Section 302C Out?

To avoid the Federal inheritance tax many a wealthy man used to deed over most of his property to his intended heirs when he felt death overtaking him. So widespread became this type of tax evasion that Congress in 1926 amended the Internal Revenue Laws by inserting a provision (Section 302C) that all such gifts within two years of death were presumably made to cheat the U. S. Treasury and must be taxed as part of the final estate. Last week in Manhattan U. S. District Judge Alfred Conkling Coxe declared Section 302C unconstitutional as it deprived heirs of their property without due process of law. Judge Coxe reasoned that Congress could not set up a legal presumption contrary to the facts.

On July 1, 1927 Col. Henry Aaron Guinzburg, Jewish rubber manufacturer and philanthropist, gave his son Harold a $71,368 house as a wedding present. On Nov. 16, 1928 Col. Guinzburg died. The Government, contending that the gift was made in expectation of death to evade the inheritance tax, assessed the Guinzburg estate an extra $2,000. Col. Guinzburg's lawyer son-in-law James Marshall, son of the late great Louis Marshall, brought what the U. S. accepted as a test suit.

The Government hastened to appeal its adverse decision which, if lost in the Supreme Court, would compel the Treasury to refund more than $50,000,000 collected under Section 3O2C.

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