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United States Supreme Court

SHERMAN v. U S(1900)

No. 459

Argued: Decided: May 14, 1900

In the circuit court of the United States for the northern district of New York, on November complaint against the United States, seeking to recover from said defendant the sum of $8,969.02, which he claimed had been unjustly exacted by John G. Ward, collector of internal revenue for the fourteenth district of New York, from George T. Murdock, executor of the last will of Mrs. Jane H. Sherman, the mother of complainant, as a duty or tax imposed by virtue of the provision of the act of June 13, 1898; that said sum of $8,969.02 was deducted by the said executor from the income due and payable under the provisions of said will to the complainant; that the income, of which the complainant was entitled to receive an annual portion during his life, was composed in part of United States bonds, which the complainant avers to be, by virtue of the acts of Congress under which they were issued, nontaxable and nonassessable for the purposes of taxation. [178 U.S. 150, 151]   The United States, appearing by Charles H. Brown, United States attorney for the northern district of New York, demurred to the complaint upon the ground that the same did not state facts sufficient to constitute a cause of action. On hearing the circuit court sustained the demurrer, and ordered that the complin t be dismissed. A writ of error was allowed to this judgment, and the cause was brought to this court.

Messrs. Charles E. Patterson, Alpheus T. Bulkeley, Charles F. Southmayd, William V. Rowe, and Evarts, Choate, & Beaman for plaintiff in error.

Solicitor General Richards for defendant in error.

Mr. Justice Shiras delivered the opinion of the court:

In so far as the contentions urged in this action are based on the allegation that the tax imposed on the legacies left in the will of Mrs. Jane H. Sherman is void because it is an unapportioned direct tax, or, if not a direct tax, but a duty or excise, the same is void because not uniform throughout the United States, or void because it is not competent to levy an inheritance or legacy tax upon property passing to legatees under the laws of the state of New York, they have been disposed of adversely to the plaintiff, in the case of Knowlton v. Moore, recently decided by this court ( 178 U.S. 41 , 20 Sup. Ct. Rep. 747, 44 L. Ed. --).

So, too, the proposition that bonds of the United States and the income therefrom are not lawfully taxable under an inheritancetax law of the United States, because exempted by contract from such tax, has just been decided not to be well founded, in the case of Murdock v. Ward, 178 U.S. 139 , 20 Sup. Ct. Rep. 775, 44 L. Ed.--.

The allegation in the complaint, that 'it is not within the constitutional power of Congress to require the payment of a larger or different amount of tax from or imposed upon a legacy or a legatee, because of the greater wealth of the donor of such legacy, than is required when the legacy is the gift of a testator of smaller means,' need not be considered, because this court has held in the case of Knowlton v. Moore that upon a proper construction of the act of June 13, 1898, the [178 U.S. 150, 152]   amount of the inheritance or legacy tax levied thereunder is measured by the amount of the legacy or distributive share passing under the laws of the state, and not by the amount of the estate of the testator or of the deceased owner.

As, however, it appears in this record that the taxes actually levied and paid on the legacies left by the will of Mrs. Sherman were computed upon the mistaken assumption that the amount of the estate of the testatrix was the measure of the tax, and not the amount of the respective legacies, the complainant is entitled to be repaid the excess thus imposed upon his legacy. As we have reversed the judgment in the case of Murdock v. Ward, and have remanded that case to the circuit court of the southern district of New York, in order that the erroneous computation may be corrected, and as thus what is coming to the plaintiff in error, upon such correction being made, will be recovered by Murdock as executor and trustee under the will of Mrs. Sherman, and thereby and in that case the plaintiff in error will be indemnified, he needs no further proceeding in his suit in the circuit court for the northern district of New York. Lest, however, the judgment dismissing his complaint may embarrass his right to claim indemnity from the executor, we shall reverse this judgment, and it is so ordered.

Mr. Justice White dissents in respect to the taxability of the bonds.

Mr. Justice Peckham took no part in the decision of the case.

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