No. 391.
The question is whether the entire value or only one-half the value of real property-purchased by a decedent with his own funds and held at his death by his wife and himself under a joint tenancy set up prior to 1916-may be included in the decedent's gross estate under the 1924 Revenue Act.
In 1909, real estate in Illinois was conveyed to W. Francis Jacobs, the decedent, and Elizabeth C. Jacobs, his wife, 'as joint tenants' and this joint tenancy continued until decedent's death; the wife never contributed any part of, or consideration for, the joint property; decedent died June 17, 1924 (after the effective date of the 1924 Revenue Act), and as survivor the wife became sole owner in fee of the whole of the joint property.
The Commissioner included the full value of the property in decedent's gross estate for taxation under the 1924 Act. As executrix, respondent paid the tax, and sought recovery in the District Court which held that the estate tax could be imposed only upon one-half of the joint property's total value. The Circuit Court of Appeals affirmed.
Respondent construes the 1924 Revenue Act as taxing-by its terms-only one-half the value of the joint property, and contends that inclusion of the property's entire value for estate tax purposes would as retroactive taxation violate the Due Process Clause of the Fifth Amendment, U.S.C.A.Const.
First. It is clear that Congress intended, by Section 302 of the 1924 Act, to include in the gross estate of a decedent the full value at death of all property owned by him and any other in joint tenancy or by the entirety-irrespective of the date of the tenancy's creation-insofar as the property or consideration therefor is traceable to the decedent. Subdivision (h) of Section 302 specifically provided that the provisions of section 302 relating to joint tenancies should 'apply to the transfers, trusts, estates, interests, rights, powers, and relinquishment of powers, as * * * described therein whether made, created, arising, existing, exercised or relinquished before or after the enactment of this Act.' (Italics supplied.) Section 302(h) was enacted in the 1924 Act after this Court, on May 1, 1922, had decided that the 1916 Act did not purport to impose an estate tax measured by the value of property held in joint tenancies created prior to the 1916 Act (39 Stat. 756). 'The clear language of the 1924 statute repels the notion that it has no application to joint tenancies created prior to September 8, 1916.'
Second. Here, decedent paid the entire purchase price of the joint property with his own individual funds and, therefore, the 1924 statute required the inclusion of the full value of the joint property in his gross estate. Contending that the tax as so applied is retroactive, respondent insists that the Due Process Clause of the Fifth Amendment forbids such taxation. The reasoning is that a one-half interest in the joint property was transferred to, and vested in the wife in 1909; that the tax in question only applies to transfers; and that the one-half interest transferred to the wife in 1909 could not thereafter (1924) be taxed as a part of decedent's gross estate without retroactively applying the tax to the 1909 transfer.
But the tax was not levied on the 1909 transfer and was not retroactive. At decedent's death in 1924, ownership and beneficial rights in the property which had existed in both tenants jointly changed into the single ownership of the survivor. This change in ownership, attributable to the special character of joint tenancies, was made the occasion for an excise, to be measured by the value of the property in which the change of ownership occurred. Had the tenancy not been created, this survivorship and change of ownership would not have taken place, but the tax does not operate retroactively merely because some of the facts or conditions upon which its application depends came into being prior to the enactment of the tax.