3. Provisions in Detail. a. THE RATES The rates imposed by the act of 1916 upon net estates of those dying after September 8, of that year and prior to March 3, 1917, are as follows: On the next On the next $1,000,000 - -2 per cent.. -3 per cent.. 8 per cent. 9 per cent. On all amounts in excess of $5,000,000 ten per cent. $500 2,000 3,000 8,000 27,500 60,000 70,000 80,000 90,000 The rates established by the amendment of March 3, 1917 on net estates of those dying after that date are as follows: Title ix of the War Revenue Act of October 3, 1917 imposes the following in addition to those above, Upon the transfer of each net estate of any decedent dying after the passage of this Act: a tax equal to the following percentages of its value: No tax shall be paid on the transfer of the net estate of any decedent dying while serving in the military or naval forces of the United States, during the continuance of the present war, or if death results from injuries received or disease contracted in such service within one year after the termination of such war. NOTE. The above was passed by Congress after this chapter was written and the book nearly printed. If the tax is on the transfer there must be a transferee and some provision must be made for adjusting the burden among several transferees. Apparently the law is regarded by the treasury department as an estate tax on property. How the courts will regard it, and, if they sustain the law, how they will legislate to adjust the burdens of the tax remains to be seen. b. EXEMPTIONS AND DEDUCTIONS. To non-residents there is no specific exemption. On all estates of resident decedents $50,000 is deducted before any tax can accrue. There is also deducted debts, funeral expenses, administration expenses, state inheritance taxes, mortgages, losses not compensated by insurance and any other deduction allowed by the laws of the state where the estate is administered. In case of non-residents such deductions are proportioned on the: ratio of the value of the property in this country to the entire estate of the decedent located elsewhere. C. DUTIES OF EXECUTORS. Within thirty days after qualifying the executor or administrator must give written notice to the collector of internal revenue if the gross estate exceeds $60,000 in case of a resident, or in case of a non-resident if any part of the property is situated within the United States, and file an inventory. As the executor is appointed by a state court and has no relations with the United States government the power to impose this duty upon him is not clear. At all events it is the first taxing statute that requires notice from the taxpayer instead of providing that the taxing power shall itself give the notice. Apparently the Congress supposed that the "notice and a hearing" afforded should be for the benefit of the taxing power and not for the benefit of the taxpayer. d. DISCOUNT INTEREST AND PENALTY. A The tax is due within one year and must be paid from the principal of the estate before any distribution. discount of 5% per annum is allowed for payment before the year, based on the amount of time the tax is anticipated. After 90 days the tax draws interest at 10% from death but the penalty may be reduced to 6% in case of unavoidable delay. Unpaid taxes remain a lien against the estate for ten years. e. TREASURY DEPARTMENT RULINGS. Some of the important rulings of the treasury department upon questions arising in specific cases under the tax are as follows: 1. Transfers in contemplation of death made prior to the statute are taxable if the decedent died after the statute took effect. 2. Inheritances taxes imposed by the states are a proper deduction in ascertaining the net estate. (Revoked Sept. 1, 1917. Not allowed since that date.) 3. Income and increases during settlement are not taxed but losses are allowed. 4. Advance payments for the discount are not accepted unless a reasonably accurate inventory has been filed. 5. United States bonds must pay the inheritance tax and be included in the net estate. 6. One half of a wife's community property under Texas and Louisiana laws is taxable. 7. Deductions are regulated by those allowed by the local state courts. 3. The Federal Statute and Department Regulations. The Federal Statute (Sec. 212) authorized the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, to make such regulations as he may deem necessary to carry out the provisions of the act, and these regulations, within that limitation, and if consistent with the Federal laws and the Constitution, have the force of law. The statute, accompanied by the regulations prescribed, was issued by the Department as Internal Revenue Regulations No. 37, May, 1917, and is the most recent and only authoritative exposition of the law, in the absence of judicial construction. In view of the doubtful constitutionality of the entire statute, emphasized rather than minimized by the view of the department; the law as interspersed with these regulalations is given as issued by Regulation No. 37, as follows: INTERNAL REVENUE REGULATIONS NO. 37, LAW AND REGULATIONS RELATING TO THE ESTATE TAX. [For convenient reference each section of Title II of the revenue act of September 8, 1916, or of Title III of the special preparedness revenue act of March 3, 1917, is immediately followed by the pertinent articles of the regulations. Unless otherwise shown, all sections are of the September 8, 1916, act.] DEFINITIONS. SEC. 200. That when used in this title The term "person" includes partnerships, corporations, and associations. The term "United States" means only the States, the Territories of Alaska and Hawaii, and the District of Columbia. The term "executor" means the executor or administrator of the decedent, or, if there is no executor or administrator, any person who takes possession of any property of the decedent; and The term "collector" means the collector of internal revenue of the district in which was the domicile of the decedent at the time of his death, or, if there was no such domicile in the United States, then the collector of the district in which is situated the part of the gross estate of the decedent in the United States, or, if such part of the gross estate is situated in more than one district, then the collector of internal revenue at Baltimore, Md. *Additional war tax October 3, 1917, enacted after this chapter was in See page 494. press. ARTICLE I. The tax is not imposed in Porto Rico or the Philippine Islands, but, under the definition in the title, the property in the United States of deceased residents of the islands is taxable as the property of non-residents. ART. II. This act does not distinguish between citizens and aliens but does distinguish between residents and nonresidents of the United States. If a citizen of the United States has maintained his principle domicile abroad prior to death, his estate is taxable as that of a non-resident. ART. III. If a resident decedent has maintained domiciles in more than one collection district, the facts should be presented to the commissioner for ruling as to the proper collector to receive 30-day notice, return and tax payment. RATES OF TAX. SEC. 201. That a tax (hereafter in this title referred to as the tax), equal to the following percentages of the value of the net estate to be determined as provided in section two hundred and three, is hereby imposed upon the transfer of the net estate of every decedent dying after the passage of this act, whether a resident or non-resident of the United States: One per centum of the amount of such net estate not in excess of $50,000; Two per centum of the amount by which such net estate exceeds $50,000 and does not exceed $150,000; Three per centum of the amount by which such net estate exceeds $150,000 and does not exceed $250,000; Four per centum of the amount by which such net estate exceeds $250,000 and does not exceed $450,000; Five per centum of the amount by which such net estate exceeds $450,000 and does not exceed $1,000,000; Six per centum of the amount by which such net estate exceeds $1,000,000 and does not exceed $2,000,000; Seven per centum of the amount by which such net estate exceeds $2,000,000 and does not exceed $3,000,000; Eight per centum of the amount by which such net estate exceeds $3,000,000 and does not exceed $4,000,000; Nine per centum of the amount by which such net estate exceeds $4,000,000 and does not exceed $5,000,000; and Ten per centum of the amount by which such net estate exceeds $5,000,000. |