In the discharge of that duty, as I see it, it follows that the word "incomes" in the sixteenth amendment should not and cannot be so construed as to include property other than income even if such property is described as income by an act of congress, as such a construction permits the congress to nullify the provisions of the second section of article I of the constitution, that direct taxes shall be apportioned.

Let judgment be entered for the plaintiff to recover of the defendant $17,756.79, together with interest on the same from July 19, 1918, together with costs of suit.

Ordered accordingly.

(T. D. 3115, January 12, 1921)

Treasury certificates of indebtedness

Instructions relative to acceptance of treasury certificates of indebtedness for income and profits taxes, supplementing articles 1731 and 1732, regulations No. 45 (revised), and superseding T. D. 2973.

I. Collectors of internal revenue are authorized and directed to receive at par United States treasury certificates of indebtedness, series TM-1921, dated March 15, 1920, series TM 2-1921, dated July 15, 1920, series TM 3-1921, dated September 15, 1920, and series TM 4-1921, dated October 15, 1920, all maturing March 15, 1921, in payment of income and profits taxes payable on March 15, 1921. Collectors are authorized and directed to receive at par treasury certificates of indebtedness of series TJ-1921, dated June 15, 1920, and series TJ 2-1921, dated December 15, 1920, both maturing June 15, 1921, in payment of income and profits taxes payable on June 15, 1921; treasury certificates of indebtedness of series TS-1921, dated September 15, 1920, maturing September 15, 1921, in payment of income and profits taxes payable on September 15, 1921, and treasury certificates of indebtedness of series TD-1921, dated December 15, 1920, maturing December 15, 1921, in payment of income and profits taxes, payable on December 15, 1921. Collectors are further authorized and directed to receive at par, in payment of income and profits taxes payable, at the maturity of the certificates, respectively, treasury certificates of indebtedness of any other series which may be issued maturing on March 15, June 15, September 15, or December 15, 1921, respectively, and expressed to be acceptable in payment of income and profits taxes. Collectors are not authorized hereunder to receive in payment of income or profits taxes any treasury certificates of indebtedness not expressed to be acceptable in payment of income and profits taxes, nor any treasury certificates maturing on a date other than the date on which the taxes are payable. Collectors are authorized to receive treasury certificates of indebtedness which are acceptable as herein provided in payment of income and profits taxes, in advance of the respective dates on which the certificates mature. Treasury certificates acceptable in payment of income and profits taxes have one or more interest coupons attached, including as to each series a coupon payable at the maturity of the certificates, but all interest coupons must in each case be detached by the taxpayer before presentation to the collector, and collected in ordinary course when due. The amount, at, par, of the treasury certificates of indebtedness presented by any taxpayer in payment of income and profits taxes must not exceed the amount of the taxes to be paid by him, and collectors shall in no case pay interest on the certificates or accept them for an amount other or greater than their face value.

2. Deposits of treasury certificates of indebtedness received in payment of income and profits taxes must be made by collectors, unless otherwise specifically instructed by the secretary of the treasury, with the federal reserve bank of the district in which the collector's head office is located, or in case such head office is located in the same city with a branch federal reserve bank, with such branch federal reserve bank. Specific instruc

tions may be given to collectors by the secretary of the treasury in certain instances for the deposit of the certificates with federal reserve banks of other districts and branch federal reserve banks. The term "federal reserve bank," where it appears herein, unless otherwise indicated by the context, includes branch federal reserve banks. Treasury certificates accepted by the collector prior to the dates when the certificates respectively mature should be forwarded by the collector to the federal reserve bank, to be held for account of the collector until the date of maturity and for deposit on such date.

3. Collectors of internal revenue are not authorized, unless express instructions otherwise are given by the secretary of the treasury, to receive in payment of income or profits taxes interim receipts issued by federal reserve banks in lieu of definite certificates of the series herein described,

4. Certificates of indebtedness should in all cases be indelibly stamped on the face thereof as follows by the collector, and when so stamped should be delivered to the federal reserve bank in person if the collector is located in the same city, and in all other cases forwarded by registered mail uninsured:

., 192...

This certificate has been accepted in payment of income and profits taxes, and will not be redeemed by the United States except for credit of the undersigned.

5. Collectors should make in tabular form a schedule in duplicate of the certificates of indebtedness to be forwarded to the federal reserve bank, showing the serial number of each certificate, the date of issue and maturity, with serial designation, and face value. Certificates of indebtedness accepted prior to the date of maturity must be scheduled separately. At the bottom of each schedule there should be written or stamped "Income and profits taxes $.. which amount must agree with the total shown on the schedule. One copy of this schedule must accompany certificates sent to the federal reserve bank, and the other be retained by the collector. The income and profits tax deposits resulting from the deposits of such certificates must in all cases be shown on the face of the certificate of deposit (national bank form 15) separate and distinct from the item of miscellaneous internal-revenue collections (formerly called ordinary). Until certificates of deposit are received from the federal reserve banks, the amounts represented by the certificates of indebtedness forwarded for deposit must be carried by collectors as cash on hand, and not credited as collections, as the dates of certificates of deposit determine the dates of collections.

6. For the purpose of saving taxpayers the expense of transmitting such certificates as are held in federal reserve cities or federal reserve branch bank cities to the office of the collector in whose district the taxes are payable, taxpayers desiring to pay income and profits taxes by such treasury certificates of indebtedness acceptable in payment of taxes should communicate with the collector of the district in which the taxes are payable and request from him authority to deposit such certificates with the federal reserve bank in the city in which the certificates are held. Collectors are authorized to permit deposits of treasury certificates of indebtedness in any federal reserve bank with the distinct understanding that the federal reserve bank is to issue a certificate of deposit in the collector's name covering the amount of the certificates of indebtedness at par and to state on the face of the certificate of deposit that the amount represented

thereby is in payment of income and profits taxes. The federal reserve bank should forward the original certificate of deposit to the treasurer of the United States with its daily transcript, and transmit to the collector the duplicate and triplicate, accompanied by a statement giving the name of the taxpayer for whom the payment is made, in order that the collector may make the necessary record and forward the duplicate to the office of the commissioner of internal revenue.

7. This treasury decision amends and supplements the provisions of article 1731 and 1732 of regulations No. 45 (revised), and supersedes T. D. 2973.

I.

(T. D. 3119, January 17, 1921)

Estate tax-Act of September 8, 1916–Decision of court

ESTATE TAX-TRANSFER IN CONTEMPLATION OF DEATH-RETROACTIVE
OPERATION OF ACT.

The act of September 8, 1916, title II, applies to all transfers in contemplation of death, whether made before or after the passage of the act, provided the transferrer's death occurred after the act took effect.

2. SAME-ACT OF SEPTEMBER 8, 1916-CONSTITUTIONALITY.

The act of September 8, 1916, title II, construed as applying to transfers made in contemplation of death before its passage, where the transferrer died after the act took effect, is not unconstitutional.

3. SAME "IN CONTEMPLATION OF DEATH" Defined.

By the term "in contemplation of death,” as used in section 202 of the act of September 8, 1916, and applied to a gift inter vivos, is not meant on the one hand the general expectancy of death which is entertained by all persons, nor, on the other, is the meaning of the term necessarily limited to an expectancy of immediate death or a dying condition. Nor is it necessary, in order to constitute a transfer in contemplation of death, that the conveyance or transfer be made while death is imminent, or immediately impending by reason of ill health, disease, injury or like physical conditions. But a transfer may be said to be made in contemplation of death if the expectancy or anticipation of death in either the immediate or reasonably near future is the moving cause of the transfer.

4. ESTATE TAX-TRANSFER IN CONTEMPLATION OF DEATH EVIDENCE.

The decedent on April 22, 1915, made a deed absolute in form conveying personal property worth about $1,000,000 in trust with no reservations in her favor. She died September 16, 1916, of apoplexy, primarily resulting from hardening of the arteries. She was a childless widow and had lived for many years in the family of a sister whose husband, and ultimately whose children, were the beneficiaries of the deed of trust. On May 26, 1915, the decedent made her will and in it referred to the disposition of her estate and to the wills made at the same time by her sister and brotherin-law. Held, that it was clear, in the light of the evidence presented, that a question of fact was presented for the jury's determination.

5. SAME-TRANSFER IN CONTEMPLATION OF DEATH-PRESUMPTION.

It was not error to charge that, in determining the issue of fact whether the transfer was made in contemplation of death, there might be taken into account the presumption afforded by the prima facie clause of section 202 (b) of the act, which provides that "Any transfer of a material part of his property in the nature of a final disposition or distribution thereof, made by the decedent within two years prior to his death without such a consideration (namely, a fair consideration in money or money's worth) shall, unless shown to the contrary, be deemed to have been made in contemplation of death *

*

6. SAME-TRANSFER IN

WITNESS.

CONTEMPLATION

OF DEATH-CONCLUSION OF

It is incompetent for a witness to state a fact which is for the ultimate conclusion of the jury; in the present instance, whether a testatrix had any expectancy that she was in danger of passing away in the near future. 7. EVIDENCE-HEARSAY.

Testimony of a witness that he understood that decedent, her sister, and the latter's husband made their wills together so as not to excite decedent, was properly excluded; witness plainly having no first-hand knowledge of the matter.

8. SAME-OBJECTION TO COMPETENCY-TIME.

Where no exception was taken to overruling of objection to testimony on ground that it was immaterial, and the witness then testified without objection, a subsequent objection, on the question being substantially repeated to the same witness, but without statement of the grounds of asserted incompetency, and without motion to strike out the testimony already given, came too late.

The appended decision, dated December 10, 1920, of the United States circuit court of appeals, sixth circuit, in the case of Victor E. Shwab, executor, v. Doyle, collector, is published for the information of internal revenue officers and others concerned.

UNITED STATES CIRCUIT COURT OF APPEALS, SIXTH CIRCUIT

Victor E. Shwab, executor plaintiff in error, v. Emanuel J. Doyle, collector internal revenue, defendant in error

ERROR to the district court of the United States for the western district of Michigan

Submitted June 11, 1920. Decided December 10, 1920

Before KNAPPEN, DENISON, and DONAHUE, circuit judges

KNAPPEN, circuit judge: Suit by plaintiff in error to recover an estate tax paid under protest.

On April 22, 1915, decedent made to the Detroit Trust Co. a deed absolute in form, conveying personal property worth about $1,000,000 in trust, for the payment of both interest and principal to certain beneficiaries, with no reservation in favor of the grantor. The conveyance took immediate effect, and was accompanied by delivery of the property conveyed. It was purely voluntary and without momentary consideration. Decedent died September 16, 1916, possessed of a remaining estate of about $800,000, upon which a tax was assessed and paid upon return by the executor under title II of the revenue act of September 8, 1916 (39 Stat., ch. 463; U. S. Comp. Stat., 1916, sec. 63361⁄2), which took effect seven days before decedent's death, viz, September 9, 1916. That tax is not involved here, nor is its validity questioned. The tax here in question was assessed under section 202 of the same act, as upon a transfer made in contemplation of death. Plaintiff contended below and contends here (1) that the act was not intended to reach absolute conveyances in contemplation of death made before the passage of the act; (2) that if so intended it is unconstitutional; (3) that there was no substantial evidence that the transfer was "in contemplation of death" within the meaning of the statute. The trial court denied plaintiff's motion for a direct verdict, held the statute valid and applicable to the trust deed, if made in contemplation of death, and submitted to the jury the question whether it was so made. There were verdict and judgment for defendant.

1. Was the act intended to apply to transfers made before its passage? Section 202 includes in the taxable value of a decedent's estate (a) prop

erty held by the decedent at the time of his death and subject thereafter to the payment of debts and expenses of administration, and to distribution as part of his estate; (b) property “of which decedent has at any time made a transfer or with respect to which he has created a trust, in contemplation of or intended to take effect in possession or enjoyment at or after his death, except in case of a bona fide sale for a fair consideration in money or money's worth;" (c) property held jointly or as tenants in the entirety by decedent and any other person.

It will be observed that the transfers mentioned in subdivision (b) are of two classes-those made "in contemplation of death" and those "intended to take effect in possession or enjoyment at or after" death. We are concerned with the first only of these classifications.

In our opinion the statute evidences an intent on the part of congress that the tax should apply to all transfers in contemplation of death, whether made before or after the passage of the act, provided the transferrer's death occur after the act took effect. This intent is, we think, evidenced by a variety of considerations.

(a) Section 201 imposes a tax upon the transfer of the net estate of "every person dying after the passage of this act." In section 202 the taxable estate of the decedent embraces all transfers of the two classes already mentioned which the decedent has "at any time made." The remaining paragraph of section 202 (b) not already set out declares that “any transfer of a material part of his property in the nature of a final disposition or distribution thereof made by the decedent within two years prior to his death without such a consideration (a fair consideration in money or money's worth) shall, unless shown to the contrary, be deemed to have been made in contemplation of death within the meaning of this title." The italicized words in each of the foregoing quotations indicate, on their face, an allembracing intent, and are thus prima facie opposed to a limitation to transfers made after the passage of the act.

(b) The evident theory of the statute is that transfers intended to take effect after the death of the grantor, as well as those made in contemplation of death, are equally testamentary in character.-Rosenthal v. People (211 Ill., 306, 309); Keeney v. New York (222 U. S., 525, 536). Such classification is within the power of congress. The theory of taxation on account of transfers testamentary in character is that death is the generating source of the tax.-Knowlton v. Moore (178 U. S., 41, 56); Cahen v. Brewster (203 U. S., 543, 550). A transfer is accordingly taxed only at the death of the transferrer, no matter how long the transfer may precede death. Congress has accordingly included the two classes of transfers in one and the same section and subjected them, so far as terms go, to precisely the same treatment. In our opinion a transfer intended to take effect in possession or enjoyment after the grantor's death would under this statute be taxable, although made before the passage of the act.-Wright v. Blakeslee (101 U. S., 174, 176). The natural inference would be, in the absence of substantial evidence to the country, that the same result was intended as to transfers made in contemplation of death.

(c) While the interests derived by a grantee under an absolute and immediately effective conveyance in contemplation of death are vested, the same is true of any irrevocable conveyance which takes effect in possession or enjoyment only upon the death of the grantor, although in the latter case such vesting is merely in expectancy. If congress had power, as we think it had, to tax both classes of conveyances, even if made before the passage of the act, no good reason suggests itself why it should desire to discriminate between the two classes of transfers.

It is not to our minds unnatural, nor is it necessarily unjust, that congress should intend that one taking a conveyance of a testamentary character, entirely without consideration, should do so at the risk of having the