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one-fourth per cent, the tax amounting to $115,191.28. After payment of this amount and subsequently to the passage on March 2, 1901, 31 Stat. 938, of an amendment to the war revenue act of 1898, the Commissioner of Internal Revenue, considering that by that amendment Alfred G. Vanderbilt had become immediately liable for a tax on his right to succeed to the whole residue if he lived to the ages of thirty and thirty-five years respectively, assessed a death duty based upon that hypothesis. In making this assessment as by the mortality tables it was shown that Alfred G. Vanderbilt had a life expectancy beyond the ages of thirty and thirty-five years, the Commissioner assessed the interest as a vested estate equal in value to the sum of the entire residuary estate, viz., $18,972,117.46. Upon this valuation a tax was levied of two and one-fourth per cent, producing $426,872.64. On this amount, however, credit was allowed for the sum of the tax previously paid, leaving the balance due. $311,681.36. On September 3, 1901, this balance was paid by the executors under protest, “and upon compulsion of the collector's threat of distraint and sale.” The executors thereupon made the statutory application to the Commissioner of Internal Revenue for the refunding of the amount, and it being refused, commenced in the Circuit Court of the United States for the Southern District of New York this action to recover the payment.

The facts, as above stated, were averred, and the right to recover was based upon the ground that, as Alfred G. Vanderbilt only had the enjoyment presently of the revenues of the residuary estate up to the period when he might attain the age of thirty years, he was only liable to be assessed upon that beneficial interest. For this reason it was charged that the assessment made of the bequest to Alfred G. Vanderbilt of the whole residuary estate, upon condition that he reached the ages of thirty and thirty-five years respectively, was unwarranted.

The Circuit Court, on the ground that the complaint lid not

Argument for Plaintiffs in Error.

1.96 U. S.

state a cause of action, sustained a demurrer to that effect filed by the Government, and dismissed the action. 121 Fed. Rep. 590. The Circuit Court of Appeals stated the facts as above recited, and certified certain questions.

Mr. Howard Taylor, with whom Mr. Henry B. Anderson and Mr. Chandler P. Anderson were on the brief, for plaintiffs in error:

Sections 29 and 30 of the act of June 13, 1898, imposed a legacy tax as distinguished from a probate tax; that is, they provided for the imposition of a tax upon the right to take a beneficial interest in the property of a decedent, arising in the manner prescribed in the act, which tax was directed to be assessed at a certain rate per cent of the clear value of such beneficial interest, the rate being primarily determined by the relationship of the beneficiary to the testator. Where property is limited in trust they did not provide for the imposition of a tax upon the passing to the trustees of the bare legal title: to the property regardless of the character of the beneficial interest or interests therein.

See Knowlton v. Moore, 178 U. S. 41, as to the rights and objects upon which death duties are imposed and the right of Congress to levy such taxes, the form of the tax under this particular act and its mode of assessment, and that the tax is imposed not upon the whole bulk of the estate but with respect to each separate legacy and is paid out of the -legacy with respect to which it is assessed. Fitzgerald v. Rhode Island Trust Co., 52 Atl. Rep. 814. Nor is the tax upon the property passing but on the succession. United States v. Perkins, 163 V. S. 625; Magoun v. Illinois Trust &c. Bank, 170 U. S. 283; Snyder v. Bettman, 190 U. S. 249.

It therefore appears that the tax imposed with respect to a legacy under the act of 1898 is a tax upon the interest in property to which a person succeeds upon another's death, and that such interest must be a present beneficial interest of a legatee and not merely a trustee's interest as custodian of

196 U. S.

Argument for Plaintiffs in Error.

the property, which is not a beneficial interest and has no clear value upon which to compute the tax, and conversely it appears that the tax is not upon the property itself, nor upon the mere passing of property, nor upon an interest in property which ceased by reason of death. It is further evident that, under this act a legacy tax has nothing to do with the bulk or value of the estate of the testator, but only with the legatee's interest in the particular legacy out of which the tax is payable, and, although it is payable out of such legacy, it is not computed upon the value of the property passing under such legacy, but only upon the clear value of the beneficial interest in such legacy, and consequently, that unless and until such interest has a clear value, no tax can be assessed.

The tax was intended to attach only to present interests and the assessment and collection of taxes upon future rights or interests which are contingent, or which if vested are subject to conditions subsequent which may prevent them ever coming into possession, must be postponed until they become absolutely vested.

Similar state statutes have been so construed. Matter of Swift, 137 N. Y. 77, 88; Matter of Daris, 149 N. Y. 539; Matter of Curtis, 142 N. Y. 219; Matter of Roosevelt, 143 N. Y. 120; Matter of Hoffman, 143 N. Y. 327; Matter of Cager, 111 N. Y. 342; Matter of Vanderbilt, 172 N. Y. 69, 72; Matter of Brez, 172 N. Y. 609; Billings v. People, 189 Illinois, 472; People v. McCormick, 208 Illinois, 437.

The subsequent acts of Congress relating to the war revenue act show that it was intended to be construed and applied as imposing a tax assessable only upon beneficial interests and collectible only when such interests are actually perfected either in possession or enjoyment.

By the seventeenth clause of the will Alfred G. Vanderbilt has four separate and distinct interests in the residuary estate, one of which, namely, his right to receive the income in the entire residue until he becomes thirty years of age, is vested and subject to taxation, and three of which, namely, his right

Argument for Plaintiffs in Error.

196 U.S.

to receive one-half of the principal of the residue upon becoming thirty years of age, his right to receive the income in the other half of the residue until he shall become thirty-five years of age, and his right to receive the principal of the other half of the residue upon reaching that age, are all future interests and not preséntlytaxable.

As to whether a gift is future or contingent or there is an immediate vested interest, see Leake v. Edwards, 2 Mer. 363; Warner v. Durant, 76 N. Y. 133, 136; Smith v. Edwards, 88 N. Y. 92, 103; Goebel v. Wolf, 113 N. Y. 405, 412; Zartman v. Ditmars, 37 App. Div. N. Y. 173; Vawdry v. Geddes, 1 Russ. & M. 203; Greenland v. Waddell, 116-N. Y. 234; Schlereth v. Schlereth, 173 N. Y. 453; Matter of Seaman, 147 N. Y. 69; Campbell v. Stokes, 142 N. Y. 23; Stevenson v. Lesley, 70 N. Y. 512; Rudd v. Cornell, 171 N. Y. 114; Matter of Vanderbilt, 172 N. Y. 69; Matter of Tracy, 179 N. Y. 519, and cases cited.

These interests, being future and conditional, and likely to. be defeated before they can vest in possession or enjoyment, no tax can be assessed or collected with respect to them under the .war revenue law until they vest absolutely. Whether they are called .contingent or vested, or by whatever name they are designated, the fact is that they are not rights of actual ownership and they have no clear value upon which a tax can be computed. They should therefore be treated in the same way that the remainder interests were treated in the case of Knowlton v. Moore, supra, where no tax was assessed with respect to such interests in the residue, pending the termination of the intervening interests therein.

The present “clear value” of all the beneficiary's interests in the residue, the enjoyment of two of which are conditional upon his reaching the age of thirty years, and the enjoyment of one of which is conditional upon his reaching the age of thirty-five years, cannot now accurately be determined but obviously is not equal to the full cash value of the property comprising the entire residue.

The war revenue law does not require the collection of a

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Argument for Defendant in Error.

tax imposed thereunder until the beneficiary becomes entitled to the actual possession or enjoyment of the legacy.

Mr. Assistant Attorney General Robb for defendant in error:

Vested remainders are taxed by the war revenue law, Knowlton v. Moore, 178 U. S. 41, 71. The history of the legacy tax legislation and analysis of this statute show this. See construction of act of 1866 in Mason v. Sargent, 104 U. S. 689; Pennsylvania. Company v. McClain, 105 Fed. Rep. 367; S. C., 108 Fed. Rep. 618. Vested remainders are taxed upon vesting. Land Title Co. v. McCoach, 127 Fed. Rep. 381, 386; Brown v. Kinney, 128 Fed. Rep. 310; Peck v. Kinney, 128 Fed. Rep. 313. Such a tax results in no injustice. United States v. Perkins, 163 U. S. 625; Plummer v. Coler, 178 U. S. 115; United States v. Fox, 94 U. S. 315; Snyder v. Bettman, 190 U.S. 249. The uniformity clause of the Constitution is not violated. Knowlton v. Moore, 178 U. S. 41; License Tax Case, 5 Wall. 472; United State v. Singer, 15 Wall. 111; Head Money Cases, 112; U. S. 580. Subsequent legislation of Congress shows this was the intent. See also the New York cases cited on brief of plaintiff in error construing New York statute and Matter of Stewart, 131 N. Y. 274; Matter of Davis, 149 N. Y. 139. The tax is'colectible when the remainder vests. The interests of the beneficiary are vested remainders. See in Federal courts Price v. Watkins, 1 Dallas, 8; Carver v. Astor, 4 Pet. 1; Crane v. Morris, 6 Pet. 598; Coxall v. Shererd, 5 Wall. 268; Doe v. Considine, 6 Wall. 458; Cropley v. Cooper, 19 Wall. 167; Daniel v. Whartenby, 17 Wall. 639; Clapp v. Mason, 94 U. S. 589; McArthur v. Scott, 113 U. S. 340; Thaw v. Ritchie, 136 U. S. 519; Williams v. Hedrick, 96 Fed. Rep. 657; Tirrell v. Bacon, 3 Fed. Rep. 62; In re Wood, 98 Fed. Rep. 972; In re Haslett, 116 Fed. Rep. 680; In re McHarry, 11 Fed. Rep. 498; and New York cases, Doe v. Provoost, 4 Johns. 61; Hone's Executor: v. Van Schaick, 20 Wend. 564; Moore v. Lyons, 25 Wend. 119; Everitt v. Everitt, 29 N. Y. 39; Moore v. Little, 41 N. Y. 66; Manice v. Manice, 43 N. Y. 303; Livington v. Greene,

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