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Opinion of the Court.

308 U.S.

power of revocation, which was crucial in the Porter case. Neither opinion rested upon or made any mention of any practice affecting cases where such a power of modification is reserved. After the decision in the Hesslein case the ruling of the Bureau in this case was again reversed and notice of deficiency sent to the taxpayer.

From this record it is apparent that there was no established administrative practice before the opinion of April, 1935, and if the practice was adopted then it was because of a mistaken departmental ruling of law based on an obvious misinterpretation of the decisions in the Porter and Guggenheim cases.

Administrative practice may be of persuasive weight in determining the construction of a statute of doubtful meaning where the practice does not conflict with other provisions of the statute and is not so inconsistent with applicable decisions of the courts as to produce inconsistency and confusion in the administration of the law. Such a choice, in practice, of one of two possible constructions of a statute by those who are expert in the field and specially informed as to administrative needs and convenience, tends to the wise interpretation and just administration of the laws. This is the more so when reliance has been placed on the practice by those affected by it.

But courts are not bound to accept the administrative construction of a statute regardless of consequences, even when disclosed in the form of rulings. See Helvering v. New York Trust Co., 292 U. S. 455, 468. Here the practice has not been revealed by any published rulings or action of the Department on which taxpayers could have relied. The taxpayers in the present cases are contend

'In the petition for certiorari filed in November, 1937, in Hesslein v. Hoey (No. 556), the Government asserted that the 300 cases referred to in the stipulation in this case had been decided so recently that the time for filing claims for refunds had not expired.

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Opinion of the Court.

ing for different rulings. In Harriet Rosenau, 37 B. T. A. 468 (1938), as in the Humphreys case, the taxpayer contended that the date when the power to change the beneficiary is renounced is controlling. The petitioner here, who contends that the date of relinquishment of the power of revocation is controlling, rather than the date of surrender of power of modification, set up his trust and relinquished the power of revocation before the gift tax was enacted. The reënactment of the gift tax statute by the 1932 Act can not be said to be a legislative approval of the practice which had not been disclosed by Treasury regulation, ruling or decision, and which does not appear to have been established before the adoption of the 1932 Act. Cf. McCaughn v. Hershey Chocolate Co., 283 U. S. 488, 492; Massachusetts Mutual Life Ins. Co. v. United States, 288 U. S. 269, 273; Helvering v. New York Trust Co., 292 U. S. 455, 468.

The very purpose sought to be accomplished by judicial acceptance of an administrative practice would be defeated if we were to regard the present practice as controlling. If a practice is to be accepted because of the superior knowledge of administrative officers of the administrative needs and convenience, see Brewster v. Gage, 280 U. S. 327, 336, there is no such reason for its acceptance here. The Government by taking no position confesses that it is unable to say how administrative need and convenience will best be served. If, as we have held, we may reject an established administrative practice when it conflicts with an earlier one and is not supported by valid reasons, see Burnet v. Chicago Portrait Co., 285 U. S. 1, 16, we should be equally free to reject the practice when it conflicts with our own decisions. A change of practice to conform to judicial decision, such as has occurred since the decision in the Hesslein case, or to meet administrative exigencies, will be accepted as controlling when consistent with our decisions. Morrissey v. Com

Opinion of the Court.

308 U.S.

were reënacted without change of present moment in §§ 501, 510, 801. The applicable estate tax provisions are § 302 (c) (d) of the 1926 Act, 44 Stat. 40, 71. Section 501 (c) of the 1932 Act added a new provision that transfers in trust, with power of revocation in the donor, should be taxed on relinquishment of the power. This was repealed by § 511 of the Act of 1934, 48 Stat. 680, because Burnet v. Guggenheim, 288 U. S. 280, had declared that such was the law without specific legislation. H. R. No. 704, 73rd Cong., 2d Sess., p. 40; Sen. Rep. No. 558, 73rd Cong., 2d Sess., p. 50.

For the reasons stated in our opinion in the Sanford case we conclude that the reserved power in the donor at the time of the creation of the trust rendered the gift incomplete and not subject to the gift tax. As pointed out in our opinion in the Sanford case the Treasury regulation under the 1932 Act, Art. III, Regulation 79 (1933 edition), in force when the trust was created, affords no basis for modification of our construction of the statute. Whatever validity the amended regulation of 1936 may have in its prospective operation, we think it is so plainly in conflict with the statute as to preclude its application retroactively so as to subject to tax such transfer as was made by the creation of the trust in 1934. Cf. Helvering v. R. J. Reynolds Tobacco Co., 306 U. S. 110.

Affirmed.

MR. JUSTICE BUTLER took no part in the consideration or decision of this case.

Counsel for Parties.

BOTELER, TRUSTEE, v. INGELS, DIRECTOR OF MOTOR VEHICLES OF CALIFORNIA, ET AL.

CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE NINTH CIRCUIT.

Nos. 15 and 16. Argued October 16, 1939.-Decided
November 6, 1939.

1. Section 57 (j) of the Bankruptcy Act, barring allowance of debts owing to federal, state, or local governments, as penalties, except for the amount of the pecuniary loss sustained etc., prohibits allowance of tax penalties only if incurred by the bankrupt prior to bankruptcy. P. 59.

2. Penalties attaching upon nonpayment of state automobile license taxes, which taxes and penalties accrued while the business of a bankrupt estate was being operated by a trustee in bankruptcy for the purpose of liquidation, are allowable against the bankrupt estate by virtue of the Act of June 18, 1934, which subjects trustees and other appointees of United States courts, who are authorized to conduct a business, "to all State and local taxes applicable tc such business the same as if such business were conducted by an individual or corporation. . . ." P. 60. 100 F. 2d 915, affirmed.

CERTIORARI, 307 U. S. 617, to review the reversal of two orders of the District Court, which in effect held a bankrupt estate not liable for penalties accruing upon nonpayment of state automobile license taxes. Appeals from the orders were consolidated for briefing, hearing, and decision in the Circuit Court of Appeals; and the cases are treated similarly here.

Mr. Raphael Dechter, with whom Messrs. Thomas S. Tobin and Joseph J. Rifkind were on the brief, for petitioner.

Mr. H. H. Linney, Deputy Attorney General of California, with whom Messrs. Earl Warren, Attorney General, and Frank W. Richards, Deputy Attorney General, were on the brief, for respondents.

Opinion of the Court.

308 U.S.

MR. JUSTICE BLACK delivered the opinion of the Court.

Under California law vehicle license and registration fees are due the State on January first of each year; they become delinquent when a vehicle is operated without registration and license; if the fees are not paid within thirty days after delinquency a penalty equal to the fees accrues; fees and penalties are protected by statutory lien on the vehicle from the due date.1

The single question presented is sufficiently stated by the petition for certiorari:

"Is a bankrupt's estate liable to penalties imposed by state statutes for non-payment of automobile license fees where license fees and penalties claims accrued during operations for purposes of liquidation of the business of bankrupt's estate by the Trustee in Bankruptcy?"

As trustees of a business in bankruptcy, petitioner and his predecessor continuously operated unregistered and unlicensed vehicles on California highways, from January first to February twenty-seventh. Tender of fees without accrued penalties was rejected by California. Upon petition of the trustee, the referee in bankruptcy ordered the vehicles sold free and clear of any claims or liens of the State but permitted California to file claims for fees, without penalties, within thirty days or be forever barred. The referee's order was confirmed by the District Court which also directed California officials (respondents here) to issue licenses to the trustee. The Circuit Court of Appeals reversed, ordering alternatively that accrued fees and penalties be paid, or that the vehicles be disposed of subject to the lien of the State for the unpaid taxes and penalties. Because of asserted conflict with the

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1c. 362, Calif. Stat. of 1935, p. 1313, as amended. c. 27, Calif. Stat. of 1935, Calif. Vehicle Code, pp. 147, 150, 151.

*100 F. 2d 915. The court below stated that the two cases here reviewed (Nos. 15, 16) "involved the identical facts, were consolidated

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