V.

JOSEPH JERMAIN SLOCUM, Herbert
Jermain Slocum, Stephen L'Hommedieu
Slocum, et al.

[61] WILLIAM H. EDWARDS, Formerly Co. 233 Mass. 475, 7 A.L.R. 696, 124 Collector of Internal Revenue for the N. E. 265; Old Colony Trust Co. v. Second District of New York, Petitioner, Treasurer, 238 Mass. 549, 16 A.L.R. 689, 131 N. E. 321; Corbin v. Townshend, 92 Conn. 505, 103 Atl. 647; Roebling's Estate, 89 N. J. Eq. 163, 104 Atl. 295; Re Kountze, 93 N. J. Eq. 143, 115 Atl. 93; Re Knight, 261 Pa. 537, 104 Atl. 765; State v. First Calumet Trust & Sav. Bank, 71 Ind. App. 471, 125 N. E. 200; People v. Pasfield, 284 Ill. 454, 120 N. E. 286; State ex rel. Smith v. Probate Ct. 139 Minn. 210, 166 N. W. 125; People v. Bemis, 68 Colo. 48, 189 Pac. 32; Re Inman, 101 Or. 182, 16 A.L.R. 675, 199 Pac. 615; Re Miller, 184 Cal. 674, 16 A.L.R. 694, 195 Pac. 413.

(See S. C. Reporter's ed. 61-63.)

Internal revenue - estate tax ing tax from exemptions.

deduct

In computing the transfer tax imposed by a statute upon "the net estate" of a decedent, the amount of a tax to be paid is not to be deducted from the exemption, which results in adding it to the

amount of the taxable estate.

[For other cases, see Internal Revenue, III. h, in Digest Sup. Ct. 1908; II. e, in 1918 Supp.; III. e, in 1923 Supp.]

N WRIT of Certiorari to the United

the Second Circuit to review a judgment affirming a judgment of the District Court of the United States for the Southern District of New York in plaintiffs' favor in an action brought to recover a tax paid under protest. Affirmed.

See same case below, 287 Fed. 651. The facts are stated in the opinion. Special Assistant to the Attorney General Alfred A. Wheat argued the cause, and, with Solicitor General Beck, filed a brief for petitioner:

The residuary estate is that which remains after all paramount claims upon the estate have been satisfied.

Re Hamlin, 226 N. Y. 407, 7 A.L.R. 701, 124 N. E. 4; Morgan v. Huggins, 48 Fed. 5; Plunkett v. Old Colony Trust Note.-As to nature of inheritance tax -see note to Re McKennan, 33 L.R.A. (N.S.) 606.

which is transferred under the state law.

Knowlton v. Moore, 178 U. S. 41, 58, 44 L. ed. 969, 976, 20 Sup. Ct. Rep. 747; Wardell v. Blum, 276 Fed. 226, affirmed in 258 U. S. 617, 66 L. ed. 793, 42 Sup. Ct. Rep. 271; Re Swift, 137 N. Y. 77, 18 L.R.A. 709, 32 N. E. 1096; Re Hamlin, 185 App. Div. 155, 172 N. Y. Supp. 787, affirmed in 226 N. Y. 407, 7 A.L.R. 701, 124 N. E. 4; Re Ramsdill, 190 N. Y. 492, 18 L.R.A. (N.S.) 946, 83 N. E. 584; People ex rel. Andrews v. Cameron, 140 App. Div. 76, 124 N. Y. Supp. 949, 956, affirmed in 200 N. Y. 584, 94 N. E. 1094; People ex rel. Crook v. Wells, 179 N. Y. 257, 71 N. E. 1126.

If the property out of which the Federal estate tax was paid was transferred under the decedent's will, it was necessarily part of the property which passed to the legatees charged with the payment of the tax, and, in the present case, was included in the amount of the charAs to taxes on succession and col-itable residuary bequests, and was therelateral inheritance-see notes fore deductible from the gross estate. to Re Howe, 2 L.R.A. 825; Wallace v. Myers, 4 L.R.A. 171; Com. v. Ferguson, 10 L.R.A. 240; Re Romaine, 12 L.R.A. 401; Rodman v. Com. 33 L.R.A.(N.S.) 592; and Magoun v. Illinois Trust & Sav. Bank, 42 L. ed. U. S. 1037

As to when taxes illegally assessed may be recovered back-see notes to Bank of United States v. Bank of Washington, 8 L. ed. U. S. 299; Erskine v. Van Arsdale, 21 L. ed. U. S. 63; Phelps v. New York, 2 L.R.A. 626; and State ex rel. McCarty v. Nelson, 4 L.R.A. 300.

Gould v. Gould, 245 U. S. 151, 62 L. ed. 211, 38 Sup. Ct. Rep. 53; United States v. Field, 255 U. S. 257, 65 L. ed. 617, 18 A.L.R. 1461, 41 Sup. Ct. Rep.

256.

Messrs. Harlan F. Stone and Edward H. Green filed a brief as amici curiæ.

Mr. Justice Holmes delivered the opinion of the court:

This is a suit brought by the respondents, executors of the will of Mrs. Sage, to recover the amount of a tax paid

estate will be ascertained before the tax is computed. The government offers an algebraic formula by which it would solve the problems raised by two mutually dependent indeterminates. It fairly might be answered, as said by the circuit court of appeals, that "algebraic formulæ are not lightly to be imputed to legislators," but it appears to us that the structure of the statute is sufficient to exclude the imputation. As further remarked below, the theory departs from the long-established practice of the law not to regard the incidence of a tax in the levying of a tax, and the position of the government is contrary to the expressed intent of the statute to encourage charitable bequests. It is inconsistent with itself also in maintaining that while the distribution of the burden of taxation among the several beneficiaries is a matter of state regulation, the residue is not to be diminished by the state inheritance tax, but only by the estate tax of the United States. Judgment affirmed.

under protest. The tax was levied under, It thus manifestly assumes that the net the Act of February 24, 1919, chap. 18, § 400, 40 Stat. at L. 1057, 1096, Comp. Stat. § 63363 a, Fed. Stat. Anno. Supp. 1919, p. 130, [62] which imposes upon "the transfer of the net estate of every decedent dying after the passage of this act" taxes equal to specified percentages of the net estate, determined as provided in § 403. Mrs. Sage left an estate of $49,129,256.99. She bequeathed specified sums amounting to $1,285,000 for charitable purposes, $8,618,079.55 for pur poses other than charitable, and the residue to charitable and educational institutions named. It is admitted that, in estimating the tax now in question, there is to be deducted from the gross estate the sum of $3,789,321.74 for debts and expenses and the charitable gifts of $1,285,000. These, with the gifts to individuals, above stated, would leave a residue of $35,436,855.70, which the executors contend is exempt by the statute. Adding to the sums admitted to be exempt the residue thus arrived at and the statutory exemption of $50,000, the amount for which exemption is claimed will be $40,561,177.44, leaving a taxable remainder of $8,568,079.55. The government required the payment of an additional sum, reached by deducting from the exempted estate the amount of the tax to be paid; or, in other words, add-[64] UNITED STATES OF AMERICA ing the amount of the tax to the taxable estate. The suit is to recover this additional sum. The executors prevailed in the district court and circuit court of appeals after a discussion with which the government well might have remained satisfied. 287 Fed. 651.

The CHIEF JUSTICE took no part in the decision of this case.

AT

THE RELATION OF THE ST. LOUIS SOUTHWESTERN RAILWAY COMPANY, Plff. in Err.,

V.

INTERSTATE COMMERCE COMMIS-
SION OF THE UNITED STATES,
George B. Maginty, Charles F. Staples,
et al.

(See S. C. Reporter's ed. 64–79.) Evidence power of legislature prima facie evidence.

1. The legislature may make one fact prima facie evidence of another if the inference is not so unreasonable as to be a purely arbitrary mandate. Records

public documents

to examine.

right

The government's argument turns largely upon the consideration that a residue is only what is left after the payment of paramount claims. But this is not a tax upon a residue; it is a tax upon a transfer of his net estate by a decedent, a distinction marked by the words that we have quoted from the statute, and previously commented upon at length in Knowlton v. Moore, 178 U. S. 41, 49, 77, 44 L. ed. 969, 973, 984, 20 2. Under a statute providing that recSup. Ct. Rep. 747. It comes into ex-ords and data of the Interstate Commerce istence before, and is independent of, Commission shall be open to the inspection the receipt of the property by the and examination of the public unless otherlegatee. It taxes, as Hanson, Death wise ordered by the Commission, an adDuties, puts it in a passage [63] cited in verse order of the Commission puts an end 178 U. S. 49, "not the interest to which to the right to examine them as public some person succeeds on a death, but the interest which ceased by reason of the death." It levies a sum equal to a certain percentage of the value of the 3. In a hearing before the Interstate net estate, and provides the criteria by Commerce Commission as to the value of which the net estate shall be ascertained. a railroad, the Commission is not to be

documents.

cross-exam

Railroads valuation
ination of Interstate Commerce Com-
mission.

cross-examined as to its capacity to de-, dence material to the prosecution of recide, or modes of deciding, what is in- lator's protest.

Interstate Commerce Commission v. Louisville & N. R. Co. 227 U. S. 88, 57 L. ed. 431, 33 Sup. Ct. Rep. 185; Omaha The Valuation Act [§ 19a of the In- v. Omaha Water Co. 218 U. S. 190, 197, terstate Commerce Act] did not em- 54 L. ed. 991, 998, 48 L.R.A. (N.S.) 1084, power the Commission to abrogate re- 30 Sup. Ct. Rep. 615; Ohio Valley Water lator's right, as a party litigant, to Co. v. Ben Avon, 253 U. S. 287, 64 L. examine records and data in the posses-ed. 908, P.U.R.1920E, 814, 40 Sup. Ct. sion of the Commission containing evi- Rep. 527; Bratton v. Chandler, 260 U. S.

264

110, 67 L. ed. 157, 43 Sup. Ct. Rep. 43;, made an order setting the matter down John Deere Plow Co. v. Jones, 68 Kan. for hearing in Washington on Septem650, 76 Pac. 750; American Shipbuilding ber 26, 1922. On July 20 the relator Co. v. Whitney, 190 Fed. 109; Boston filed a motion with the Commission, & M. R. Co. v. State, 75 N. H. 513, 31 praying for an order allowing it to exL.R.A. (N.S.) 539, 77 Atl. 996, Ann. Cas. amine the underlying data upon which 1912A, 382; Wertheim v. Continental R. the valuation was based, and for a sub& T. Co. 21 Blatchf. 246, 15 Fed. 716; poena duces tecum to named officers of Gugy v. Maguire, 13 Lower Can. Rep. the Commission, directing them to bring (Dec. des Tribunaux) 33; Hartranft's with them to the hearing all the data Appeal, 85 Pa. 433, 27 Am. Rep. 667. in any way relating to the matter in Mr. P. J. Farrell argued the cause celed the hearing, and in October made issue. In August the Commission canand filed a brief for defendants in error: Congress intended to leave the Com-cited that the opening of certain records an order to the following effect: It remission entirely free to exercise its own to inspection before they were offered in judgment and discretion in connection evidence before the Commission in hearwith the issuance of subpoenas duces tecum and also in connection with the ings upon protests, or before a court of issuance of other subpoenas, and it would competent jurisdiction, would be detrinot be proper for this Court, by order- make it impossible to secure as uninmental to the public interest; would ing the issuance of a writ of mandamus, fluenced opinions upon land values and to interfere in any way with the free price and cost information as the Comexercise of such judgment and discremission could otherwise; would unnection. increase the expense; and would seriousessarily prolong the work, and greatly ly interfere with due performance of the regular duties of the Commission's employees. It therefore ordered that, until further order, office or field notations, etc., in the Bureau of Valuation; opinions and correspondence from or to any employee thereof; land field notes; land computation sheets; cost information secured from others than the carrier in question; cost studies and [76] cost analyses prepared by the Bureau of Valuation, should not be open to inspection by other than the employees of the

Interstate Commerce Commission V. United States, 260 U. S. 32, 34, 67 L. ed. 112, 114, 43 Sup. Ct. Rep. 6.

The motion referred to in the petition as exihibit 4 is entirely general in character, and in said motion no particular record or particular datum is mentioned, specified, or designated.

Jenkins v. Bennett, 40 S. C. 393, 18 S. E. 931; Omaha v. Omaha Water Co. 218 U. S. 180, 54 L. ed. 991, 48 L.R.A. (N.S.) 1084, 30 Sup. Ct. Rep. 615.

Mr. Justice Holmes delivered the opin

ion of the court:

Commission unless and until offered in evidence at hearings or before a court, as above.

This proceeding arises under what is now § 19a of the Interstate Commerce Act. Act of February 4, 1887, chap. Thereupon the relator filed the present 104, 24 Stat. at L. 379, as amended by petition for mandamus in the supreme Act of March 1, 1913, chap. 92, 37 Stat. court of the District of Columbia. It at L. 701, and Act of February 28, 1920, sets forth the foregoing facts in detail, chap. 91, § 433, 41 [75] Stat. at L. 456, and annexes a copy of the valuation, 474, 493, Comp. Stat. § 3586, Fed. Stat. with the Commission's statement of the Anno. Supp. 1920, p. 118. Obeying this kinds of proof and methods used in maksection the Interstate Commerce Com- ing its findings, and further statement mission made a tentative valuation of that those findings were based upon certhe relator's property and served it up- tain underlying facts compiled by the on the relator, the St. Louis South- employees of the Bureau of Valuation, western Railway Company, in July, 1921. these underlying facts being indicated In due time the relator filed its protest at some length. They embraced conagainst the valuation, as provided by the tracts for materials made over the whole act, especially against the findings of the country for the ten years ending June final value of the property, cost of re- 30, 1914; contracts for constructing railproduction new, the cost of reproduction roads or parts during the same time; less depreciation, present value of rela- actual expenditures for various classes tor's lands, and the present cost of con- of construction work in unidentified demnation and damages or of purchase projects selected by the Bureau; books, of lands in excess of present value. In vouchers, and invoices of materials, July, 1922, the Commission, as required, etc., used in construction during

Lindsley v. Natural Carbonic Gas Co. 220 U. S. 61, 82, 55 L. ed. 369, 379, 31 Sup. Ct. Rep. 337, Ann. Cas. 1912C, 160. If Congress had given no hearing before the Commission, but still had made its conclusions prima facie evidence of value, it would be that any constitutional hard to say rights of the railroads had been infringed. Reitler v. Harris, 223 U. S. 437, 56 L. ed. 497, 32 Sup. Ct. Rep. 248; Meeker v. Lehigh Valley R. Co. 236 U. S. 412, 430, 59 L. ed. 644, 657, P.U.R. 1915D, 1072, 35 Sup. Ct. Rep. 328, Ann. The strongest basis Cas. 1916B, 691. for the relator's claim is the statute itself.

the same time; undisclosed records of another "if the inference is not so
purporting to show the service life unreasonable as to be a purely arbitrary
of various classes of material, etc., to- mandate."
gether with an inspection report by the
Bureau's engineers, showing the age of
the materials, etc., in relator's railroad.
From such data, classified and selected,
compilations and analyses were made
purporting to show average cost of ma-
terials, etc., etc., and the average ratios
of engineering and general expenses
during construction and interest during
construction to cost of construction in
selected projects, and the average serv-
ice, life, age, etc., of the various units
of property in relator's railroad. These
compilations were used as the basis for
finding cost of reproduction new and
cost of reproduction less depreciation
Similarly, the [78] The statute provides that "unless
in the relator's case.
present value of relator's lands is said otherwise ordered by the Commission,
to have been reached upon uncommuni- with the reasons therefor, the records
cated data which it is not necessary to and data of the Commission shall be
repeat, and the present cost of condem- open to the inspection and examination
nation or damage, or of [77] purchase of the public." The Commission has or-
in excess of the present value of relator's dered otherwise, as we have stated, and
land, is said to have been reached in the order puts an end to the claim to
the same general way. The foregoing examine the data on the naked ground
data are alleged to have been reduced that they are public documents. But,
to writing and to be within the control as the statute provides for a hearing
of the Commission. It is alleged that before the Commission, it does not fol-
much of the information gathered was low necessarily that the parties to the
not under oath, and that many state- proceeding are subject to the same rule
ments were made orally, and that many when the data are desired as evidence.
opinions were taken from persons not The hearing, to be sure, is not of the
The railroads have no
ordinary kind.
qualified to express the same.
The relator prayed for an order direct- adversary. The Commission, of course,
ing the Commission to allow it to ex- has no object except to arrive at the
amine these underlying data, contracts, truth. It is not to be cross-examined
reports, compilations, and records of the for bias or otherwise as to its capacity
Bureau of Valuation so far as in any to decide or modes of deciding what is
way relating to valuation of the relator's intrusted to it; but, on the other hand,
property, and to make written and since it must grant a hearing, manifest
It justice requires that the railroads should
photographic copies of the same.
also asked that the Commission be di- know the facts that the Commission
rected to issue subpoenas to named of- supposes to be established, and we pre-
ficers, as in the motion made to the sume that it would desire the grounds
Commission, stated above. On a motion of its tentative valuation to be subjected
to that effect the petition was dismissed to searching tests. But there are nec-
While there can be no
by the supreme court, and the judgment essary limits.
was affirmed by the court of appeals. public policy or relation of confidence
We are of opinion that the judgment that should prevail against the para-
was right, and will indicate not only the mount claim of the roads, the work of
grounds of our decision, but what we the Commission must go on, and cannot
think that the relator reasonably may be stopped, as it would be if many of
the railroads concerned undertook an
demand.
We need
examination of all its papers to see
what they could find out.
not now consider whether the statute
authorizes the order if it be construed
to apply to cases like the present, for
we cannot doubt that this Commission
will do all in its power to help the re-
lator to whatever it justly may demand.

The relator's claim of right has for its broadest basis the fact that the valuation, when made final by the Commission, will be prima facie evidence in various judicial proceedings in which the value of the property is material to the decision of the case. But the legislature may make one fact prima facie evidence

264 U. S.

264