9

STONE, C. J., dissenting.

"successors and assigns." See Walling v. Reuter Co., 321
U.S. 671, 674-675, and cases cited.

It has long been deemed to be an abuse of power for a
federal court to enjoin practices in which a defendant
has not engaged and which are unrelated to those which
may be properly enjoined. See Labor Board v. Express
Publishing Co., 312 U. S. 426, and cases cited. To me it
seems no less a misuse of authority for a court, as well as
for the Labor Board itself, to threaten those who are not
subject to its command. This is the more so where the
tendency of the threat is to inflict an unauthorized penalty
on the employer by deterring third persons from dealing
with him to acquire his property and business, in circum-
stances in which that may lawfully be done.

That there have been numerous cases before this Court where the Board's order has not been challenged in this respect, is significant only as showing how extensive the abuse has become and how ready employers and the lower courts have been to acquiesce in threatened wrong when the injury seemed not to be immediate. But these are not reasons for our acquiescence, when the question is brought to us for decision for the first time. It is no part of the function of the Board or of courts to make unwarranted threats against suitors or innocent third persons. Such misleading and unwarranted use of the phrase should be avoided, either by striking it from the decree or so qualifying it as to designate the class of "successors and assigns" to whom it may be lawfully applied. Cf. Southport Co. v. Labor Board, 315 U. S. 100, 107.

FONDREN ET AL. v. COMMISSIONER OF
INTERNAL REVENUE.

CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE FIFTH CIRCUIT.

No. 88. Argued December 11, 12, 1944.-Decided January 29, 1945. 1. Irrevocable trusts for the benefit of minors provided for distribution of specified percentages when the beneficiaries reached the ages of 25 and 30 and of the remainder when they reached 35. The trustee was authorized to apply income and corpus toward maintenance and education of the beneficiaries if, contrary to expectations, necessity therefor should arise. Held that gifts to the trusts were gifts of "future interests in property," within the meaning of § 504 (b) of the Revenue Act of 1932 and Treasury Regulations 79, so that the $5,000 exclusion prescribed by that section was not allowable. P. 24.

2. To bring the statutory exclusion into force, it is not enough that the donee has acquired vested rights; he must have the right presently to use, possess, or enjoy the property. P. 20.

3. The fact that the beneficiary is specified and in esse, or that the amount of the gift is definite and certain, does not render the statutory exclusion applicable, where enjoyment of the property is postponed. P. 26.

4. Section 504 (b) makes no distinction between gifts for the benefit of minors and gifts to adults. P. 28.

5. It does not follow from the result here reached that the statutory exclusion would not be applicable in any case to gifts for the benefit of minors. P. 29.

6. A settled construction of a statute, which Congress has reenacted, should be followed. P. 29.

141 F. 2d 419, affirmed.

CERTIORARI, 323 U. S. 685, to review the affirmance of a decision of the Tax Court, 1 T. C. 1036, sustaining the Commissioner's assessment of a deficiency in gift taxes.

Mr. W. M. Cleaves, with whom Mr. E. E. Townes was on the brief, for petitioners.

Mr. J. Louis Monarch, with whom Solicitor General Fahy, Assistant Attorney General Samuel O. Clarke, Jr. and Mr. Sewall Key were on the brief, for respondent.

MR. JUSTICE RUTLEDGE delivered the opinion of the Court.

In 1935, 1936 and 1937 petitioner, Ella F. Fondren, and her husband, since deceased, created seven separate irrevocable trusts, each in favor of a grandchild of tender years; and each of them made gifts to each trust of corporate stock having the fair market value of $5,975. The donors made gift tax returns for 1937, claiming the statutory exclusion of $5,000 for each gift, and accordingly reported taxable gifts for each trust of $975. Gift taxes were paid on this basis.

The Commissioner made deficiency assessments, disallowing the exclusions on the ground that the gifts were of "future interests in property" within the meaning of the Revenue Act of 1932, c. 209, 47 Stat. 169, and Treasury Regulations 79 (1936 ed.). The Tax Court upheld the Commissioner, the cases being consolidated for hearing and decision. 1 T. C. 1036. The Circuit Court of Appeals affirmed the Tax Court's decision, one judge dissenting. 141 F. 2d 419. Certiorari was granted, 323 U. S. 685, because of the importance of the question as

1 The statute is as follows:

"Sec. 504. Net Gifts.

"(a) General Definition. The term 'net gifts' means the total amount of gifts made during the calendar year, less the deductions provided in section 505.

"(b) Gifts Less Than $5,000.—In the case of gifts (other than of future interests in property) made to any person by the donor during the calendar year, the first $5,000 of such gifts to such person shall not, for the purposes of subsection (a), be included in the total amount of gifts made during such year."

The pertinent part of the Regulation is quoted in the text below.

affecting the taxability of gifts made for the benefit of minor children and because of alleged or apparent conflict with decisions of other courts.2

The sole issue is whether the gifts were of "future interests" within the meaning of the statute and the regulation. The latter provides:

“Art. 11. . . . 'Future interests' is a legal term, and includes reversions, remainders, and other interests or estates, whether vested or contingent, and whether or not supported by a particular interest or estate, which are limited to commence in use, possession, or enjoyment at some future date or time. ." (Emphasis added.)

Upon the facts the issue turns on whether the interests acquired by the minor beneficiaries were "limited to commence in use, possession, or enjoyment at some future date or time." Ryerson v. United States, 312 U. S. 405; United States v. Pelzer, 312 U. S. 399.

Under these decisions it is not enough to bring the exclusion into force that the donee has vested rights. In addition he must have the right presently to use, possess or enjoy the property. These terms are not words of art, like "fee" in the law of seizin, United States v. Pelzer, supra, at 403, but connote the right to substantial present economic benefit. The question is of time, not when title vests, but when enjoyment begins. Whatever puts the barrier of a substantial period between the will of the beneficiary or donee now to enjoy what has been

2 The petition alleged conflict with Smith v. Commissioner, 131 F. 2d 254 (C. C. A. 8th); Sensenbrenner v. Commissioner, 134 F. 2d 883 (C. C. A. 7th); and Kinney v. Anglim, 43 F. Supp. 431 (N. D. Calif.). Cf. also Disston v. Commissioner, 144 F. 2d 115 (C. C. A. 3d). The decision, one judge dissenting, overruled the prior decision. in Commissioner v. Taylor, 122 F. 2d 714, cert. denied, 314 U. S. 699. A petition for writ of certiorari was filed in the Disston case on October 12, 1944, and now is pending.

given him and that enjoyment makes the gift one of a future interest within the meaning of the regulation. Accordingly, it has been held that if the income of a trust is required to be distributed periodically, as annually, but distribution of the corpus is deferred, the gift of the income is one of a present interest, that of the corpus one in futuro. Fisher v. Commissioner, 132 F. 2d 383; Sensenbrenner v. Commissioner, 134 F. 2d 883. A fortiori, if income is to be accumulated and paid over with the corpus at a later time, the entire gift is of a future interest, although upon specified contingency some portion or all of the fund may be paid over earlier. The contingency may be the exercise of the trustee's discretion, either absolute or contingent. It may also be the need of the beneficiary, not existing when the trust or gift takes effect legally, but arising later upon anticipated though unexpected conditions, either to create a duty in the trustee to pay over or to permit him to do so in his discretion."

In the light of these principles and decisions, it is necessary to consider the terms of the trusts and the circum

3 Welch v. Paine, 120 F. 2d 141; Commissioner v. Taylor, 122 F. 2d 714, 715, cert. denied, 314 U. S. 699; Commissioner v. Brandegee, 123 F.2d 58; Commissioner v. Phillips' Estate, 126 F. 2d 851; Commissioner v. Gardner, 127 F. 2d 929; Welch v. Paine, 130 F. 2d 990; Commissioner v. Wells, 132 F. 2d 405; French v. Commissioner, 138 F.2d 254; Roberts v. Commissioner, 143 F. 2d 657; Howe v. United States, 142 F. 2d 310; Hutchings-Sealy National Bank v. Commissioner, 141 F. 2d 422; Helvering v. Blair, 121 F. 2d 945.

Ibid.

5 Welch v. Paine, 120 F. 2d 141; Commissioner v. Taylor, 122 F. 2d 714, 715, cert. denied, 314 U. S. 699; Commissioner v. Brandegee, 123 F. 2d 58; Commissioner v. Phillips' Estate, 126 F. 2d 851; Commissioner v. Gardner, 127 F. 2d 929; Winterbotham v. Commissioner, 46 B. T. A. 972; cf. Ryerson v. United States, 312 U. S. 405, 408. 6 Cf. authorities cited note 3 supra.

637582°-46 -6