Monday, April 29, 2013

Lyeth v. Hoey case brief

Lyeth v. Hoey case brief
305 U.S. 188, 59 S. Ct. 155,83 L. Ed. 119, 1938 U.S. 1173

CASE SYNOPSIS: Certiorari was granted to the Circuit Court of Appeals for the Second Circuit, to review whether property received by petitioner, grandson of decedent grandmother, from the estate in compromise of his claim as an heir, was taxable as income under the Revenue Act of 1932.

FACTS: Petitioner inherited property from his grandmother. When the will was offered for probate in Massachusetts, the heirs objected, citing lack of testamentary capacity and undue influence. A compromise agreement was entered into. Heirs formed a corporation, to which they assigned their interests in the estate in exchange for common stock. Petitioner received his share of the estate, and respondent Commissioner of Internal Revenue taxed petitioner's share as income. The district court granted summary judgment to petitioner, but the intermediate appellate court reversed.

On further appeal, the court reversed that decision and affirmed the district court.

The intermediate appellate court erred in applying the Massachusetts rule, which depended upon the law of the jurisdiction under which petitioner received the property. What an heir acquired by inheritance within the meaning of federal statute was a federal, not state, question. State law controlled only when the federal taxing statute, by express language or necessary implication, made its operation dependent upon state law. There was no such expression or implication here, and exemption from taxation applied.

CONCLUSION: The court reversed the decision of the intermediate appellate court, holding that the property petitioner inherited from his grandmother was exempt from taxation under the Revenue Act of 1932.
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