Taxation of Transfers in Contemplation of Death: A Proposal for Abolition

WHEN a tax statute has been in effect for almost thirty years, has been considered by the courts in more than two hundred and fifty instances, 1 and its meaning is still so unsettled as to produce contrary results in almost identical cases, 2 there would seem to be little excuse for further delay in curing the situation either by drastic amendment or by outright repeal.This should be even more true where the Government's record of successful litigation has been consistently poor, as a result of which it has presumably been driven in recent years to the expedient of interpreting the provision in a manner going far beyond the test laid down by the Supreme Court.And, finally, there is crying need for a change because, as attorneys engaged in estate tax matters know and as even revenue officers will occasionally admit in private conversation, the threat of the provision is often invoked in negotiations for settlements of estate tax liability primarily for trading purposes with respect to transfers quite clearly not within the ambit of the statute.This harsh indictment is directed at the provision taxing transfers made in contemplation of death.It was incorporated in the Federal Estate Tax Law of 1916 1 in the following language which remains substantially unchanged in the currently effective section of the Internal Revenue Code 4:"That the value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated,... to the extent of any interest therein of which the decedent has at any time made a transfer, or with respect to which he has created a trust, in contemplation of... his death, except in case of a bona fide sale for t Member, District of Columbia and New York Bars, formerly Special Assistant to the Attorney General, Tax Division, Department of Justice.1.All of the statistics in this article and much of its subject matter