Tyler v. United States

Background

These cases involve married couples and property titled as tenants by the entirety. In one case a Maryland man had conveyed stock to himself and his wife as tenants by the entirety. In two Pennsylvania cases the husband and wife held real estate or ground rents as tenants by the entirety, and the property had been bought with the husband’s separate funds. The Internal Revenue Service included these property interests in the decedent’s gross estate to compute a federal estate tax. Lower tribunals disagreed in different cases, producing conflicting judgments about whether the statutory inclusion was constitutional.

Reasoning

The Court asked whether including tenancy-by-entirety property in the gross estate was a constitutional exercise of Congress’s taxing power and whether it violated the Fifth Amendment’s due process protection. The Court explained that tenancy by the entirety treats spouses as a unit, but that death can create new and substantial rights for the survivor—exclusive possession and the power to dispose—which did not exist before. Because death produced these added rights, the tax operated on that event and its practical results. The Court therefore treated the tax as an indirect death duty, not an unapportioned direct tax, and found no arbitrary confiscation or deprivation of property without due process.

Real world impact

The decision allows the federal government to count such jointly held property when measuring estate taxes. It prevents a common form of lifetime transfer from escaping the estate tax and increases tax exposure for surviving spouses who receive full ownership at death.