Knowlton v. Moore, 178 U.S. 41 (1900)

Knowlton v. Moore{1}

No. 387

Argued December 6-7, 1899
Decided May 14, 1900
178 U.S. 41

ERROR TO THE CIRCUIT COURT OF THE UNITED

STATES FOR THE EASTERN DISTRICT OF NEW YORK

Syllabus

The plaintiffs in error were the executors of the will of Edwin F. Knowlton, of Brooklyn, New York. The defendant in error was the United States Collector of Internal Revenue for the First Collection District for the New York. Mr. Knowlton died at Brooklyn in October, 1898, and his will was duly proved. Under the portion of the Act of Congress of June 13, 1898, which is printed at length in a note to the opinion of the Court in this case, the United States Collector of Internal Revenue demanded of the executors a return showing the amount of the personal estate of the deceased and the legatees and distributees thereof. This return the executors made under protest, asserting that the Act of June 13 was unconstitutional. This return showed that the personal estate amounted to over two and a half millions of dollars, and that there were several legacies, ranging from under $10,000 each to over $1,500,000. The collector levied the tax on the legacies and distributive shares, but, for the purpose of fixing the rate of the tax, considered the whole of the personal estate of the deceased as fixing the rate for each, and not the amount coming to each individual legatee under the will. As the rates under the statute were progressive from a low rate on legacies amounting to $10,000 to a high rate on those exceeding $1,000,000, this decision greatly increased the aggregate amount of the taxation. The executors protested on the grounds (1) that the provisions of the act were unconstitutional, (2) that legacies amounting to less than $10,000, were not subject to any tax or duty, (3) that a legacy of $100,000, taxed at the rate of $2.25 per $100, was only subject to the rate of $1.12 1/2. Demand having been made by the collector for payment, payment was made under protest, and, after the Commissioner of Internal Revenue had refused to refund any of it, the executors commenced suit to recover the amount so paid. The circuit court sustained a demurrer upon the ground that no cause of action was alleged, and dismissed the suit, which was then brought here by writ of error. Held:

(1) That the statute clearly imposes the duty on the particular legacies or distributive shares, and not on the whole personal estate

(2) That it makes the rate of the tax depend upon the character of the links connecting those taking with the deceased, being primarily determined by the classifications, and progressively increased according to the amount of the legacies or shares.

(3) That the court below erred in denying all relief, and that it should have held the plaintiffs entitled to recover so much of the tax as resulted from taxing legacies not exceeding ten thousand dollars, and from increasing the tax rate with reference to the whole amount of the personal estate of the deceased from which the legacies or distributive shares were derived.

Death duties were established by the Roman and ancient law, and, by the modern laws of France, Germany, and other continental countries, England and her colonies, and an examination of all shows that tax laws of this nature rest, in their essence, upon the principle that death is the generating source from which the particular taxing power takes its being, and that it is the power to transmit or the transmission from the dead to the living on which such taxes are more immediately vested.

When a particular construction of a statute will occasion great inconvenience or produce inequality and injustice, that view is not to be favored if another and more reasonable interpretation is present in the statute.

The provision in Section 8 of Article I of the Constitution that "all duties, imports and excises shall be uniform throughout the United States" refers purely to a geographical uniformity, and is synonymous with the expression "to operate generally throughout the United States."

The statute considered in this case embraces the District of Columbia.

The case is stated in the opinion of the Court.