusts previously created under the Nichols v. Coolidge, 274 U. S. 531 , line of cases. This same apprehension may well have been the underlying reason for a statement, relied on by the dissent, made on the floor of the House that the resolution was not made “retroactive for the reason that we were afraid that the Senate would not agree to it.” 74 Cong. Rec. 7199 (1931). Recent cases have indicated that the fear of such a constitutional interpretation is not a valid one. Central Hanover Bank v. Kelly, 319 U. S. 94 , 97-98; Fernandez v. Wiener, 326 U. S. 340 , 355.
The plain implications of the Hallock opinion recognize that the Hassett and Marshall cases did not reaffirm the May v. Heiner doctrine. In the Marshall case the trust, created in 1920, contained a provision that should the settlor outlive the trust beneficiary, the trust corpus would revert to the settlor. That is the very type of provision which we held in Hallock would require inclusion of its value in the settlor’s estate. Since the Hallock case did not overrule the Marshall case involving a trust created in 1920, it must have accepted the Marshall and Hassett cases as deciding no more than that the value of the trust properties there could not be included in the de
That the Hallock opinion did not treat the Hassett and Marshall cases as having reaffirmed this Court’s interpretation of the pre-1931 possession or enjoyment clause is further emphasized by the effect of the Hallock case on the type of trust in McCormick v. Burnet, 283 U. S. 784 , a trust created before 1931. The United States Court of Appeals in that case had held that the trust property should be included in the decedent’s estate chiefly because of the trust provision that the corpus should revert to the settlor in the event that she outlived her three children. 43 F. 2d 277 . This Court in its per curiam opinion reversed the Court of Appeals and held that the McCormick corpus need not be included in the decedent’s estate. Our Hallock case held directly the contrary, for since Hallock, the McCormick corpus would have to be taxed under the pre-1931 language of §811 (c). In so interpreting the pre-1931 language in the Hallock case, we necessarily rejected the contention made there that the Congress by passage of the resolution and this Court by the Hassett and Marshall opinions had accepted as correct the May v. Heiner restrictive interpretation of §811 (c). It is plain that this Court in the Hallock case considered that the Has-sett and Marshall cases held no more than that the 1931 and 1932 amendments were prospective, and that neither the congressional resolution nor the Hassett and Marshall cases were designed to give new life and vigor to the May v. Heiner doctrine.[11]
11 A dissent filed in this case has an appendix citing “decisions DURING THE PAST DECADE IN WHICH LEGISLATIVE HISTORY WAS DECISIVE OP CONSTRUCTION OP A PARTICULAR STATUTORY PROVISION,” post, p. 687. Many other decisions of less recent date could also be cited to establish this well-known fact which nobody disputes. But we think *651 here, in the language of our opinion in the Hallock case, which opinion was written by the author of today’s dissent, that the actions of Congress relied on in the dissent have not “under any rational canons of legislative significance . . . impliedly enacted into law a particular decision which, in the light of later experience, is seen to create confusion and conflict in the application of a settled principle of internal revenue legislation.” Helvering v. Hallock, 309 U. S. 106 , 121, note 7. The basic “settled principle” now as when Hallock was written is that where a trust agreement reserves the settlor’s possession or enjoyment of part or all of the trust property until death, the value of the trust should be included in the settlor’s gross estate. The arguments in dissent here based on stare decisis, legislative history, and possible consequences of this Court’s holding, are strikingly like the forceful arguments made in the Hallock dissent. But the persuasive and sound arguments advanced by the Court’s spokesman in Hallock were there considered by the majority of this Court to be a sufficient answer to what was said in the Hallock dissent. Particularly forceful was this Court’s statement in the Hallock opinion that “we walk on quicksand when we try to find in the absence of corrective legislation a controlling legal principle.”
Concurrence — Reed J.
Reversed.
Mr. Justice Jackson concurs in the result.
concurring in No. 3, Spiegel v. Commissioner, post, p. 701, and dissenting in No. 5, Commissioner v. Church, ante, p. 632.
As these tax decisions may have an influence on subsequent decisions beyond the limited area of the issues decided, I have thought it advisable to state my position for whatever light it may throw. I agree with the judg
So far as Commissioner v. Church is concerned, I do not believe that May v. Heiner, 281 U. S. 238 , should be overruled. The Joint Resolution of March 3, 1931, therefore, stands as the determinative factor in reaching a conclusion as to the taxability of the Church estate. Hassett v. Welch, 303 U. S. 303 , decided that the Resolution was not retroactive. Consequently, the Church estate is not subject to an estate tax because of the reservation of a life estate.
We are asked to accept an overruling of May v. Heiner, supra, and also, I think, of Reinecke v. Northern Trust Co., 278 U. S. 339 , not to mention the incidental fall of Hassett v. Welch, supra, on the one side, or, on the other hand, to limit the rule as to the possibility of reverter in Helvering v. Hallock, 309 U. S. 106 , and the numerous cases that follow its teaching, to reverters expressly reserved in the documents. Legislation indicates a purpose to promote gifts as a desirable means for early distribution of property benefits. In reliance upon a long-settled course of legislative and judicial construction, donors have made property arrangements that should not now be upset summarily with no stronger reasons for doing so than that former courts
(1) A provision including in a decedent’s estate the value at time of death of interest in any transfer by trust “in contemplation of or intended to take effect in possession or enjoyment at or after his death” has been in the federal estate tax law since the Income Tax Act of 1916.[1] It will be noted that the phrase relating to a transfer “in contemplation of or intended to take effect in possession or enjoyment at or after his [settlor’s] death” has not changed. It was construed by this Court, at first, to apply to those circumstances where something passed
1 This provision first appeared in § 202 (b) of the Revenue Act of 1916, 39 Stat. 756 , 777-78, and read as follows: “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: “(b) To the extent of any interest therein of which the decedent has at any time made a transfer, or with respect to which he has created a trust, in contemplation of or intended to take effect in possession or enjoyment at or after his death, except in case of a bona fide sale for a fair consideration in money or money’s worth. . . With small changes it was included in § 402 (c) of the Revenue Acts of 1918 and 1921, 40 Stat. 1057 , 1097; 42 Stat. 227 , 278, and in *654 § 302 (c) of the Revenue Acts of 1924 and 1926, 43 Stat. 253 , 304; 44 Stat. 9 , 70. In 1931 the provision was amended by H. J. Res. No. 529, 46 Stat. 1516 , and assumed its present form in the Revenue Act of 1932, 47 Stat. 169 , 279. It now reads as follows: “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, except real property situated outside of the United States— “(c) Transfers in contemplation of, or talcing effect at death. “To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after his death, or of which he has at any time made a transfer, by trust or otherwise, under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death (1) the possession or enjoyment of, or the right to the income from, the property, or (2) the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom; except in case of a bona fide sale for an adequate and full consideration in money or money’s worth. . . .” The italicized words are the additions made by the amendments of 1931 and 1932 to § 302 (c) of the Revenue Act of 1926. See Hassett v. Welch, 303 U. S. at 307-308 . The underscored phrase at the end of the first paragraph was added by the Revenue Act of 1934, § 404, 48 Stat. 680 , 754. There has been no further change.
Klein v. United States, 283 U. S. 231 , brought doubt into the above conception of the meaning of the phrase in question. That trust was to A for life and on condition that A survive the donor to A in fee simple. It was the death of the donor that “brought the larger estate into being . . . and effected its transmission from the dead to the living,” this Court said in upholding the tax on the trust property. This was construed by four members of the Court to mean that the donor’s death “operating upon his gift inter vivos not complete until his death, is the event which calls the statute into operation.” Mr. Justice Stone, dissenting in the later case of Helvering v. St. Louis Trust Co., supra, 46. The two positions, one that only power in the settlor at the time of death to cause the property to be transferred from him to another by will or by descent or to select beneficiaries through appointment brought the property formerly transferred within the reach of the words “intended to take effect in possession or enjoyment at or after his death,” the Reinecke concept, and the other that, in addition, every possibility of reversion of the transferred interest to the settlor must be barred by the trust instrument, the dissenter’s ground in Helvering v. St. Louis Trust Co., were fully discussed in the majority and dissenting opinions in Helvering v. Hallock, 309 U. S. 106 .[2] The latter
2 Whether the taxable event is the “transfer inter vivos,” as we suggested in Helvering v. Hallock, 309 U. S. 106 , 111, see Shukert *656 v. Allen, 273 U. S. 545 , 546, and Fidelity-Philadelphia Trust Co. v. Rothensies, 324 U. S. 108 , 110-11, or the transfer at death, as now seems to me more precise, seems immaterial. See Int. Rev. Code § 810; dissent in Helvering v. St. Louis Trust Co., 296 U. S. 39 , 46-47; Reinecke v. Northern Trust Co., 278 U. S. 339 , 347. It was said of a transfer in contemplation of death, “It is thus an enactment in aid of, and an integral part of, the legislative scheme of taxation of transfers at death.” Milliken v. United States, 283 U. S. 15 , 23; Heiner v. Donnan, 285 U. S. 312 , 330, cf. dissent at 334. In either case transfer of an interest in property intended to take effect in possession or enjoyment at or after death is taxed. If taxed as an excise on the privilege of transfer at death, the transferee has taken subject to the tax. Int. Rev. Code § 827 (b). It is a means of checking tax avoidance. Cf. Milliken v. United States, 283 U. S. 15 , 20. See Helvering v. Bullard, 303 U. S. 297 , an estate tax on a trust that retained a life estate. We there said, pp. 301-2, “A further vindication of the exaction is the authority of Congress to treat as testamentary, transfers with reservation of a power or an interest in the donor.” See Fernandez v. Wiener, 326 U. S. 340 , 352; cf. Heiner v. Donnan, 285 U. S. 312 , 331-32.
Prior cases have involved trust instruments where the settlor specifically reserved remainders, reverters or contingent powers of appointment. In these cases the value at death of the entire corpus of the trusts was taxed. This was because in each case there was a contingency through which completed gifts of the entire corpus to the beneficiaries might fail before the death of the settlor with the result that the settlor would again control the transfer of the corpus.'[4] In such circumstances, I take it as settled that the property is taxable on the event of the settlor’s death under §§ 810 and 811 (c). Cf. 324 U. S. at 111.
The trust instruments in the present cases of the Spiegel and Church estates do not specifically provide for such possibility of reverter or for regaining control of the devolution of the property. The issue raised by these cases is whether a like possibility of reverter springing not from the instrument but by operation of law through the failure of all beneficiaries named in the trust instru
3 National Safe Deposit Co. v. Stead, 232 U. S. 58 , 67.
4 Helvering v. Hallock, 309 U. S. 106 ; Fidelity-Philadelphia Trust Co. v. Rothensies, 324 U. S. 108 ; Commissioner v. Estate of Field, 324 U. S. 113 ; Goldstone v. United States, 325 U. S. 687 .
To lay bare the heart of the problem, it seems helpful to put aside certain phases of possible congressional intention and possible statutory meaning, as not involved or heretofore decided for sound reasons.
A. It was not the purpose of Congress at any time in dealing with the inclusion of transfers of property in trust to have the whole value, at the donor’s death, of the total of all gifts made during life, included in the settlor’s
5 Since the state law defines and creates rights and interests in property and the federal taxing statutes only say which of these rights and interests created by state law shall be taxed, the law of Illinois controls the construction of this trust. Helvering v. Stuart, 317 U. S. 154 , 161-63; Blair v. Commissioner, 300 U. S. 5 , 9-10. The trustee in the Spiegel case could act only in the interest of the beneficiaries of the trust. It is well established in Illinois as in other jurisdictions that a trustee in the absence of express authority cannot deal on his own behalf with any part of the trust property. Doner v. Phoenix Joint Stock Land Bank of Kansas City, 381 Ill. 106 , 45 N. E. 2d 20 ; Kinney v. Lindgren, 373 Ill. 415 , 26 N. E. 2d 471 ; City of Chicago v. Tribune Co., 248 Ill. 242 , 93 N. E. 757 ; and in determining the powers of the trustee reference must be had to the intention of the grantor as manifested in the whole trust instrument. Crow v. Crow, 348 Ill. 241 , 180 N. E. 877 ; Bear v. Millikin Trust Co., 336 Ill. 366 , 168 N. E. 349 ; Harris Trust & Savings Bank v. Wanner, 326 Ill. App. 307 , 61 N. E. 2d 860 . Even though a trustee has been vested with full power and discretion as to the management of the trust he is still subject to the control of the equity court, and this discretion cannot be exercised by the trustee so as to defeat the trust or to deprive the cestui que trust of its benefits. Maguire v. City of Macomb, 293 Ill. 441 , 127 N. E. 682 ; Jones v. Jones, 124 Ill. 254 , 15 N. E. 751 . This rule that the trustee must administer the trust solely in the interest of the cestui que trust has the support of both reason and authority. See Helvering v. Stuart, 317 U. S. 154 , 162-66; Restatement, Trusts § 170; 2 Scott, Trusts § 187.
B. The Joint Resolution of 1931 made no change in the language of the subsection of the estate tax relating to the inclusion in estates of interests in trusts intended to take effect in possession or enjoyment at or after death. Neither the resolution nor the discussion on the floor of either house suggested a change in the words of the section to define what is meant by an interest intended to take effect after death. Congress aimed at the retention of life interests, not at this Court’s determinations of the meaning of “possession or enjoyment.” Those words were left untouched and an addition was made providing for the inclusion in the estate of interests where the settlor had retained the possession or enjoyment of the property or a right to income or the power to designate the beneficiaries. See note 1, supra. Therefore the words relating to intention, death, possession or enjoyment have the same meaning now as they did
6 This statement does not refer to the items of deduction or exemption covered by Int. Rev. Code § 812 but to the value of gifts not covered by § 812 that also are not covered by § 811.
7 46 Stat. 1516 .
8 May v. Heiner, 281 U. S. 238 ; Burnet v. Northern Trust Co., 283 U. S. 782 ; Morsman v. Burnet, 283 U. S. 783 ; McCormick v. Burnet, 283 U. S. 784 .
Assuming that Congress might have legislated so that the added words would apply to the estates of all who died after the passage of the Joint Resolution, Congress definitely manifested an intention that the amendments were not to apply to trusts created prior to the Resolution though the settlor might die subsequently thereto. This whole matter is discussed thoroughly and, I think, unanswerably in Hassett v. Welch, 303 U. S. 303 , and I can add nothing to the argument. Attention, however,
9 Why “possession or enjoyment of . . . the property” was put in the amendment to the section I do not know. It reads as if Congress intended to make it clear that the possession or enjoyment of the property was a basis for taxation. Such result would have followed from the original language. That is probably why no cases have been called to our attention that have turned on the use of these words in the amendment.
Mr. Garner of the same Committee stated:
“The Committee on Ways and Means this afternoon had a meeting and unanimously reported the resolution just passed. We did not make it retroactive for the reason that we were afraid that the Senate would not agree to it. But I do hope that when this matter is considered in the Seventy-second Congress we may be able to pass a bill that will make it retroactive.”
And in answer to a question, he reiterated, “I have strong hopes that the next Congress will make it retroactive.” Congress never took any subsequent action and this Court’s interpretation of the meaning of “intended to take effect in possession or enjoyment” remained the same. The addition to the section made by the Joint Resolution made certain future gifts inter vivos, which would theretofore have been free of estate tax, subject to such a tax.
C. As a corollary to the foregoing section B, it is clear to me also that Congress by the Joint Resolution made no change in the statute for the purpose of bringing trusts into an estate merely because the actual use of the estate or its income by the cestui que trust was postponed until the death of the donor. Shukert v. Allen, supra.
D. It is impossible for me to look upon the Spiegel or Church trust as closely akin to a will. The decisive
10 74 Cong. Rec. 7198-99.
Returning to the issue in these present cases, the difference between them and Helvering v. Hallock and its progeny is that here the possibility of reverter arises by operation of law whereas in them the possibility arises out of the terms of the trust. That difference I do not think is material as to taxability under § 810 and § 811 (c). Granting that in early interpretations of the sections this Court might logically have determined that remote possibilities of reverter did not interfere with the beneficiaries’ complete possession and enjoyment of the gift during the lifetime of the donor, the balance of experience and precedent, since Helvering v. Hallock, tips the scale the other way in my judgment. It is important, though not decisive, since we are not justified in pushing every rule to its logical extreme, that this conclusion is a
I recognize that this interpretation has possibilities of variation in result through the employment of technicalities of property law. The addition of a phrase may make the difference between a completed or an incom-pleted gift. To make the intention of the settlor the determinative factor creates equal difficulties. Nor am I unmindful of this Court’s effort, in which I joined, in the Hallock case to find a harmonizing principle for the difficulties engendered by § 811 (c). In that case the principle applied was that a tax lies against an estate when the death of the grantor brings a larger estate into being for the beneficiary. This does accomplish uniformity in the interpretation of the section of federal law. Hallock attempted nothing more. It leaves its application to particular trusts dependent upon state determination of when a settlor has divested himself of every possible interest in the res of a trust.[11] We are
11 Helvering v. Stuart, 317 U. S. 154 , 161-62: “When Congress fixes a tax on the possibility of the revesting of property or the distribution of income, the ‘necessarj’’ implication,’ we think, is that the possibility is to be determined by the state law. Grantees under deeds, wills and trusts, alike, take according to the rule of the state law. The power to transfer or distribute assets of a trust is essentially a matter of local law. . . . Congress has selected an event, that is the receipt or distributions of trust funds by or to a grantor, normally brought about by local law, and has directed a tax to be levied if that event may occur. Whether that event may or may not occur depends upon the interpretation *664 placed upon the terms of the instrument by state law. Once rights are obtained by local law, whatever they may be called, these rights are subject to the federal definition of taxability.”
(2) The foregoing leads to the conclusion in the Spiegel case that this estate must, pay a federal estate tax on the trust res unless that res, under the law of Illinois, would have passed to the heirs at law or the legatees of the last descendant of the settlor. If under Illinois law the estate returned to the settlor on his surviving all his descendants, the tax is due. The possibilities of this happening in this case are extremely remote but a trust might have been created by a young son for an aged mother to pay her the income for life and at the settlor’s death to pay her the principal.
The Court of Appeals concluded ( 159 F. 2d at 259 ) that “If none of the beneficiaries survived the settlor, and that was a possibility, then the trust failed, and the trustees would hold the bare naked title to the corpus as resulting trustees for the settlor.” There is no Illinois case holding squarely on this point, and in the absence of such a determination by a state court we do not interfere with a reasonable decision of the circuit which embraces Illinois. Helvering v. Stuart, 317 U. S. 154 , 164; MacGregor v. State Mutual Life Assurance Co., 315 U. S. 280 . The rule followed by the Court of Appeals accords with that generally accepted. Restatement, Trusts § 411; 3 Scott, Trusts §411; 2 Bogert, Trusts and Trustees § 468; Harris Trust & Savings Bank v. Morse, 238 Ill. App. 232 ; Lill v. Brant, 6 Ill. App. 366 , 376.[12]
12 The Illinois Annotations to the Restatement of the Law of Trusts, § 411, says that the rule of the Restatement “states the law,” but no case has been found where the trustee holds the corpus upon a *665 resulting trust for the settlor because of the failure of the inter vivos trust. See Restatement, Trusts, Ill. Anno. § 411, comment (b). In view of the uncertainties surrounding the theory that the burden of proof is on the taxpayer to show that the Commissioner of Internal Revenue is in error as to the law applicable to an assessment of a deficiency, I do not depend upon that theory to support the judgment of the Court of Appeals. See Helvering v. Leonard, 310 U. S. 80 ; Helvering v. Fitch, 309 U. S. 149 ; cf. Helvering v. Stuart, 317 U. S. 154 , dissent, 172; 2 Paul, Federal Estate and Gift Taxation, § 14.47, n. 4 and 1946 Supp.; 9 Mertens, Law of Federal Income Taxation 285-86.
From a reading of the trust instrument involved in the instant case, it is manifest that the settlor did not intend to grant his children the power to dispose of their respective shares should they predecease the settlor with
13 In Chater v. Carter, 238 U. S. 572 , this Court considered the following language whereby an inter vivos trust was created. “The trust for Lottie Lee is to cause the dividends to be paid to her during the three years from January 1st next and if she shall then be living to transfer the shares to her.” The cestui que trust died before the expiration of the three-year period and the question arose as to whether the heir of the cestui que trust or the estate of the settlor was to receive the corpus. This Court considered it unnecessary “to strain the meaning of words, as is sometimes done to avoid intestacy when wills are to be construed.” It concluded that the trust having failed, the trustee must redeliver the corpus “to him from whom it came. In other words, there is a resulting trust for the donor.”
No error appears in the conclusion of the Court of Appeals on this point.
(3) Finally, the situation in the Church case must be dealt with. The trust was created in New York by a resident of New York who died a resident of New Jersey. Two of three trustees were at all times residents of New York where the stocks and accounts of the trust were kept. From what is before me, I would assume that the New York law would control as to the possibility of the retention of an interest by the settlor. This produces a variant from the Spiegel case. The determination of New York law will be made by a circuit that does not include that state. This, I think, is not significant in determining the course to be followed.
As the Court of Appeals for the Third Circuit made its decision on the authority of the Dobson rule, 161 F. 2d 11 , it did not consider the effect of Hassett v. Welch, 303 U. S. 303 . As May v. Heiner stands, in my opinion, trusts, like the Church trust, created prior to the passage of the Joint Resolution of March 3, 1931, are not includable in the gross estate of a settlor for federal estate tax purposes unless there is a possibility of reverter to the settlor by operation of the controlling state law. To determine this question, I would vacate the judgment
Dissent — Frankfurter J.
I
I would affirm No. 3, Spiegel v. Commissioner; I would vacate No. 5, Commissioner v. Church.
dissenting.[1]
By fitting together my agreement with portions of the dissenting concurrence and my disagreement with a part of the comprehensive dissenting opinions of my brother Burton, I could indicate, substantially, my views of these cases. But such piecing together would make a Joseph’s coat. Therefore, even at the risk of some repetition of what has been said by others, a self-contained statement on the basic issues of these cases will make for clarity. Particularly is this desirable where disharmony of views supports a common result — a result the upsetting of which by Congress is almost invited.
I
n the Spiegel case, No. 3, the decedent made a settlement by the terms of which he reserved no interest for himself, and it is not suggested that the form of the settlement disguised an attempted evasion of the estate-tax law. The corpus of the decedent’s estate is found to be subject to the estate tax on the basis of Helvering v. Hallock, 309 U. S. 106 , as supplemented by Fidelity-Philadelphia Trust Co. v. Rothensies, 324 U. S. 108 , Commissioner v. Estate of Field, 324 U. S. 113 , and Goldstone v. United States, 325 U. S. 687 . On that basis it is now decided that if there is a possibility, due to the terms of the instrument or by operation of law, however remote, that settled property may return to the set-
* [This is also a dissent from Estate of Spiegel v. Commissioner, post, p. 701.]
This case is brought under the decisions of Hallock and the three subsequent cases only by a disregard of the vital differences between the interest created by the Spiegel indenture and the arrangements before this Court in the four cases upon which reliance is placed.
1. In 1920, Spiegel transferred securities to himself and another person as co-trustees, the income to be paid equally to Spiegel’s three named children during his lifetime. If any of the children died before the settlor, the share of that child was to go to his issue, if any, otherwise to the settlor’s other children. The instrument provided further that upon the settlor’s death the corpus, together with any accumulated income, should be divided “equally among my said three (3) children, and if any of my said children shall have died, leaving any child or children surviving, then the child or children of such deceased child of mine shall receive the share” of the trust to which his or her parent would have been entitled.
2. In the Helvering v. Hallock series, supra, each of the several donors created a trust giving an estate to another but providing that the property would revert to the donor if the donee predeceased him. The donor’s death in each case was the operative fact which established final and complete dominion as between the donor and the donee according to the terms of the instruments. Until the former’s death the donor was, as it were, competing with the donee for the ultimate use and enjoyment of the property. We there held that the particular form of conveyancing words is immaterial if the net effect is that transferred property will revest in a donor who survives the donee. Except on a contingency of Illinois law so remote as to be nonexistent in the practical affairs of life, the property would never revert to Spiegel. His death no doubt would finally determine which children or grandchildren would have the ultimate enjoyment of the trust corpus settled upon his children, but in the real world the property could never come back to him as a windfall. His death did not determine contingencies
1 The Court of Appeals for the Seventh Circuit did not determine whether a grandchild who survived his parent also had to survive the settlor-decedent to have the right to his share of the principal go to his estate.
Contrary to the suggestion in the concurring opinion in this case — a suggestion accepted by the majority opinion — the Court of Appeals did not find that Spiegel retained an interest because he had not provided for all contingencies. It included the settled property in the gross estate on the theory that every trust carries as it were the seed of its own destruction through failure of the trust, thereby generating a resulting trust. It said, “If none of the beneficiaries survived the settlor, and that was a possibility, then the trust failed, and the trustees would hold the bare naked title to the corpus as resulting trustees for the settlor.” 159 F. 2d at 259 . But this mode of argument would have swept into the gross estate a conveyance in trust in fee to any of Spiegel’s children in 1920 since the failure of the trust for any conceivable reason presumably would not turn the trust property into an outright gift to the trustees.
The trust indenture is a comprehensive arrangement for the children and their offspring to take care of the contingencies of mortality among the children and their offspring. Provisions such as were made in the Spiegel case are precisely the kind of arrangement made by an ancestor for his children and children’s children by which he settles property upon them with a view to the contingencies of successive generations and reserves no interest in himself. Nothing was reserved in the settlor except what feudal notions about seisin may have reserved. But feudal notions of seisin are no more pertinent in tax cases when they lead to imposition of an estate tax than when they lead away from it. At the very basis of the decision of the Hallock case was the insistence that these “unwitty diversities of the law of property derive [d] from medieval concepts as to the necessity of a continuous
3. The three later decisions invoked by the Court bear no resemblance to the situation presented by the Spiegel case and give no justification for the ruling now made. In Fidelity-Philadelphia Trust Co. v. Rothensies, supra, the settlement provided for a life estate in the settlor, life estates in the two daughters, and a reversion in the settlor unless the daughters had issue. See Brief for Respondent, p. 8, Fidelity-Philadelphia Trust Co. v. Rothensies, supra; Goldstone v. United States, 325 U. S. 687 , 693, n. 3. The birth of the grandchildren which cut off the settlor’s interest did not occur until after the death of the settlor. Since, therefore, the taxability is to be determined at death, it followed that the value of the trust property was to be included in the gross estate. The sole controversy was whether deduction should be allowed for the mother’s and daughters’ life interests and for a contingent gift to unborn children.[3] Likewise in the Estate of Field case it was conceded that the settlor retained until death a substantial interest — the right to
2 The grant of certiorari was “limited to the question of whether the entire value of the corpus of the trust at the time of decedent’s *672 death should have been included in the decedent’s gross estate.” Fidelity-Philadelphia Trust Co. v. Rothensies, 324 U. S. 108 , 110. The same is true in Commissioner v. Estate of Field, 324 U. S. 113 , 114.
The birth of grandchildren in Spiegel’s lifetime destroys all resemblance between his case and the cases just discussed. On the least favorable reading of the trust instrument — whereby the grandchildren would have to survive not only their parents but also the settlor — the possibility that the settlor would regain the property was extremely tenuous. Reading the trust instrument in a customary and not in a hostile spirit, the grandchildren would merely have to survive their parents and not the settlor for their interest to become indefeasible. Thus the remote contingency of reacquisition by the settlor vanishes.[4]
To be sure, in both the Fidelity-Philadelphia Trust Co. and the Estate of Field cases there is generality of
3 In No. 5, Commissioner v. Church, it is even clearer that events subsequent to the creation of the trust removed whatever possibility of reverter had previously existed even if one assumes that when the trust was created the settlor would regain the property if children or his brothers and sisters did not survive him. The trust indenture provided that the corpus was to go to the issue of deceased brothers and sisters if he survived his brothers and sisters, but there was no requirement that the children survive anyone to take. Unless we are going to import notions of tortious conveyances into modern trust arrangements, the subsequent birth of the children *673 of his brothers and sisters removed any possibility that the property would come back to the settlor. Since I do not reject May v. Heiner, I do not regard the retention of the life estate as causing the estate to be taxed.
4. But even the gossamer thread which binds the majority together in subjecting the Spiegel trust corpus to an estate tax is visible only to their mind’s eye. The gossamer thread is the remote possibility that at the time of Spiegel’s death there would be a reverter of the trust property to him. But that possibility depends entirely upon its recognition by the law of Illinois. It is at best a dubious assumption that such a reverter exists under Illinois law. My brother Burton’s argument in disproof is not lightly to be dismissed. At best, however, this Court’s guess that Illinois law would enforce such a reverter may be displaced the day after tomorrow by the Illinois Supreme Court’s authoritative rejection of the guess. If tax liability is to hang by a gossamer thread, the Court ought to be sure that the thread is there. Since only the courts of Illinois can definitively
II
The reach of the Church case, No. 5, extends far beyond the proper construction of the tax statute.[6] It concerns the appropriate attitude of this Court toward a series of long-standing unanimous decisions by this Court. More than that, it involves the respect owed by this Court to the expressed intention of Congress.
4 See Smith-Hurd, Ill. Stat. Ann., Title 110, § 181.1. (Added May 16, 1945.)
5 The portion of § 811 (c) with which we are now concerned has been continuously on the statute books since 1916, when the first federal estate-tax law was enacted. Revenue Act of 1916, § 202 (b), 39 Stat. 777 ; Revenue Act of 1918, §402 (c), 40 Stat. 1097 ; Revenue Act of 1921, § 402 (c), 42 Stat. 278 ; Revenue Act of 1924, § 302 (c), 43 Stat. 304 ; Revenue Act of 1926, § 302 (c), 44 Stat. 70 , amended by Joint Resolution of March 3, 1931, 46 Stat. 1516 ; Revenue Act of 1932, § 803 (a), 47 Stat. 278 ; Int. Rev. Code §811 (c).
In fairness, attention should be called to the fact that in joining the Court’s decisions laying down, and adhering to, the May v. Heiner ruling, Mr. Chief Justice Hughes, Mr. Justice Holmes, Mr. Justice Brandéis, and Mr. Justice Stone were not denied argument which the Government has now urged upon us. But it is also fair to the Government to point out that it has not of its own accord asked this Court to overrule the four decisions rendered eighteen years ago. It was only after the case was ordered for reargument and a series of questions was formulated by the Court which shed doubt upon the continued vitality of May v. Heiner, that the Government
6 See Screws v. United States, 325 U. S. 91 , 112-113. “But beyond that is the problem of stare decisis. The construction given § 20 in the Classic case formulated a rule of law which has become the basis of federal enforcement in this important field. The rule adopted in that case was formulated after mature consideration. It should be good for more than one day only. We do not have here a situation comparable to Mahnich v. Southern S. S. Co., 321 U. S. 96 , where we overruled a decision demonstrated to be a sport in the law and inconsistent with what preceded and what followed. The Classic case was not the product of hasty action or inadvertence. It was not out of line with the cases which preceded. It was designed to fashion the governing rule of law in this important field. We are not dealing with constitutional interpretations which throughout the history of the Court have wisely remained flexible and subject to frequent reexamination. The meaning which the Classic case gave to the phrase ‘under color of any law’ involved only a construction of the statute. Hence if it states a rule undesirable in its consequences, Congress can change it. We add only to the instability and uncertainty of the law if we revise the meaning of § 20 to meet the exigencies of each case coming before us.”
Those powers were promptly invoked in this case. Because the Treasury was dissatisfied with the meaning given by this Court to the estate-tax provision, the very next day after the three decisions reaffirming May v. Heiner were handed down, the Treasury appealed to Congress for relief and Congress gave relief. The true significance of today’s decision in the Church case is not to be found in the Court’s failure to respect stare decisis. The extent to which judges should feel in duty bound not to innovate is a perennial problem, and the pull of the past is different among different judges as it is in the same judge about different aspects of the past. We are obligated, however, to enforce what is within the power of Congress to declare. Inevitable difficulties arise when Congress has not made clear its purpose, but when that purpose is made manifest in a manner that leaves no doubt according to the ordinary meaning of English speech, this Court, in disregarding it, is disregarding the limits of the judicial function which we all profess to observe.
The Treasury no doubt was deeply concerned over the emphatic reaffirmation of May v. Heiner. The relief sought from Congress was formulated by the fiscal and legal expert who had that very day failed in persuading this Court to overrule May v. Heiner. What relief did the Treasury seek from Congress? Did the Secretary of the Treasury ask Congress to rewrite § 302 (c) of the Revenue Act of 1926, now §811 (c) of the Internal Revenue Code, so as to sterilize May v. Heiner ? Certainly not. Not one word was altered of the language of the provision which this Court felt compelled to construe
When the Joint Resolution of March 3, 1931, was adopted, it was clear that it was to be only of prospective effect. Its sponsors specifically declared:
“Entirely apart from the refunds that may be expected to result, it is to be anticipated that many persons will proceed to execute trusts or other varieties of transfers under which they will be enabled to escape the estate tax upon their property. It is of the greatest importance therefore that this situation be corrected and that this obvious opportunity for tax avoidance be removed. It is for that purpose that the joint resolution is proposed.” 74 Cong. Rec. 7198 and 7078.
And there was good reason for not making it retroactive:
“We did not make it retroactive for the reason that we were afraid that the Senate would not agree to it. But I do hope that when this matter is considered in the Seventy-second Congress we may be able to pass a bill that will make it retroactive.” 74 Cong. Rec. 7199.
When the section was reenacted by the 72d Congress as § 803 (a) of the Revenue Act of 1932, it remained in the pre-lkfay v. Heiner language with the Joint Resolution of March 3, 1931, added in slightly different phrasing. 47 Stat. 279 . This section was interpreted in 1938 by a unanimous Court as not applying to a reserved life estate created in 1924. Hassett v. Welch, 303 U. S. 303 . The briefs filed by the Government in that case again contained much of the same data now found to demand a contrary result.[8] On the same day this Court also decided Helvering v. Bullard, 303 U. S. 297 , which held the Joint Resolution applicable to reserved life estates created after the passage of the Resolution. It quoted the same language from Matter of Keeney, 194 N. Y. 281 , 287, now quoted by the majority, thus indicating that it appreciated the tax-avoidance problem and would have interpreted § 803 (a) retroactively had Congress indicated that it intended to tax reserved life estates created before March 3, 1931.[9] It
7 See Brief for Petitioner, pp. 20 et seq., in Hassett v. Welch, 303 U. S. 303 .
8 The Court made it clear in May v. Heiner and the three cases following it that it was resolving a statutory, rather than a constitutional, question. May v. Heiner, 281 U. S. 238 , 244-245; Burnet v. Northern Trust Co., 283 U. S. 782 , 783; Morsman v. Burnet, 283 U. S. 783 , 783-784; McCormick v. Burnet, 283 U. S. 784 , 784-785. Nor was Congress left in doubt that the Court had merely construed the statute which Congress was then being asked to qualify. In the House, Mr. Black of New York asked, “Was the Supreme *680 Court decision based on a constitutional question, or a discussion of the statute?” To which a sponsor of the legislation, Mr. Garner of Texas, replied, “It was on the statute itself, and was not constitutional.” 74 Cong. Rec. 7199. Indeed it is difficult to assume that the Court was affected by notions of constitutionality in view of the fact that when the courts of the State of New York held similar words to apply to a reserved life estate, this Court rejected the contention that the law offended the due process clause of the Fourteenth Amendment. Keeney v. New York, 222 U. S. 525 .
“The petitioners ask us to hold that § 302 (c) of the Revenue Act of 1926 as amended by the Joint Resolution of Congress of March 3, 1931, and § 803 (a) of the Revenue Act of 1932, includes in the gross estate of a decedent, for estate tax, property which, before the adoption of the amendments, was irrevocably transferred with reservation of a life estate to the transferor . . . .” 303 U. S. at 304.
If May v. Heiner had not been accepted as authoritative, it would have been pointless to decide that the amendment to § 302 (c) of the Revenue Act of 1926 did not operate retroactively. See Learned Hand, J., in Helvering v. Proctor, 140 F. 2d 87 , 89 (C. A. 2d Cir.).
Of course the Government did not attack May v. Heiner in Hassett v. Welch, supra. Having been rebuffed three times by this Court in its efforts to secure its overruling and having resorted to Congress to nullify its effect, the whole claim of the Government in Hassett v. Welch was that Congress had, as it were, overruled May v. Heiner by the Resolution of March 3, 1931, not only prospectively, but retrospectively. That construction of the Resolution of 1931 had to be rejected in the light of the legislative history of the Resolution. The unanimity of
Congress has made no change in this section since 1932 and the identical language was carried over as § 811 (c) of the Internal Revenue Code in 1939. There has been no amendment to this language in the Code. Although the sponsors of the Joint Resolution in the House expressed the hope that the next Congress would make the Resolution’s provisions retroactive, nothing of the sort was done. See 74 Cong. Rec. 7199, partially quoted ante at p. 678. Nor did the Treasury remind any subsequent Congress of this unfinished business, despite the fact that it urged amendment of other provisions of the estate-tax law.[10]
9 See, e. g., Hearings before Committee on Ways and Means on Revenue Revision, 1932, 72d Cong., 1st Sess. 7, 42-43; Hearings before Committee on Finance on the Revenue Act of 1932, 72d Cong., 1st Sess. 33, 51; 75 Cong. Rec. 5787; Hearings before Committee on Ways and Means on the Revenue Act, 1936, 74th Cong., 2d Sess. 624; Hearings before the Committee on Ways and Means on Revision of Revenue Laws 1938, 75th Cong., 3d Sess. 108; Hearings before the Finance Committee on the Revenue Act of 1938, 75th Cong., 3d Sess. 692-93; Hearings before the Committee on Ways and Means on Revenue Revision of 1941, 77th Cong., 1st Sess. 74-75; Hearings before the Finance Committee on the Revenue Act of 1941, 77th Cong., 1st Sess. 37; Data on Proposed Revenue Bill of 1942 Submitted to the Committee on Ways and Means by the Treasury Department and the Staff of the Joint Committee on Internal Revenue Taxation 363-65 (1942), and Hearings before the Committee on Ways and Means on Revenue Revision of 1942, 77th Cong., 2d *682 Sess. 7, 91-92, 94; Revised Hearings before the Committee on Ways and Means on Revenue Revision of 1943, 78th Cong., 1st Sess. 7; Revised Hearings before the Finance Committee on the Revenue Act of 1943, 78th Cong., 1st Sess. 46; Federal Estate and Gift Taxes, A Proposal for Integration and for Correlation with the Income Tax, A Joint Study prepared by an Advisory Committee to the Treasury Department and by the Office of the Tax Legislative Counsel, with the cooperation of the Division of Tax Research and the Bureau of Internal Revenue (1948); Letter from the Under Secretary of the Treasury to the Chairman, Committee on Ways and Means, February 26, 1948, pp. 3, 5, 8 (mimeographed copy furnished by the Department of the Treasury).
10 The entire text of the Hallock opinion insofar as here relevant makes clear why the situation in the Hallock case is not at all similar to that involved in the Church case. “Nor does want of specific Congressional repudiations of the St. Louis Trust cases serve as an implied instruction by Congress to us not to reconsider, in the light of new experience, whether those decisions, in conjunction with the Klein case, make for dissonance of doctrine. It would require very persuasive circumstances enveloping Congressional silence to debar this Court from reexamining its own doctrines. To explain the cause of non-action by Congress when Congress itself sheds no light is to venture into speculative unrealities. Congress may not have had its attention directed to an undesirable decision; and there is no indication that as to the St. Louis Trust cases it had, even by any bill that found its way into a committee pigeon-hole. Congress may not have had its attention so directed for any number of reasons that may have moved the Treasury to stay its hand. But certainly such inaction by the Treasury can hardly operate as a controlling administrative practice, through acquiescence, tantamount to an estoppel barring reexamination by this Court of distinctions which it had drawn. Various considerations of parliamentary tactics and strategy might be suggested as reasons for the inaction of the Treasury and of Congress, but they would only be sufficient to indicate that we walk on quicksand when we try to find in the absence of corrective .legislation a controlling legal principle.” Footnote 7 of the Hallock opinion recognized the doctrine of reenactment but stated that it “has no relevance to the present problem” because (1) “the fact of Congressional action in dealing with one problem while silent on the different problems created by the St. Louis Trust cases, does not imply controlling acceptance by Congress of those cases”; (2) “since the decisions in the St. Louis Trust cases, Congress has not re-enacted §302 (c)”; (3) there was “. . . no . . . long, uniform administrative construction and subse *684 quent re-enactments of an ambiguous statute to give ground for implying legislative adoption of such construction.” As indicated in the text of this dissent, the footnote also pointed out that Congress by the Joint Resolution of March 3,1931, could plausibly be said to have rejected the attitude underlying the St. Louis Trust cases. The table in the next note shows just how inapposite are these observations to the story of the Treasury’s attempt to undo this Court’s ruling in May v. Heiner and the cases which followed it.
11 Bearing of legislation subsequent to Helvering v. St. Louis Union Trust Co., 296 U. S. 39 , compared with that in response to May v. Heiner, 281 U. S. 238 . Relevant factors St. Louis Trust cases May v. Heiner series 1. Age of questioned interpretation when abandoned Five years Eighteen years 2. Weight of adjudication (a) Court’s division 5-4 Unanimous (b) Times decided Once Five times 3. Evidence of Congressional acquiescence None (a) The exact holding explained to Congress (b) Change expressly made prospective 4.Apparent reason for Congressional adherence to questioned case None Difficulty of getting necessary Senate votes
“The opinion of the majority in Helvering v. Hal-lock, supra, did not explicitly, or by inference from
12 Klein v. United States, 283 U. S. 231 .
13 Helvering v. St. Louis Union Trust Co., 296 U. S. 39 ; Becker v. St. Louis Union Trust Co., 296 U. S. 48 .
14 And even the judge who found May v. Heiner inconsistent with the Hallock case suggested that the Tax Court determine whether the grantor failed to relinquish his life estate in reliance on May v. Heiner. See Frank, J., dissenting in Commissioner v. Hall’s Estate, 153 F. 2d 172 , 174, 175 (C. A. 2d Cir.). The Government at the bar of this Court suggested that hardships could be alleviated by a regulation relieving of a tax those estates which could show such reliance. The very suggestion involves a confession that the decision urged upon the Court would be unfair.
anything said, declare that May v. Heiner, supra . . . was no longer law. We do not forget that in a note on page 120 of 309 U. S. . . . Frankfurter, J., spoke of the 'Congressionally discarded May v. Heiner doctrine;’ but it would be quite unwarranted from that to infer that the court meant to overrule that 'doctrine,’ and the note was added for quite another purpose. ... it cannot properly be interpreted as holding that the amendment was a legislative interpretation that May v. Heiner, supra, had been wrongly decided. Perhaps it was wrongly decided; perhaps the amendment is evidence that it was; but the Supreme Court did not say so, or indicate that it thought so. It is true that Roberts, J. in his dissent found no difference (309 U. S. at page 127 . . .) between that decision and Helvering v. St. Louis Union Trust Co., supra, 296 U. S. 39 . . . and apparently thought that consistently, May v. Heiner, supra, must also fall, but the majority did not share his opinion.
''Helvering v. Hallock, supra, 309 U. S. 106 . . . was concerned with quite another situation. The settlor had provided that, if he survived his wife— who had a life estate — the remainder went to him; but if she survived him, the remainder went to her. All that was decided was that, when that was the intent, it made no difference what was the form of words used. It was enough that the settlor’s death cut off an interest which he had reserved to himself upon a condition then determined; that made the remainder a part of his estate. ... If therefore May v. Heiner, supra, 281 U. S. 238 . . . is to be overruled, we do not see how Helvering v. Hallock, supra, can be thought to contribute to that result; it must be overruled by a new and altogether
independent lift of power, which it is clearly not ours to exercise. Furthermore, if the Commissioner is right, Helvering v. Hallock, supra, 309 U. S. 106 . . . also overruled Hassett v. Welch, 303 U. S. 303 . . . sub silentio. That decision had held that the amendment to § 302 (c) did not operate retroactively; and it would not have been necessary to discuss that question, nor would the actual result have been the same, if May v. Heiner, supra, 281 U. S. 238 . . . had not been law.”
I would reverse Spiegel v. Commissioner, No. 3, and affirm Commissioner v. Estate of Church, No. 5.
Appendix A
DECISIONS DURING THE PAST DECADE IN WHICH LEGISLATIVE HISTORY WAS DECISIVE OF CONSTRUCTION OF A PARTICULAR STATUTORY PROVISION
United States v. Durkee Famous Foods, Inc., 306 U. S. 68 ; United States v. Towery, 306 U. S. 324 ; Kessler v. Strecker, 307 U. S. 22 ; United States v. Maher, 307 U. S. 148 ; United States v. One 1936 Model Ford, 307 U. S. 219 ; Sanford v. Commissioner, 308 U. S. 39 ; Palmer v. Massachusetts, 308 U. S. 79 ; Valvoline Oil Co. v. United States, 308 U. S. 141 ; Haggar Co. v. Helvering, 308 U. S. 389 ; American Federation of Labor v. Labor Board, 308 U. S. 401 ; Kalb v. Feuerstein, 308 U. S. 433 ; Morgan v. Commissioner, 309 U. S. 78 ; South Chicago Coal & Dock Co. v. Bassett, 309 U. S. 251 ; Amalgamated Utility Workers v. Consolidated Edison Co. of New York, 309 U. S. 261 ; Germantown Trust Co. v. Commissioner, 309 U. S. 304 ; Sheldon v. Metro-Goldwyn Pictures Corp., 309 U. S. 390 ; United States v. City and County of San Francisco, 310 U. S. 16 ; Sunshine Anthracite Coal Co. v. Adkins, 310 U. S. 381 ; United States v. American Trucking Assns., 310 U. S. 534 ; United States v. Dickerson, 310 U. S. 554 ; Helvering v. Northwest Steel Rolling Mills, Inc., 311 U. S. 46 ; Neuberger v. Commissioner, 311 U. S. 83 ; Milk Wagon Drivers’ Union v. Lake Valley Farm Products, 311 U. S. 91 ; Helvering v. Janney, 311 U. S. 189 ; Taft v. Helvering, 311 U. S. 195 ; Hines v. Davidowitz, 312 U. S. 52 ; United States v. Gilliland,
Dissent — Burton J.
OPINIONS DURING THE PAST DECADE RESTING UPON THE RULE THAT THE REENACTMENT OP A STATUTE CARRIES GLOSS OP CONSTRUCTION PLACED UPON IT BY THIS COURT
Electric Storage Battery Co. v. Shimadzu, 307 U. S. 5 , 14; Rasquin v. Humphreys, 308 U. S. 54 ; Apex Hosiery Co. v. Leader, 310 U. S. 469 ; Brooks v. Dewar, 313 U. S. 354 ; Helvering v. Griffiths, 318 U. S. 371 ; Walling v. Halliburton Oil Well Cementing Co., 331 U. S. 17 ; Commissioner v. Munter, 331 U. S. 210 ; Francis v. Southern Pacific Co., 333 U. S. 445 ; United States v. South Buffalo R. Co., 333 U. S. 771 ; cf. Federal Communications Comm’n v. Columbia Broadcasting System of California, 311 U. S. 132 , 132-133; see Mr. Justice Black dissenting in Washingtonian Publishing Co. v. Pearson, 306 U. S. 30 , 42; see Mr. Chief Justice Stone dissenting in Girouard v. United States, 328 U. S. 61 , 70.
dissenting.
Except for its important reservation to the settlor of a right to the net income of the trust during the settlor’s life, the deed of trust in this case[1] is largely comparable to the trust instrument in the Spiegel case, 335 U. S. 701 .
1 This Indenture made the 17th day of May, 1924, between Francois L. Church, of the Borough of Brooklyn, City and State of New York (hereinafter sometimes called the “Settlor”), party of the first part, and Francois L. Church and E. Dwight Church, of the Borough of Brooklyn, city and State of New York, and Charles T. Church, of New Rochelle, New York (hereinafter sometimes called the “Trustees”), parties of the second part. Whereas the said Francois L. Church is desirous of making provision for any lawful issue which he may leave at the time of his death as well as provide an income for himself for life in the manner hereinafter set forth, Now, therefore, the said Francois L. Church, in consideration of the sum of One Dollar to him in hand paid, the receipt whereof is hereby acknowledged, and the acceptance by said parties of the second part of the trust herein declared, has simultaneously with the execution and delivery hereof, sold, assigned, transferred and set over and does hereby sell, assign, transfer and set over unto the *691 said Francois L. Church, E. Dwight Church and Charles T. Church as Trustees, and to their successors, the following securities, to wit: One thousand (1000) shares of stock of Church & Dwight Co., a corporation organized under the laws of Maine, To have and to hold the same, together with the moneys and investments into which in the exercise of any power hereinafter given to the trustees or by law vested in them, the said described securities or the proceeds thereof and such moneys may from time to time be converted in trust nevertheless to hold, manage, invest and reinvest the said trust estate upon the trust herein contained and with the powers herein or by law conferred upon the trustees, and to collect and receive the income accruing therefrom and after paying from said income all charges and expenses properly chargeable against the income of said trust estate to pay over the net income to the Settlor, Francois L. Church, during the term of his natural life and upon the death of the Settlor this trust shall cease and determine and the trustees are ordered and directed to transfer and pay over the principal amount of said trust estate, with all increase thereof as it shall then exist, to the child or children of the Settlor then surviving the issue of any deceased child or children to take the share per stirpes which their parent would have been entitled to receive if living. In the event that the Settlor should die leaving no lawful issue him surviving then and in that event the trustees are ordered and directed to transfer and pay over the principal amount of said trust estate with all increase thereof as it shall then exist in equal shares to the brothers and sisters of the Settlor then surviving, any child or children of a deceased brother or sister to take the share per stirpes which their parent would have been entitled to receive if living. The Trustees with respect to such trust are hereby authorized and empowered: (1) To retain the trust estate during the continuance of the trust in the same investment in which it was received by them without being liable to account for any resulting loss; (2) To sell at public or private sale upon such terms and for such price or prices and at such time or times and together or in such lots or parcels as the Trustees may think proper the securities *692 held by them in the trust, but no such sale or sales shall be made by the trustees without the consent first obtained of the Settlor; Likewise in the event of a sale the proceeds of such sale shall be reinvested by the trustees without unnecessary delay in securities approved by the Settlor or in default of such approval in securities authorized for investment by Trustees by the laws of the State of New York; (3) To compromise any claim or claims that may at any time arise with reference to the trust estate or any property or security forming a part thereof; (4) To exchange any of the trust securities for other securities in connection with any reorganization of Church & Dwight Company or any other company or companies issuing securities then belonging to the trust; (5) To vote upon stock, directly or by proxy, in any manner and to the same extent as' if the trustees held the shares in their own right, including the power to vote in favor of consolidating or merging corporations into or with each other or into or with other corporations, for the dissolution or liquidation of corporations, the creating or authorization of indebtedness, mortgages and other liens and for the organization or reorganization of corporations and to deposit securities with any reorganization committee or protection committee of any corporation. (6) To apportion in their uncontrolled discretion as between income and principal as the trustees may deem proper, any losses or profits resulting from the increase or decrease in the value of the securities or property which may at any time form a part of the trust estate, and also so to apportion the income of the trust estate, and any loss in said income and any proceeds received upon account of income, whether by way of interest, dividends, stock dividends or by way of the distribution of cash, bonds, debentures, stocks or other securities by corporations whose stocks or securities may at any time form a part of the principal of the trust estate or otherwise, and also similarly to apportion expenses incurred in the administration of said trust or in connection with the realization upon any of said securities or property; (7) To employ counsel or attorneys at law in connection with *693 the administration of the trust if in their discretion the Trustees deem it necessary or desirable and to pay them reasonable compensation for their services as an expense of the administration of said trust. In the event that any of the Trustees should resign or for any other reason cease to be a trustee such vacancy shall be filled by the appointment of a successor trustee in writing by the Settlor. In witness whereof the parties hereto have hereunto set their hands and seals the day and year first above written. Francois L. Church, Settlor. Francois L. Church, E. Dwught Church, Charles T. Church, Trustees.
The evidence of the factual intent of this settlor, likewise, is comparable to that of the settlor in the Spiegel
First. It is the law of New York that must determine here whether the possibility of a reverter, either to the settlor or to his estate, arose by operation of law from the deed of trust. As this case came up from New Jersey, in the Third Circuit, we have no announcement of the law of New York from the United States Court of Appeals for the Second Circuit which includes New York. Furthermore, when the United States Court of Appeals for the Third Circuit rendered its judgment in favor of the taxpayer, it did so in express reliance upon the opinion of the Tax Court and the Tax Court, in turn, did not elucidate the law of New York.
While I rest my conclusion in favor of affirmance upon the absence of the factual intent which, as stated in my dissent in the Spiegel case, I believe is required by
Second. In the opinion of the Court in the instant case, the judgment below is reversed, however, without facing any of the above grounds for its affirmance. This is done by overruling May v. Heiner, 281 U. S. 238 , and that action has carried with it the foundation for this Court’s opinion in Hassett v. Welch, 303 U. S. 303 . The effect of such reversal is to place this trust, which was executed in 1924, in the same position as though it had been executed after the Joint Resolution of March 3, 1931, 46 Stat. 1516 -1517. That Resolution made the federal estate tax applicable to property transferred thereafter by any deed of trust that reserved to the transferor a right to the possession or enjoyment of or the income from the trust property during his life. There is no doubt but that the transfer in the instant case would have been subject to the estate tax if the deed of trust had been executed after, instead of before, the Resolution of March 3, 1931. The legislative history of that Resolution demonstrates, however, that it was not intended to be retroactive. Its prospective character also carried
2 The respondent cites particularly Fulton Trust Co. v. Phillips, 218 N. Y. 573 , 581, 113 N. E. 558 , 559; and Matter of Bowers, 195 App. Div. 548 , 186 N. Y. S. 912 , aff’d, 231 N. Y. 613 , 132 N. E. 910 ; and, as presenting analogous situations in testamentary trusts or dispositions, Matter of Elting, 268 App. Div. 74 , 48 N. Y. S. 2d 892 , aff’d, 294 N. Y. 941 , 63 N. E. 2d 123 ; Matter of McCombs, 261 App. Div. 449 , 25 N. Y. S. 2d 894 , aff’d, 287 N. Y. 557 , 38 N. E. 2d 226 .
After the execution of the instant trust in 1924 — and certainly between March 3, 1931 and the death of the settlor on December 11, 1939 — there was little, if any, reason for him to consider making further disposition of his reserved rights in order to protect his estate from the federal estate tax. Between 1924 and 1939, there were handed down by this Court its decisions in May v. Heiner, supra, on April 14, 1930; Morsman v. Burnet, 283 U. S. 783 , and its two companion cases, on March 2, 1931; and Hassett v. Welch, supra, on February 28, 1938. In those of the above decisions which were rendered before March 3, 1931, this Court unanimously and unequivocally held that the federal estate tax was not to be applied to a trust merely because of the retention thereunder of a right in the settlor to receive the income of the trust during his life. The entry made by this Court in each of the companion cases decided March 2, 1931, expressly stated a doubt as to the constitutional authority of Congress to enact a law which would apply the estate tax retroactively to transfers that already had been made. The action of Congress on March 3, 1931, reflected that doubt. The seven Justices who participated in the case of Hassett v. Welch, supra, in 1938, refrained from expressing doubt as to the state of the law before March 3, 1931. In that case the Court reviewed carefully the legislative history that was material to the case and also the administrative interpretation which had been given to the statute. The Court concluded as follows (at pp. 314-315):
“In view of other settled rules of statutory construction, which teach that a law is presumed, in the absence of clear expression to the contrary, to operate prospectively; that, if doubt exists as to the
construction of a taxing statute, the doubt should be resolved in favor of the taxpayer, we feel bound to hold that the Joint Resolution of 1931 and § 803 (a) of the Act of 1932 apply only to transfers with reservation of life income made subsequent to the dates of their adoption respectively.
“Holding this view, we need not consider the contention that the statutes as applied to the transfers under consideration deprive the respondents of their property without due process in violation of the Fifth Amendment.”
Thus, up to the time of the settlor’s death in 1939, he never was given reason, at least by this Court, to suspect that the property which he had included in his 1924 deed of trust would be-added to his gross estate for federal estate tax purposes.[3]
The issue as originally presented in May v. Heiner was solely one of statutory interpretation and there were persuasive arguments for deciding the case either way. However, the unanimous decision of this Court in that case changed the status of that issue. Thereafter, the statute carried the meaning ascribed to it by this Court.
3 It appears in the record that the settlor, in 1924, relied upon the advice of his family attorney and, assuming the continuance of such a relationship, such attorney in subsequent consultations may well have counseled the settlor’s further policy in express reliance upon May v. Heiner, 281 U. S. 238 . With comparable situations evidently in mind, it has been suggested, in opinions which recently have considered the possibility of overruling May v. Heiner, supra, that no judgment overruling that case should be rendered by this Court without remanding the case to the District Court to ascertain whether or not the parties had in fact placed reliance upon the authority of that case and making special provision to avoid an unfair result if such reliance were found in fact to have existed. See dissenting opinions in Helvering v. Proctor, 140 F. 2d 87 , 91 (C. A. 2d Cir.); and Commissioner v. Hall’s Estate, 153 F. 2d 172 , 175 (C. A. 2d Cir.).
4 The discussion in the opinion in Hassett v. Welch, supra, was limited to the claimed effect of the 1931 and 1932 Amendments. This Court’s judgment in that case and in Helvering v. Marshall, supra, however, affirmed the judgments of the respective Courts of Appeals for the First and Second Circuits. (In Welch v. Hassett, 90 F. 2d 833 (C. A. 1st Cir.), the Court of Appeals discussed and relied upon McCormick v. Burnet, 283 U. S. 784 , Morsman v. Burnet, 283 U. S. 783 , Burnet v. Northern Trust Co., 283 U. S. 782 , May v. Heiner, supra, and Reinecke v. Northern Trust Co., 278 U. S. 339 . In Commissioner v. Marshall, 91 F. 2d 1010 (C. A. 2d Cir.), the Court of Appeals relied primarily upon the Welch decision in the First Circuit.) Those respective Courts of Appeals accordingly had held that the 1931 and 1932 Amendments were inapplicable to a trust which was executed in 1924 (and reaffirmed in 1926) by a settlor who died in 1932, and to another which was executed in 1920 by a settlor who died in 1933. They also held that, under § 302 (c) of the Revenue Act of 1926, c. 27, 44 Stat. 9 , 70, the Commissioner could not lawfully require the trusteed property to be included for federal estate tax purposes in the gross estates of the respective settlor-decedents. This Court’s affirmance of those judgments was, therefore, a confirmation of its original holding that, before the 1931 and 1932 Amendments, this statute did not render trust *698 property subject to the federal estate tax merely because the settlor in transferring the property to his trustees had reserved for himself a right to the income of that property during his life and had provided for the distribution of the corpus of the trust at his death in the manner stated in those cases. The prospective language of the 1931 and 1932 Amendments left the meaning of the statute unchanged as to trusts executed before March 3, 1931. It is that unchanged meaning which is applicable in the instant case.
By reversing May v. Heiner this Court repudiates the finality of its 1930 and 1931 decisions interpreting the
Value is added to the fully considered decisions of this Court by our own respect for them. Faith is justifiable that this Court will exercise extreme self-restraint in using its power of self-reversal. While that power is essential in appropriate cases and is an inherent part of this Court’s finality of jurisdiction, each case that suggests its use should be scrutinized with the utmost care. In the instant case I find arguments to suggest and support, but not to require, a construction of the statute contrary to that originally given in May v. Heiner. I find nothing sufficient to justify the reversal of this Court’s original construction 18 years after this Court approved it unanimously and 17 years after this Court unanimously reaf
5 The status of May v. Heiner has been mentioned by this Court from time to time without calling forth any repudiation of its authority by a majority of the Court. See Helvering v. Hallock, 309 U. S. 106 , 120, n. 7, and dissenting opinions at 123, 126 et seq.; Fidelity-Philadelphia Trust Co. v. Rothensies, 324 U. S. 108 , concurring opinion at 113. The effect upon it of the Hallock case has been considered many times by federal courts with a resulting adherence to both cases. “The opinion of the majority in Helvering v. Hallock, supra, did not explicitly, or by inference from anything said, declare that May v. Heiner, supra, . . . was no longer law.” Circuit Judge L. Hand in Helvering v. Proctor, 140 F. 2d 87 , 88 (C. A. 2d Cir.). See also, Commissioner v. Hall’s Estate, 153 F. 2d 172 (C. A. 2d Cir.); Commissioner v. Singer’s Estate, 161 F. 2d 15 (C. A. 2d Cir.); Commissioner v. Kellogg, 119 F. 2d 54 (C. A. 3d Cir.); Schultz v. United States, 140 F. 2d 945 (C. A. 8th Cir.); United States v. Brown, 134 F. 2d 372 (C. A. 9th Cir.); New York Trust Co. v. United States, 100 Ct. Cl. 311 , 51 F. Supp. 733 ; Estate of Matthews, 3 T. C. 525 . While these decisions are not binding upon this Court as precedents, they are decisions which those courts properly reached in determining the binding force, upon them, of our decisions in May v. Heiner and Helvering v. Hallock. They have an appropriate bearing upon the exercise of our discretion to overrule May v. Heiner at this late date.
Cases cited
- Helvering v. Hallock 309 U. S. 106 at 119 p. 634, p. 636, p. 637, p. 643, p. 644, p. 645, p. 646, p. 649, p. 650, p. 652, p. 655, p. 656, p. 660, p. 662, p. 663, p. 667, p. 668, p. 669, p. 671, p. 676, p. 683, p. 686, p. 687, p. 698
- 161 F. 2d 11 161 F. 2d 11 p. 635, p. 666, p. 685
- 159 F. 2d 257 159 F. 2d 257 p. 635, p. 668, p. 670, p. 672, p. 673
- Fidelity-Philadelphia Trust Co. v. Rothensies 324 U. S. 108 at 111 p. 636, p. 646, p. 656, p. 657, p. 667, p. 671
- May v. Heiner 281 U. S. 238 p. 636, p. 637, p. 638, p. 639, p. 652, p. 655, p. 675, p. 686, p. 687, p. 694
- Vanderbilt v. Eidman 196 U. S. 480 p. 638
- Keeney v. Comptroller of New York 222 U. S. 525 at 194 p. 638, p. 642, p. 679
- Helvering v. Bullard 303 U. S. 297 at 304 p. 638, p. 679, p. 680
- 32 F. 2d 1017 32 F. 2d 1017 p. 639
- 283 U. S. 782 283 U. S. 782 p. 639, p. 655, p. 675
- Morsman v. Burnet 283 U. S. 783 p. 639, p. 655, p. 675, p. 695
- McCormick v. Burnet 283 U.S. 784 p. 639, p. 650, p. 655, p. 675
- Hassett v. Welch 303 U. S. 303 p. 640, p. 647, p. 648, p. 649, p. 650, p. 651, p. 652, p. 660, p. 666, p. 678, p. 679, p. 680, p. 681, p. 687, p. 694, p. 695, p. 697, p. 700
- Klein v. United States 283 U. S. 231 p. 642, p. 643, p. 655, p. 685
- Helvering v. St. Louis Union Trust Co. 296 U. S. 39 p. 642, p. 655, p. 686
- Becker v. St. Louis Union Trust Co. 296 U. S. 48 p. 642
- Shukert v. Allen 273 U. S. 545 p. 646, p. 654, p. 660, p. 661
- Smith v. Shaughnessy 318 U. S. 176 p. 646, p. 688
- Goldstone v. United States 325 U. S. 687 at 691 p. 646, p. 667, p. 671
- Commissioner v. Estate of Field 324 U. S. 113 p. 646, p. 656, p. 667
- 43 F. 2d 277 43 F. 2d 277 p. 650
- Reinecke v. Northern Trust Co. 278 U. S. 339 p. 652, p. 654, p. 655, p. 659, p. 660
- Helvering v. City Bank Farmers Trust Co. 296 U. S. 85 p. 655
- Porter v. Commissioner 288 U. S. 436 p. 655
- Helvering v. Stuart 317 U. S. 154 p. 664
- MacGregor v. State Mutual Life Assurance Co. 315 U. S. 280 p. 664
- Thompson v. Magnolia Petroleum Co. 309 U. S. 478 p. 674
- Spector Motor Service, Inc. v. McLaughlin 323 U. S. 101 p. 674
- Blair v. Commissioner 300 U. S. 5 p. 674
- Freuler v. Helvering 291 U. S. 35 p. 674
- Washington v. W. C. Dawson & Co. 264 U. S. 219 p. 676
- 140 F. 2d 87 140 F. 2d 87 p. 680, p. 685
- Anderson v. Wilson 289 U. S. 20 p. 682
- Helvering v. Griffiths 318 U. S. 371 p. 684, p. 690
- United States v. South Buffalo Railway Co. 333 U. S. 771 p. 684, p. 690
- Apex Hosiery Co. v. Leader 310 U. S. 469 p. 684, p. 690
- 153 F. 2d 172 153 F. 2d 172 p. 685
- 134 F. 2d 372 134 F. 2d 372 p. 685
- United States v. Durkee Famous Foods, Inc. 306 U. S. 68 p. 687, p. 699
- United States v. Towery 306 U. S. 324 p. 687
- Kessler v. Strecker 307 U. S. 22 p. 687
- United States v. Maher 307 U. S. 148 p. 687
- United States v. One 1936 Model Ford V-8 De Luxe Coach, Commercial Credit Co. 307 U. S. 219 p. 687
- Estate of Sanford v. Commissioner 308 U. S. 39 p. 687
- Palmer v. Massachusetts 308 U. S. 79 p. 687
- Valvoline Oil Co. v. United States 308 U. S. 141 p. 687
- Haggar Co. v. Helvering 308 U. S. 389 p. 687
- American Federation of Labor v. National Labor Relations Board 308 U. S. 401 p. 687
- Kalb v. Feuerstein 308 U. S. 433 p. 687
- Morgan v. Commissioner 309 U. S. 78 p. 687
- South Chicago Coal & Dock Co. v. Bassett 309 U. S. 251 p. 687
- Amalgamated Utility Workers v. Consolidated Edison Co. 309 U. S. 261 p. 687
- Germantown Trust Co. v. Commissioner 309 U. S. 304 p. 687
- Sheldon v. Metro-Goldwyn Pictures Corp. 309 U. S. 390 p. 687
- United States v. City & County of San Francisco 310 U. S. 16 p. 687
- Sunshine Anthracite Coal Co. v. Adkins 310 U. S. 381 p. 687
- United States v. American Trucking Associations 310 U. S. 534 p. 687
- United States v. Dickerson 310 U. S. 554 p. 687
- Helvering v. Northwest Steel Rolling Mills, Inc. 311 U. S. 46 p. 687
- Neuberger v. Commissioner 311 U. S. 83 p. 687
- Milk Wagon Drivers' Union, Local No. 753 v. Lake Valley Farm Products, Inc. 311 U. S. 91 p. 687
- Helvering v. Janney 311 U. S. 189 p. 687
- Taft v. Helvering 311 U. S. 195 p. 687
- Hines v. Davidowitz 312 U. S. 52 p. 687
- United States v. Gilliland 312 U. S. 86 p. 688
- Palmer v. Webster & Atlas National Bank 312 U. S. 156 p. 688
- United States v. Cooper Corp. 312 U. S. 600 p. 688
- Helvering v. Estate of Enright 312 U. S. 636 p. 688
- Maguire v. Commissioner 313 U. S. 1 p. 688
- Helvering v. Campbell 313 U. S. 15 p. 688
- Shamrock Oil & Gas Corp. v. Sheets 313 U. S. 100 p. 688
- Phelps Dodge Corp. v. National Labor Relations Board 313 U. S. 177 p. 688
- Helvering v. William Flaccus Oak Leather Co. 313 U. S. 247 p. 688
- Sampayo v. Bank of Nova Scotia 313 U. S. 270 p. 688
- Baltimore & Ohio Railroad v. Kepner 314 U. S. 44 p. 688
- Parker v. Motor Boat Sales, Inc. 314 U. S. 244 p. 688
- Textile Mills Securities Corp. v. Commissioner 314 U. S. 326 p. 688
- Gray v. Powell 314 U. S. 402 p. 688
- District of Columbia v. Murphy 314 U. S. 441 p. 688
- Illinois Natural Gas Co. v. Central Illinois Public Service Co. 314 U. S. 498 p. 688
- Duncan v. Thompson 315 U. S. 1 p. 688
- Cudahy Packing Co. v. Holland 315 U. S. 357 p. 688
- United States v. Local 807 of International Brotherhood of Teamsters, Chauffeurs, Stablemen & Helpers 315 U. S. 521 p. 688, p. 689
- Stonite Products Co. v. Melvin Lloyd Co. 315 U. S. 561 p. 688
- National Labor Relations Board v. Electric Vacuum Cleaner Co. 315 U. S. 685 p. 688
- Miles v. Illinois Central Railroad 315 U. S. 698 p. 688
- United States ex rel. Noland Co. v. Irwin 316 U. S. 23 p. 688
- Mishawaka Rubber & Woolen Manufacturing Co. v. S. S. Kresge Co. 316 U. S. 203 p. 688
- A. B. Kirschbaum Co. v. Walling 316 U. S. 517 p. 688
- Helvering v. Cement Investors, Inc. 316 U. S. 527 p. 688
- Marine Harbor Properties, Inc. v. Manufacturers Trust Co. 317 U. S. 78 p. 688
- Braverman v. United States 317 U. S. 49 p. 688
- Riggs v. Del Drago 317 U. S. 95 p. 688
- Ex parte Kawato 317 U. S. 69 p. 688
- State Bank v. Brown 317 U. S. 135 p. 688
- Pfister v. Northern Illinois Finance Corp. 317 U. S. 144 p. 688
- United States v. Wayne Pump Co. 317 U. S. 200 p. 688
- Parker v. Brown 317 U. S. 341 p. 688
- Walling v. Jacksonville Paper Co. 317 U. S. 564 p. 688
- Harrison v. Northern Trust Co. 317 U. S. 476 p. 688
- United States ex rel. Marcus v. Hess 317 U. S. 537 p. 688
- United States v. Monia 317 U. S. 424 p. 688
- Ziffrin, Inc. v. United States 318 U. S. 73 p. 688
- Palmer v. Hoffman 318 U. S. 109 p. 688
- Overstreet v. North Shore Corp. 318 U. S. 125 p. 688
- Robinette v. Helvering 318 U. S. 184 p. 688
- Helvering v. Sabine Transportation Co. 318 U. S. 306 p. 688
- Federal Security Administrator v. Quaker Oats Co. 318 U. S. 218 p. 688
- United States v. Swift & Co. 318 U. S. 442 p. 688
- Ecker v. Western Pacific Railroad 318 U. S. 448 p. 688
- Fred Fisher Music Co. v. M. Witmark & Sons 318 U. S. 643 p. 688
- Jersey Central Power & Light Co. v. Federal Power Commission 319 U. S. 61 p. 688
- National Broadcasting Co. v. United States 319 U. S. 190 p. 688
- Boone v. Lightner 319 U. S. 561 p. 688
- Schneiderman v. United States 320 U. S. 118 p. 688
- Hirabayashi v. United States 320 U. S. 81 p. 688
- Roberts v. United States 320 U. S. 264 p. 688
- United States v. Dotterweich 320 U. S. 277 p. 688
- Crescent Express Lines, Inc. v. United States 320 U. S. 401 p. 689
- Colgate-Palmolive-Peet Co. v. United States 320 U. S. 422 p. 689
- United States v. Laudani 320 U. S. 543 p. 689
- United States v. Myers 320 U. S. 561 p. 689
- McLean Trucking Co. v. United States 321 U. S. 67 p. 689
- Brotherhood of Railroad Trainmen v. Toledo, Peoria & Western Railroad 321 U. S. 50 p. 689
- B. F. Goodrich Co. v. United States 321 U. S. 126 p. 689
- Davies Warehouse Co. v. Bowles 321 U. S. 144 p. 689
- Hecht Co. v. Bowles 321 U. S. 321 p. 689
- Cornell Steamboat Co. v. United States 321 U. S. 634 p. 689
- National Labor Relations Board v. Hearst Publications, Inc. 322 U. S. 111 p. 689
- Carolene Products Co. v. United States 323 U. S. 18 p. 689
- Smith v. Davis 323 U. S. 111 p. 689
- United States v. Rosenwasser 323 U. S. 360 p. 689
- Western Union Telegraph Co. v. Lenroot 323 U. S. 490 p. 689
- Hartford-Empire Co. v. United States 323 U. S. 386 p. 689
- Central States Electric Co. v. City of Muscatine 324 U. S. 138 p. 689
- Gemsco, Inc. v. Walling 324 U. S. 244 p. 689
- Canadian Aviator, Ltd. v. United States 324 U. S. 215 p. 689
- Connecticut Light & Power Co. v. Federal Power Commission 324 U. S. 515 p. 689
- A. H. Phillips, Inc. v. Walling 324 U. S. 490 p. 689
- Brooklyn Savings Bank v. O'Neil 324 U. S. 697 p. 689
- Federal Trade Commission v. A. E. Staley Manufacturing Co. 324 U. S. 746 p. 689
- Jewell Ridge Coal Corp. v. Local No. 6167, United Mine Workers 325 U. S. 161 p. 689
- Elgin, Joliet & Eastern Railway Co. v. Burley 325 U. S. 711 p. 689
- Interstate Commerce Commission v. Parker 326 U. S. 60 p. 689
- Markham v. Cabell 326 U. S. 404 p. 689
- John Kelley Co. v. Commissioner 326 U. S. 521 p. 689
- Roland Electrical Co. v. Walling 326 U. S. 657 p. 689
- Mabee v. White Plains Publishing Co. 327 U. S. 178 p. 689
- Duggan v. Sansberry 327 U. S. 499 p. 689
- United States v. Carbone 327 U. S. 633 p. 689
- Williams v. United States 327 U. S. 711 p. 689
- Federal Trade Commission v. A. P. W. Paper Co. 328 U. S. 193 p. 689
- Hust v. Moore-McCormack Lines, Inc. 328 U. S. 707 p. 689
- United States v. Sheridan 329 U. S. 379 p. 689
- Oklahoma v. United States Civil Service Commission 330 U. S. 127 p. 689
- United States v. United Mine Workers of America 330 U. S. 258 p. 689
- United Brotherhood of Carpenters & Joiners of America v. United States 330 U. S. 395 p. 689
- American Stevedores, Inc. v. Porello 330 U. S. 446 p. 689
- Interstate Commerce Commission v. Mechling 330 U. S. 567 p. 689
- United States v. Ogilvie Hardware Co. 330 U. S. 709 p. 689
- McCullough v. Kammerer Corp. 331 U. S. 96 p. 689
- Ayrshire Collieries Corp. v. United States 331 U. S. 132 p. 689
- Williams v. Austrian 331 U. S. 642 p. 689
- Jones v. Liberty Glass Co. 332 U. S. 524 p. 689
- Fong Haw Tan v. Phelan 333 U. S. 6 p. 689
- Hilton v. Sullivan 334 U. S. 323 p. 689
- United States v. National City Lines, Inc. 334 U. S. 573 p. 689
- United States v. Zazove 334 U. S. 602 p. 689
- United States v. Congress of Industrial Organizations 335 U. S. 106 p. 689
- Shapiro v. United States 335 U. S. 1 p. 689
- Ahrens v. Clark 335 U. S. 188 p. 689
- Electric Storage Battery Co. v. Shimadzu 307 U. S. 5 p. 690
- Rasquin v. Humphreys 308 U. S. 54 p. 690
- Brooks v. Dewar 313 U. S. 354 p. 690
- Walling v. Halliburton Oil Well Cementing Co. 331 U. S. 17 p. 690
- Commissioner v. Munter 331 U. S. 210 p. 690
- Francis v. Southern Pacific Co. 333 U. S. 445 p. 690
- Federal Communications Commission v. Columbia Broadcasting System of California, Inc. 311 U. S. 132 p. 690
- Washingtonian Publishing Co. v. Pearson 306 U. S. 30 p. 690
- Girouard v. United States 328 U. S. 61 p. 690
- Estate of Spiegel v. Commissioner 335 U. S. 701 p. 690