Helvering v. Campbell
Headline: Court reverses lower tax rulings and says heirs’ tax basis for inherited securities is set by executor or trustee acquisition dates and death-date holding periods, changing how gains on inherited stock are calculated.
Holding:
- Sets heirs' tax basis based on executor/trustee acquisition or death-date values.
- Can lengthen holding period to qualify for long-term capital gains treatment.
- Makes executors’ and trustees’ records more important for heirs’ tax calculations.
Summary
Background
A father died and left parts of his estate in trusts for three children: a daughter who later became Marjorie K. Campbell, another daughter Dorothy K. G. Rogers, and a son Seymour H. Knox. Each beneficiary received portions of trust property at set ages. During the 1920s and 1930s they received stock and other securities from trustees and sold some of those holdings in 1933. Lower tribunals had ruled that the beneficiaries’ tax basis and holding periods should be measured from the date the trustees delivered the securities to the beneficiaries.
Reasoning
The Court addressed how to compute gains or losses when beneficiaries sell securities they got from a trust after a death. It held that for securities that belonged to the decedent, the relevant value is the value when executors delivered them to trustees; for securities bought by trustees, the trustees’ cost is the basis; and for securities bought by executors, the value when executors transferred them to trustees governs. The Court also said that shares coming from the decedent’s estate are treated as acquired at death for purposes of how long they were “held,” and that the usual “first-in-first-out” rule presumes estate shares are sold first. The Court reversed the lower decisions.
Real world impact
Heirs and beneficiaries will often compute gains or losses using earlier dates and values tied to the decedent’s death or the executor/trustee acquisitions, which can change taxable gain amounts and affect whether sales qualify as long-term. Executors’ and trustees’ records therefore become important for heirs’ tax calculations.
Dissents or concurrances
The Chief Justice and Justice Roberts disagreed and would have affirmed the lower court decisions for the reasons stated below.
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