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Argument for Defendants in Error.

268 U.S.

vania statute on wills; therefore they are not wills. An insurance policy is the antithesis of a will. It is primarily and fundamentally a provision for his dependents, made by a man in his lifetime. It is, as we have shown, their property both by form of contract and by statute, and the proceeds of the policy are not subject to the financial vicissitudes of the insured. It is not a part of his estate; it is not liable for his debts; it does not pass under his will; nothing new vests in the beneficiaries by reason of the insured's death.

The assessment of this tax under the provisions of § 402 (f) of the Revenue Act of 1918 was illegal because that section of the act is not retroactive. In addition to what for all other purposes is regarded as constituting a decedent's estate, this act includes in the gross estate, as it defines it, certain items of property which, though not unconnected with the past activities of the decedent's lifetime, are not at the time of his death part of his estate for the payment of debts, or for distribution, or for any other than the artificial purpose of determining the tax in accordance with the language of the act. Those items are: (1) gifts and trusts made by the decedent in contemplation of death, or to take effect at death; (2) property conveyed to the decedent and some other person and held by them at the time of the decedent's death as joint tenants or tenants by the entireties, with the right of survivorship; (3) policies of life insurance taken out by the decedent on his own life and made payable to persons other than the decedent's executors. The three provisions of the Act which accomplish this extraordinary classification of property are very similar in their terms and are identical in the fact that, as originally enacted, they did not contain any language that required them to have a retrospective application. They contained no hint that they were to be applied to any trusts, gifts, entireties, or life insurance poli

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Argument for Defendants in Error.

cies other than those made after the passage of the Act. This is the natural meaning of the language used. And that such was the meaning that Congress actually had in mind when it enacted the statute is shown by the fact that since the provisions were originally enacted Congress has from time to time added to one or another of the clauses language making it retroactive, until finally in the Act of 1924 it introduced language making them all retroactive. But this is not all. The first two of the three original provisions have already been passed upon by this Court and have been construed not to be retroactive. Shwab v. Doyle, 258 U. S. 259; Union Trust Co. v. Wardell, Id. 537; Levy v. Wardell, Id. 542; Knox v. McElligott, Id. 546.

By making subdivision (g), the language of which is exactly the same as that of subdivision (f) of $ 402 of the Acts of 1918 and 1921, applicable to all transfers, etc., made before the enactment of the Act of 1924, Congress conceded that the language of the earlier acts did not apply to the proceeds of policies taken out before this Act went into effect. Shwab v. Doyle, supra; Smietanka v. First Trust & Savings Bank, 257 U. S. 602; United States v. Field, 255 U. S. 257. The conclusion that the provisions of g 402 (f) are not applicable to the proceeds of insurance policies taken out and assigned long before this Act was passed is further supported by numerous decisions in this and other courts holding, as was held in Shwab v. Doyle, supra, that tax laws are to be strictly construed in favor of the taxpayer. United States v. Merriam, 263 U. S. 179; Gould v. Gould, 245 U. S. 151; Eidman v. Martinez, 184 U. S. 578. See Reynolds v. McArthur, 2 Pet. 417, 434. An established practice of this Court is to avoid giving to a statute a construction which involves constitutional difficulties. Panama R. R. Co. v. Johnson, 264 U. S. 375.

Even though it be deemed that the Act was intended by Congress to be retroactive, the tax was illegally levied

Argument for Defendants in Error.

268 U.S.

(a) because such a tax is a direct tax and (b) because it is not due process of law. A retroactive tax is not an excise tax but a direct tax requiring apportionment, since a tax cannot be an excise unless “ the element of absolute and unavoidable demand is lacking." Thomas v. United States, 192 U. S. 363, 371; Flint v. Stone Tracy Co., supra; Singer v. United States, 15 Wall. 111, 120; Patton v. Brady, 184 U. S. 608, 623. The tax must therefore be either a direct tax upon the person, imposed by reason of his past acts, or a direct tax upon the property transferred. It is a direct property tax within the definitions adopted in: Pollock Case, 157 U. S. 429; Dawson v. Kentucky Distilleries Company, 255 U.S. 288. Eisner v. Macomber, supra; Nicol v. Ames, 173 U. S. 509; In re Pell, 171 N. Y. 48.

A tax in any form, imposed upon the creation or transfer of property rights at a time long past, is in substance not a tax but an imposition so arbitrary and unreasonable as to amount to a confiscation of property within the prohibition of the Fifth Amendment. Brushaber v. Union Pacific R. R. Co. 240 U. S. 1; Child Labor Tax Case, 259 U. S. 20; Hill v. Wallace, 259 U. S. 44.

The Constitution requires duties, imposts and excises to be uniform throughout the United States, Art I, § 8. United States v. Singer, 15 Wall. 111.

It was not due process of law to compel the executors to pay an estate transfer tax on property which was not part of the decedent's estate, but which belonged to others. Such a tax is unconstitutional because (1) It is unequal; it is a deprivation of property without due process of law. (2) The remedy over sought to be given to the executors against the beneficiaries is inadequate, (a) Because a mere cause of action to recover is not the equivalent to immunity from taxation; and (b) Because the act attempts to give the right to recover only a part of the amount which the estate has to pay. That the

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Opinion of the Court.

tax is an excise tax founded upon the termination of Mr. Frick's title has been expressly held by this court in cases involving the application of that act. Y.M.C. A. v. Davis, 264 U. S. 47; Edwards v. Slocum, 264 U. S. 61. See Knowlton v. Moore, 178 U. S. 41.

Our proposition that you cannot include in the value of the taxable thing the value of some other thing is a fundamental point in the following cases: Pullman's Palace Car Co. v. Pennsylvania, 141 U. S. 18; Delaware, L. & W. R. R. Co. v. Pennsylvania, 198 U. S. 341; Union Refrigerator Co. v. Kentucky, 199 U. S. 194; Sou. Pac. Co. v. Kentucky, 222 U. S. 63; Wallace v. Hines, 253 U. S. 66; Air-Way Corp. v. Day, 266 U. S. 71; Wardell v. Blum, 276 Fed. 226; Chanler v. Kelsey, 205 U. S. 466. A tax cannot be made the means of imposing upon one man the burden which should be borne by another. United States v. B. & 0. R. R. Co., 17 Wall. 322; Knowlton v. Moore, supra; Loan Association v. Topeka, 20 Wall. 655.

Messrs. Ira J. Williams Jr., A. Carson Simpson, Ira J. Williams and Francis Shunk Brown; Isaac B. Lipson; Frederick Geller and Russell L. Bradford; William B. Scars and Alexander Lincoln; Tyson S. Dines, Peter H. Holme, Harold D. Roberts and Charles E. Works; and William Marshall Bullitt, filed briefs as amici curiae, by special leave of court.

MR. JUSTICE HOLMES delivered the opinion of the Court.

This is a suit by the executors of Henry C. Frick to recover the amount of taxes collected by duress under the supposed authority of the Revenue Act of February 24, 1919, c. 18; 40 Stat. 1057, on the ground that the Act is unconstitutional so far as it purports to tax the matters here concerned. The District Court gave judg

Opinion of the Court.

268 U.S.

ment for the plaintiffs for the whole sum demanded. 298 Fed. 803. The case was tried without a jury and the Court adopted as its findings among others the following facts which were agreed: Henry C. Frick died on December 2, 1919, and his will was admitted to probate on December 6. There were outstanding policies upon his life, four payable to his wife and seven to his daughter. The total amount received under them was $474,629.52, and as his estate apart from this was more than ten million dollars, an additional tax of $108,657.88, or twenty-five per cent. of the sum received less the statutory deduction of $40,000, was required to be paid. All the policies were taken out before the Revenue Act was passed. The largest one, for $114,000 dollars, was a paid-up policy issued in 1901, payable to Mrs. Frick without power in Mr. Frick to change the beneficiary. Another, similar so far as material, was for $50,000. Others were assigned or the beneficiary named (Frick's estate) was changed to Frick's wife or daughter before the date of the statute. All premiums were paid by Mr. Frick, and soine seem to have been paid after the statute went into force.

The tax imposed by the Act is, a tax upon the transfer of the net estate' of the decedent. $ 400; 40 Stat. 1096. 'For the purpose of the tax the value of the net estate shall be determined' by deducting certain allowances from the gross estate. $ 403. By $ 402 “ the value of the gross estate of the decedent shall be determined by including the value at the time of his death of all prop

(f) To the extent of the amount receivable by the executor as insurance under policies taken out by the decedent upon his own life; and to the extent of the excess over $40,000 of the amount receivable by all other beneficiaries as insurance under policies taken out by the decedent upon his own life.” These last words are the ground of the Collector's claim.

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