source: Caselaw Access Project

author: Per Curiam. Justice White, Justice Stevens,

license: Public Domain

text:
    COLORADO v. NUNEZ
    No. 82-1845.
    Argued January 17, 1984
    Decided February 21, 1984

      Steven L. Bernard argued the cause for petitioner. With him on the brief was James F. Smith.

      Kenneth H. Stern argued the cause and filed a brief for respondent.

      Briefs of amici curiae urging reversal were filed for the United States by Solicitor General Lee, Assistant Attorney General Trott, Deputy Solicitor General Frey, and David A. Strauss; and for the Colorado District Attorneys Council by Brooke Wunnike.

        Burt Neubome and Charles Sims filed a brief for the American Civil Liberties Union as amicus curiae.

   Per Curiam.

The writ is dismissed as improvidently granted, it appearing that the judgment of the court below rested on independent and adequate state grounds.

Justice White,

with whom The Chief Justice and Justice O’Connor join,

concurring.

The Court today concludes that the Colorado Supreme Court relied on independent and adequate state grounds when it affirmed the trial court’s decision to suppress a quantity of heroin seized during a search of respondent Nunez’ house following the State’s refusal to disclose the identity of a confidential informant on which the Denver Police Department had relied to establish probable cause for the search. I write not to challenge the Court’s determination that the judgment under review rests on independent and adequate state grounds, but to make clear that neither the Federal Constitution nor any decision of this Court requires the result reached by the Colorado Supreme Court.

Before the commencement of his trial on a charge of possession of a controlled substance, Nunez filed a motion to suppress most of the evidence against him on the ground, among others, that the facially valid warrant authorizing the search of his home was not supported by probable cause. In a companion motion, Nunez sought to facilitate his challenge to the legality of the search and his defense on the merits by obtaining disclosure of the names, addresses, and telephone numbers of all informants who had provided evidence against him. The trial court held a hearing at which Nunez gave testimony at odds with the affidavit supporting the search warrant and his attorney gave contradictory signals concerning whether the conduct of the affiant or the informant was at issue. See App. 31-32, 34, 36, 38-39. The court concluded that Nunez had made a sufficient “initial showing that the informant will provide information essential to the merits of his suppression ruling.” People v. Bueno, 646 P. 2d 931, 935-936 (Colo. 1982). It also found that Nunez had shown a reasonable basis in fact to believe that the informant was a likely source of relevant and helpful evidence on the question of guilt or innocence. App. 92. When the State refused to comply with its order to disclose the informant’s identity, the trial court suppressed the evidence seized pursuant to the search warrant. Id., at 93.

The State took an interlocutory appeal to the Colorado Supreme Court, which affirmed the trial court’s judgment solely on the ground that disclosure of the informant’s identity was essential to Nunez’ motion to suppress. 658 P. 2d 879 (1983). The State argued strenuously that “an accused must question the conduct of the police in constructing the warrant before he may request the court to order the prosecution to reveal the informant’s identity.” App. 107. In its view, “a court, after a proper allegation by the accused that brings the affiant’s credibility into issue, may order disclosure of the informant’s identity,” but “[t]here must be an attack upon the affiant’s credibility before the informant can be disclosed.” Id., at 103 (emphasis in original).

Although the State cited two federal cases recognizing an informant’s privilege, its distinction between situations where the affiant’s credibility is attacked and those where only the informant’s credibility is questioned rested largely on state law. The Colorado Supreme Court responded in kind, concluding that the State’s contention misapprehended its holding in People v. Dailey, 639 P. 2d 1068 (1982):

“Dailey recognized that errors in an affidavit for a search warrant can result ‘from the informant’s perjury or reckless disregard for the truth, or from the negligence or good faith mistake of either the officer or the informant.’ 639 P. 2d at 1075. When, following a veracity hearing, the probability of one of those kinds of error has been found, the election of remedies or sanctions is left to the discretion of the district court. The necessary foundation for the court’s exercise of discretion in ordering disclosure is a showing of a reasonable basis in fact to question the accuracy of the informant’s recitals.” 658 P. 2d, at 881 (emphasis added).

This holding, I believe, confers on trial courts in Colorado discretion to do far more than the Federal Constitution minimally requires.

“[I]n the exercise of its power to formulate evidentiary rules for federal criminal cases,” this Court “has consistently declined to hold that an informer’s identity need always be disclosed in a federal criminal trial, let alone in a preliminary hearing to determine probable cause for an arrest or search.” McCray v. Illinois, 386 U. S. 300, 312 (1967). See Roviaro v. United States, 353 U. S. 53 (1957). Nothing in the Federal Constitution, we held in McCray, requires a State “to abolish the informer’s privilege from its law of evidence, and to . . . disclos[e] . . . the informer’s identity in every such preliminary hearing where it appears that the officers made the arrest or search in reliance upon facts supplied by an informer they had reason to trust.” 386 U. S., at 312.

We have, to be sure, recently concluded that the Fourth and Fourteenth Amendments entitle a defendant to a veracity hearing if he makes a substantial preliminary showing that an affiant knowingly and intentionally, or with reckless disregard for the truth, included in a warrant affidavit a false statement necessary to the finding of probable cause. Franks v. Delaware, 438 U. S. 154 (1978). But in so doing we emphasized that “[t]he deliberate falsity or reckless disregard whose impeachment is permitted today is only that of the affiant, not of any nongovernmental informant.” Id., at 171. The decision in Franks neither required nor contemplated routine disclosure of informants’ identities, and we took care to avoid deciding or predetermining “the difficult question whether a reviewing court must ever require the revelation of the identity of an informant once a substantial preliminary showing of falsity has been made.” Id., at 170.

In People v. Dailey, supra, the state-court decision on which the challenged judgment rests, the Colorado Supreme Court clearly recognized the limits of the rights conferred by the Fourth and Fourteenth Amendments. Id., at 1074. It concluded, however, that Franks established only the federal constitutional standard and held that the State Constitution entitles defendants to challenge the informant’s veracity and in appropriate circumstances to have his identity disclosed for that purpose. Although this case would be resolved differently under federal law, see McCray v. Illinois, supra, at 306-309,1 agree that the challenged judgment rests solely on state-law grounds and that this Court lacks jurisdiction to review it.

Justice Stevens,

concurring.

In view of the growing public interest in the magnitude of our workload, I have on occasion taken note of some of the ways in which the present Court makes use of its resources. Several years ago, I expressed concern about the purely advisory character of individual opinions dissenting from orders denying petitions for certiorari. See Singleton v. Commissioner, 439 U. S. 940, 944-945 (1978) (opinion of Stevens, J.). More recently I have noted that the Court is prone to grant certiorari in cases that do not merit our attention. See Watt v. Alaska, 451 U. S. 259, 273-276 (1981) (Stevens, J., concurring); see also Watt v. Western Nuclear, Inc., 462 U. S. 36, 72-73 (1983) (Stevens, J., dissenting). Last Term, in South Dakota v. Neville, 459 U. S. 553 (1983), and Michigan v. Long, 463 U. S. 1032 (1983), the Court decided to enlarge its power to review state-court decisions. I dissented from those novel assertions of appellate jurisdiction in part because I was concerned about the undesirability of the rendition of purely advisory opinions by this Court. See id., at 1065 (Stevens, J., dissenting); 459 U. S., at 566 (Stevens, J., dissenting); see also 463 U. S., at 1054 (Blackmun, J., concurring in part and in judgment in Michigan v. Long) (noting “an increased danger of advisory opinions in the Court’s new approach”).

Today Justice White “agree[s] that the challenged judgment rests solely on state-law grounds and that this Court lacks jurisdiction to review it.” Ante, at 327. He nevertheless provides us with an advisory opinion, in which The ChieF Justice and Justice O’Connor join, concerning the merits of the case. We of course have jurisdiction to determine our jurisdiction over this case, but once we agree that we lack jurisdiction, this case no more provides a vehicle for deciding the question upon which three Justices now volunteer an opinion than if the petition for a writ of certiorari had never been filed. I, of course, fully respect their right to their opinions concerning that question, just as I respect other scholars who disagree with the wisdom of the choice made in Hayburn’s Case, 2 Dall. 409 (1792). I merely note that today’s advisory opinion is consistent with the Court’s emerging tendency to enlarge its own involvement in litigation conducted by state courts. This tendency feeds on itself, for it can only encourage litigants — particularly institutional litigants — to file even more petitions for certiorari in the hope of obtaining, if not review and reversal, at least an opinion by a number of Supreme Court Justices in support of their position. In light of the increasing flood of certiorari petitions, today’s advisory opinion provides further support for concluding that this situation “will very likely progressively worsen.”

       See, e. g., Coleman, The Supreme Court of the United States: Managing its Caseload to Achieve its Constitutional Purposes, 52 Fordham L. Rev. 1 (1983); Note, Of High Designs: A Compendium of Proposals to Reduce the Workload of the Supreme Court, 97 Harv. L. Rev. 307 (1983).

       See generally Stevens, Some Thoughts on Judicial Restraint, 66 Judicature 177, 180 (1982).

       White, Challenges for the U. S. Supreme Court and the Bar: Contemporary Reflections, 51 Antitrust L. J. 275, 280 (1982).


author: Chief Justice Burger Justice Powell,

text:
    DICKMAN et al. v. COMMISSIONER OF INTERNAL REVENUE
    No. 82-1041.
    Argued November 1, 1983
    Decided February 22, 1984

      Burger, C. J., delivered the opinion of the Court, in which Brennan, White, Marshall, Blackmun, Stevens, and O’Connor, JJ., joined. Powell, J., filed a dissenting opinion, in which Rehnquist, J., joined, post, p. 345.

      Frank P. Riggs argued the cause for petitioners. With him on the briefs were Guy S. Emerich, Vester T. Hughes, Jr., M. David Bryant, Jr., and Kathryn G. Henkel.

      Deputy Solicitor General Wallace argued the cause for respondent. With him on the brief were Solicitor General Lee, Assistant Attorney General Archer, Harriet S. Shapiro, Michael L. Paup, Jonathan S. Cohen, and Farley P. Katz

      Briefs of amici curiae urging reversal were filed for D’Ancona & Pflaum by Byron S. Miller and Alan L. Reinstein; and for Jones, Day, Reavis & Pogue by Erwin N. Griswold.

   Chief Justice Burger

delivered the opinion of the Court.

We granted certiorari to resolve a conflict among the Circuits as to whether intrafamily, interest-free demand loans result in taxable gifts of the value of the use of the money lent.

I

A

Paul and Esther Dickman were husband and wife; Lyle Dickman was their son. Paul, Esther, Lyle, and Lyle’s wife and children were the owners of Artesian Farm, Inc. (Arte-sian), a closely held Florida corporation. Between 1971 and 1976, Paul and Esther loaned substantial sums to Lyle and Artesian. Over this 5-year interval, the outstanding balances for the loans from Paul to Lyle varied from $144,715 to $342,915; with regard to Paul’s loans to Artesian, the outstanding balances ranged from $207,875 to $669,733. During the same period, Esther loaned $226,130 to Lyle and $68,651 to Artesian. With two exceptions, all the loans were evidenced by demand notes bearing no interest.

Paul Dickman died in 1976, leaving a gross estate for federal estate tax purposes of $3,464,011. The Commissioner of Internal Revenue audited Paul Dickman’s estate and determined that the loans to Lyle and Artesian resulted in taxable gifts to the extent of the value of the use of the loaned funds. The Commissioner then issued statutory notices of gift tax deficiency both to Paul Dickman’s estate and to Esther Dickman.

Esther Dickman and the estate, petitioners here, sought redetermination of the deficiencies in the Tax Court. Reaffirming its earlier decision in Crown v. Commissioner, 67 T. C. 1060 (1977), aff’d, 685 F. 2d 234 (CA7 1978), the Tax Court concluded that intrafamily, interest-free demand loans do not result in taxable gifts. 41 TCM 620, 623 (1980), ¶80,575 P-H Memo TC, at 2428. Because the Tax Court determined that all the loans to Lyle and Artesian were made payable on demand, it held that the loans were not subject to the federal gift tax. Id., at 624, ¶80,575 P-H Memo TC, at 2428.

B

The United States Court of Appeals for the Eleventh Circuit reversed, holding that gratuitous interest-free demand loans give rise to gift tax liability. 690 F. 2d 812, 819 (1982). Reviewing the language and history of the gift tax provisions of the Internal Revenue Code of 1954 (Code), 26 U. S, C. §2501 et seq., the Court of Appeals concluded that Congress intended the gift tax to have the broadest and most comprehensive coverage possible. The court reasoned that the making of an interest-free demand loan constitutes a “transfer of property by gift” within the meaning of 26 U. S. C. § 2501(a)(1), and accordingly is subject to the gift tax provisions of the Code. In so holding, the Court of Appeals squarely rejected the contrary position adopted by the United States Court of Appeals for the Seventh Circuit in Crown v. Commissioner, 585 F. 2d 234 (1978). We granted certiorari to resolve this conflict, 459 U. S. 1199 (1983); we affirm.

II

A

The statutory language of the federal gift tax provisions purports to reach any gratuitous transfer of any interest in property. Section 2501(a)(1) of the Code imposes a tax upon “the transfer of property by gif t. ” Section 2511 (a) highlights the broad sweep of the tax imposed by §2501, providing in pertinent part:

“Subject to the limitations contained in this chapter, the tax imposed by section 2501 shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, tangible or intangible . . .

The language of these statutes is clear and admits of but one reasonable interpretation: transfers of property by gift, by whatever means effected, are subject to the federal gift tax.

The Committee Reports accompanying the Revenue Act of 1932, ch. 209, 47 Stat. 169, which established the present scheme of federal gift taxation, make plain that Congress intended the gift tax statute to reach all gratuitous transfers of any valuable interest in property. Among other things, these Reports state:

“The terms ‘property,’ ‘transfer,’ ‘gift,’ and ‘indirectly’ are used in the broadest and most comprehensive sense; the term ‘property’ reaching every species of right or interest protected by law and having an exchangeable value.
“The words ‘transfer ... by gift’ and ‘whether . . . direct or indirect’ are designed to cover and comprehend all transactions . . . whereby, and to the extent. . . that, property or a property right is donatively passed to or conferred upon another, regardless of the means or the device employed in its accomplishment.” H. R. Rep. No. 708, 72d Cong., 1st Sess., 27-28 (1932); S. Rep. No. 665, 72d Cong., 1st Sess., 39 (1932).

The plain language of the statute reflects this legislative history; the gift tax was designed to encompass all transfers of property and property rights having significant value.

On several prior occasions, this Court has acknowledged the expansive sweep of the gift tax provisions. In Commissioner v. Wemyss, 324 U. S. 303, 306 (1945), the Court explained that

“Congress intended to use the term ‘gifts’ in its broadest and most comprehensive sense ... [in order] to hit all the protean arrangements which the wit of man can devise that are not business transactions within the meaning of ordinary speech.”

The Court has also noted that the language of the gift tax statute “is broad enough to include property, however conceptual or contingent,” Smith v. Shaughnessy, 318 U. S. 176, 180 (1943), so as “to reach every kind and type of transfer by gift,” Robinette v. Helvering, 318 U. S. 184, 187 (1943). Thus, the decisions of this Court reinforce the view that the gift tax should be applied broadly to effectuate the clear intent of Congress.

B

In asserting that interest-free demand loans give rise to taxable gifts, the Commissioner does not seek to impose the gift tax upon the principal amount of the loan, but only upon the reasonable value of the use of the money lent. The taxable gift that assertedly results from an interest-free demand loan is the value of receiving and using the money without incurring a corresponding obligation to pay interest along with the loan’s repayment. Is such a gratuitous transfer of the right to use money a “transfer of property” within the intendment of § 2501(a)(1)?

We have little difficulty accepting the theory that the use of valuable property — in this case money — is itself a legally protectible property interest. Of the aggregate rights associated with any property interest, the right of use of property is perhaps of the highest order. One court put it succinctly:

“ ‘Property’ is more than just the physical thing — the land, the bricks, the mortar — it is also the sum of all the rights and powers incident to ownership of the physical thing. It is the tangible and the intangible. Property is composed of constituent elements and of these elements the right to use the physical thing to the exclusion of others is the most essential and beneficial. Without this right all other elements would be of little value . . . .” Passailaigue v. United States, 224 F. Supp. 682, 686 (MD Ga. 1963) (emphasis in original).

What was transferred here was the use of a substantial amount of cash for an indefinite period of time. An analogous interest in real property, the use under a tenancy at will, has long been recognized as a property right. E. g., Restatement (Second) of Property § 1.6 (1977); 3 G. Thompson, Commentaries on the Modem Law of Real Property §1020 (J. Grimes ed. 1980). For example, a parent who grants to a child the rent-free, indefinite use of commercial property having a reasonable rental value of $8,000 a month has clearly transferred a valuable property right. The transfer of $100,000 in cash, interest-free and repayable on demand, is similarly a grant of the use of valuable property. Its uncertain tenure may reduce its value, but it does not undermine its status as property. In either instance, when the property owner transfers to another the right to use the object, an identifiable property interest has clearly changed hands.

The right to the use of $100,000 without charge is a valuable interest in the money lent, as much so as the rent-free use of property consisting of land and buildings. In either case, there is a measurable economic value associated with the use of the property transferred. The value of the use of money is found in what it can produce; the measure of that value is interest — “rent” for the use of the funds. We can assume that an interest-free loan for a fixed period, especially for a prolonged period, may have greater value than such a loan made payable on demand, but it would defy common human experience to say that an intrafamily loan payable on demand is not subject to accommodation; its value may be reduced by virtue of its demand status, but that value is surely not eliminated.

This Court has noted in another context that the making of an interest-free loan results in the transfer of a valuable economic right:

“It is virtually self-evident that extending interest-free credit for a period of time is equivalent to giving a discount equal to the value of the use of the purchase price for that period of time.” Catalano, Inc. v. Target Sales, Inc., 446 U. S. 643, 648 (1980) (per curiam).

Against this background, the gift tax statutes clearly encompass within their broad sweep the gratuitous transfer of the use of money. Just as a tenancy at will in real property is an estate or interest in land, so also is the right to use money a cognizable interest in personal property. The right to use money is plainly a valuable right, readily measurable by reference to current interest rates; the vast banking industry is positive evidence of this reality. Accordingly, we conclude that the interest-free loan of funds is a “transfer of property by gift” within the contemplation of the federal gift tax statutes.

C

Our holding that an interest-free demand loan results in a taxable gift of the use of the transferred funds is fully consistent with one of the major purposes of the federal gift tax statute: protection of the estate tax and the income tax. The legislative history of the gift tax provisions reflects that Congress enacted a tax on gifts to supplement existing estate and income tax laws. H. R. Rep. No. 708, at 28; S. Rep. No. 665, at 40; see also 65 Cong. Rec. 3119-3120, 8095-8096 (1924); Harriss, Legislative History of Federal Gift Taxation, 18 Taxes 531, 536 (1940). Failure to impose the gift tax on interest-free loans would seriously undermine this estate and income tax protection goal.

A substantial no-interest loan from parent to child creates significant tax benefits for the lender quite apart from the economic advantages to the borrower. This is especially so when an individual in a high income tax bracket transfers income-producing property to an individual in a lower income tax bracket, thereby reducing the taxable income of the high-bracket taxpayer at the expense, ultimately, of all other taxpayers and the Government. Subjecting interest-free loans to gift taxation minimizes the potential loss to the federal fisc generated by the use of such loans as an income tax avoidance mechanism for the transferor. Gift taxation of interest-free loans also effectuates Congress’ desire to supplement the estate tax provisions. A gratuitous transfer of income-producing property may enable the transferor to avoid the future estate tax liability that would result if the earnings generated by the property — rent, interest, or dividends — became a part of the transferor’s estate. Imposing the gift tax upon interest-free loans bolsters the estate tax by preventing the diminution of the transferor’s estate in this fashion.

Ill

Petitioners contend that administrative and equitable considerations require a holding that no gift tax consequences result from the making of interest-free demand loans. In support of this position, petitioners advance several policy arguments; none withstands studied analysis.

A

Petitioners first advance an argument accepted by the Tax Court in Crown v. Commissioner:

“[O]ur income tax system does not recognize unrealized earnings or accumulations of wealth and no taxpayer is under any obligation to continuously invest his money for a profit. The opportunity cost of either letting one’s money remain idle or suffering a loss from an unwise investment is not taxable merely because a profit could have been made from a wise investment.” 67 T. C., at 1063-1064.

Thus, petitioners argue, an interest-free loan should not be made subject to the gift tax simply because of the possibility that the money lent might have enhanced the transferor’s taxable income or gross estate had the loan never been made.

This contention misses the mark. It is certainly true that no law requires an individual to invest his property in an income-producing fashion, just as no law demands that a transferor charge interest or rent for the use of money or other property. An individual may, without incurring the gift tax, squander money, conceal it under a mattress, or otherwise waste its use value by failing to invest it. Such acts of consumption have nothing to do with lending money at no interest. The gift tax is an excise tax on transfers of property; allowing dollars to lie idle involves no transfer. If the taxpayer chooses not to waste the use value of money, however, but instead transfers the use to someone else, a taxable event has occurred. That the transferor himself could have consumed or wasted the use value of the money without incurring the gift tax does not change this result. Contrary to petitioners’ assertion, a holding in favor of the taxability of interest-free loans does not impose upon the transferor a duty profitably to invest; rather, it merely recognizes that certain tax consequences inevitably flow from a decision to make a “transfer of property by gift.” 26 U. S. C. § 2501(a)(1).

B

Petitioners next attack the breadth of the Commissioner’s view that interest-free demand loans give rise to taxable gifts. Carried to its logical extreme, petitioners argue, the Commissioner’s rationale would elevate to the status of taxable gifts such commonplace transactions as a loan of the proverbial cup of sugar to a neighbor or a loan of lunch money to a colleague. Petitioners urge that such a result is an untenable intrusion by the Government into cherished zones of privacy, particularly where intrafamily transactions are involved.

Our laws require parents to provide their minor offspring with the necessities and conveniences of life; questions under the tax law often arise, however, when parents provide more than the necessities, and in quantities significant enough to attract the attention of the taxing authorities. Generally, the legal obligation of support terminates when the offspring reach majority. Nonetheless, it is not uncommon for parents to provide their adult children with such things as the use of cars or vacation cottages, simply on the basis of the family relationship. We assume that the focus of the Internal Revenue Service is not on such traditional familial matters. When the Government levies a gift tax on routine neighborly or familial gifts, there will be time enough to deal with such a case.

Moreover, the tax law provides liberally for gifts to both family members and others; within the limits of the prescribed statutory exemptions, even substantial gifts may be entirely tax free. First, under § 2503(e) of the Code, 26 U. S. C. § 2503(e) (1982 ed.), amounts paid on behalf of an individual for tuition at a qualified educational institution or for medical care are not considered “transfer^] of property by gift” for purposes of the gift tax statutes. More significantly, § 2503(b) of the Code provides an annual exclusion from the computation of taxable gifts of $10,000 per year, per donee; this provision allows a taxpayer to give up to $10,000 annually to each of any number of persons, without incurring any gift tax liability. The “split gift” provision of Code § 2513(a), which effectively enables a husband and wife to give each object of their bounty $20,000 per year without liability for gift tax, further enhances the ability to transfer significant amounts of money and property free of gift tax consequences. Finally, should a taxpayer make gifts during one year that exceed the § 2503(b) annual gift tax exclusion, no gift tax liability will result until the unified credit of Code §2505 has been exhausted. These generous exclusions, exceptions, and credits clearly absorb the sorts of de minimis gifts petitioners envision and render illusory the administrative problems that petitioners perceive in their “parade of horribles.”

C

Finally, petitioners urge that the Commissioner should not be allowed to assert the gift taxability of interest-free demand loans because such a position represents a departure from prior Internal Revenue Service practice. This contention rests on the fact that, prior to 1966, the Commissioner had not construed the gift tax statutes and regulations to authorize the levying of a gift tax on the value of the use of money or property. See Crown v. Commissioner, 585 F. 2d, at 241; Johnson v. United States, 254 F. Supp. 73 (ND Tex. 1966). From this they argue that it is manifestly unfair to permit the Commissioner to impose the gift tax on the transactions challenged here.

Even accepting the notion that the Commissioner’s present position represents a departure from prior administrative practice, which is by no means certain, it is well established that the Commissioner may change an earlier interpretation of the law, even if such a change is made retroactive in effect. E. g., Dixon v. United States, 381 U. S. 68, 72-75 (1965); Automobile Club of Michigan v. Commissioner, 353 U. S. 180, 183-184 (1957). This rule applies even though a taxpayer may have relied to his detriment upon the Commissioner’s prior position. Dixon v. United States, supra, at 73. The Commissioner is under no duty to assert a particular position as soon as the statute authorizes such an interpretation. See also Bob Jones University v. United States, 461 U. S. 574 (1983). Accordingly, petitioners’ “taxpayer reliance” argument is unavailing.

I — < <J

As we have noted, supra, at 341-342, Congress has provided generous exclusions and credits designed to reduce the gift tax liability of the great majority of taxpayers. Congress clearly has the power to provide a similar exclusion for the gifts that result from interest-free demand loans. Any change in the gift tax consequences of such loans, however, is a legislative responsibility, not a judicial one. Until such a change occurs, we are bound to effectuate Congress’ intent to protect the estate and income tax systems with a broad and comprehensive tax upon all “transferís] of property by gift.” Cf. Diedrich v. Commissioner, 457 U. S. 191, 199 (1982).

We hold, therefore, that the interest-free demand loans shown by this record resulted in taxable gifts of the reasonable value of the use of the money lent. Accordingly, the judgment of the United States. Court of Appeals for the Eleventh Circuit is

Affirmed.

Justice Powell,

with whom Justice Rehnquist joins, dissenting.

The Court’s decision today rejects a longstanding principle of taxation, and creates in its stead a new and anomalous rule of law. Such action is best left to Congress.

H-H

The Internal Revenue Service’s attempts to assess gift taxes on interest-free demand loans is a relatively new development in the field of tax law. The gift tax provisions of the Internal Revenue Code were enacted in 1932. For 34 years — a third of a century — the IRS enforced these provisions without any intimation that an interest-free loan would have gift tax consequences. The IRS first pursued its present position in 1966 in Johnson v. United States, 254 F. Supp. 73 (ND Tex.). The District Court in Johnson rejected the argument that taxpayers who have made large interest-free loans also have made gifts equal to the value of the use of the money lent. Id., at 77. The Commissioner did not appeal the Johnson decision. Indeed, he waited seven years to announce his nonacquiescence in the outcome of that case. See Rev. Rui. 73-61, 1973-1 Cum. Bull. 408.

In 1977, the Commissioner first raised the issue before the Tax Court in Crown v. Commissioner, 67 T. C. 1060. Relying on the Johnson court’s holding and the relative novelty of the Commissioner’s position, the Tax Court refused to assess gift taxes on interest that could have been earned on borrowed money. Id., at 1063. The Court of Appeals for the Seventh Circuit affirmed the decision. 585 F. 2d 234 (1978). The Commissioner did not seek review of the Crown decision in this Court. He did announce promptly the Service’s nonacquiescence.

The Tax Court reiterated its position in 1980 in the case sub judice. Not until 1982, when the Court of Appeals for the Eleventh Circuit reversed the Tax Court in this case, had any court accepted the Commissioner’s belated interpretation of § 2501(a)(1). During the 18-year period that the Commissioner has pursued this position, Congress has not attempted to settle the controversy through legislation.

Gift taxation, like most forms of federal taxation, is a complex area, made all the more complex by Congress’ frequent amendment of the underlying statute. Because the tax system is basically one of self-assessment, complexities and uncertainties in the gift taxation area put a heavy burden on taxpayers who conscientiously try to adhere to the dictates of the Tax Code. Courts should make a conscious effort to minimize this burden by refraining from any action that would destabilize an understanding of the tax laws long accepted both by the IRS and taxpayers.

As the above chronology illustrates, until 1982, a longstanding principle of gift tax law, supported by IRS inaction and judicial opinion, was that interest-free demand loans had no gift tax significance. Relying on this principle, taxpayers made loans, tax commentators suggested making loans, and tax counselors used loans as integral parts of complex taxation minimization plans. In my view, petitioners’ reliance also was justified.

Despite this justified reliance, the Court today subjects potentially all interest-free loans to gift taxation. The adverse effects of the Court’s holding could be substantial. Many taxpayers may have used interest-free loans as an important part of a comprehensive plan to sell their business to a son, to send a daughter to medical school, or to provide for the support of an elderly parent. Such plans are not revamped easily. In addition, the recipients of the loans may not be in a position to help the taxpayers/lenders avoid future gift tax liability by making immediate repayment. The borrowed funds may have been invested in fixed assets or the borrowers simply may have spent the money. The result, in any event, is the assessment of gift taxes that might have been avoided lawfully if the taxpayer could have anticipated the Court’s holding in this case. In light of the Commissioner’s decision over a 34-year span to attach no significance to such loans, and his lack of success over the past 18 years in attempting to tax such loans, the Court of Appeals’ decision is so fundamentally unfair that this Court should be unwilling to add its imprimatur.

II

There can be little doubt that the courts are not the best forum for consideration of the ramifications of the gift taxation of interest-free loans. Congress is the body that is best equipped to determine the rules that should govern. United States v. Byrum, 408 U. S. 125, 135 (1972); Commisioner v. Brown, 380 U. S. 563, 579 (1965). The Court implies that Congress has considered this issue and decided that interest-free loans involve a “transfer” of the use-value of the money. The Court bases its position in large part on a “plain language” argument. It states: “The language of [§§ 2501(a) (1) and 2511(a)] is clear and admits of but one reasonable interpretation . . . .” Ante, at 334. The Court also states that the Committee Reports in 1932 “make plain” that Congress intended to tax all “transfers” such as those involved in this case.

This is a singularly curious argument. In effect, the Court is saying that for 34 years (1932 until 1966) — despite the plain language of the statute and clear intention of Congress — the Commissioner slept on the rights of the United States. Moreover, in view of his relative inactivity until this suit was instituted in 1980 and pursued on appeal, it hardly can be said that the Commissioner was diligent if the Court today is correct as to what Congress “plainly” instructed him to do. Interestingly, until 1982 all three of the courts that had considered these statutes had found their language far from plain. In light of the apparent difficulty that the Commissioner and the IRS have had in discerning legislative intent from the statutory provisions at issue here, the preferable course would be to await a clear directive from Congress. Nevertheless, the Court, rather than deferring to a legislative resolution of the serious problems associated with this field, adopts an open-ended interpretation of § 2501(a) not even advanced until 1966 and not accepted by any court until 1982.

The most troublesome issue generated by the Court’s opinion is the scope of its new reading of the statute. The Court does not limit its holding to interest-free loans of money. The Court states: “We have little difficulty accepting the theory that the use of valuable property ... is itself a legally protectible property interest.” Ante, at 336. Under this theory, potential tax liability may arise in a wide range of situations involving the unrecompensed use of property. Examples could include the rent-free use of a home by a child over the age of minority who lives with his parents, or by a parent over the age of self-support who lives with her child. Taken to its logical extreme, this theory would make the loan of a car for a brief period a potentially taxable event.

The possibility that the generous use by friends or family of property such as homes and even spare bedrooms could result in the imposition of gift tax liability highlights the valuation problems that certainly will result from the Court’s holding. It is often difficult to place a value on outright ownership of items of real and personal property. Those difficulties multiply when the interest to be valued is the use of the property for varying lengths of time. Even in the simplest case — where the property that is borrowed is cash— valuation problems arise. In the three decided cases in which the Commissioner belatedly pursued the theory that the Court adopts today, the Service used three different methods for determining the interest rate that should be used to establish the use-value of the borrowed money. Thus, it is clear that the Court’s decision will generate substantial valuation problems.

The Court downplays the significance of its decision by “assuming] that the focus of the Internal Revenue Service is not on such traditional familial matters [as the use of cars or homes].” Ante, at 341. The Court also concludes that the Tax Code’s “generous exclusions, exceptions, and credits clearly absorb the sorts of de minimis gifts petitioners envision and render illusory the administrative problems that petitioners perceive.” Ante, at 342. In effect, the Court has chosen to turn its back on the ramifications of its decision.

The Court, aware of the potential for abuse of its new interpretation, “assume[s]” that the Internal Revenue Service will exercise the power conferred on it in a reasonable way. Ante, at 341. This assumption is not likely to afford much comfort to taxpayers and the lawyers and accountants who advise them. The Commissioner, acting with utmost goodwill, is confronted with a dilemma. This Court today holds that the plain language of the statute mandates, and that Congress intended, the “gift tax statute to reach all gratuitous transfers of any valuable interest in property.” Ante, at 334 (emphasis supplied). No discretion is given the Commissioner and the IRS to read “all” and “any” as meaning only such transfers and only such valuable interests in property that it seems reasonable to tax. The Court identifies no statutory basis for such discretion, and even if the Court itself undertook to confer it I am not aware that we have ever before “assumed” that tax laws would be enforced — not according to their letter — but reasonably.

l-H I — I

The Court’s answer to these concerns is that the exceptions and exemptions in the Tax Code will render most administrative problems “illusory.” Ante, at 342. Although the $10,000 annual per donee exclusion will shield many taxpayers from having to pay gift taxes on intrafamily loans, the taxpayer cannot know whether he has exceeded the annual limit until he has assigned a value to every “transfer” that falls within the Court’s definition. In particular, a taxpayer who has made outright gifts during the year, approaching in dollar value the amount of the applicable annual exclusion, must be concerned with the value of intrafamily loans. Once he has exceeded the exclusion, he must file a gift tax return, listing and describing each gift. IRC §6019(1) (1982 ed.); Treas. Reg. §25.6019-4.

Nor does it suffice to say that most taxpayers will be protected from payment of gift taxes by the Tax Code’s “lifetime exemption.” Regardless of the availability of an offsetting credit, all taxpayers who exceed the annual per donee exclusion must go through the uncertain process of valuing intrafamily loans and filing a gift tax return. Moreover, a taxpayer’s reduction of the unified credit lessens the amount of credit that will be available to offset estate taxes at the time of his death. In short, the net result of the Court’s decision will be to create potential tax liability for many taxpayers who have never been subject to it before, and create legal, tax accounting, and return filing nightmares for many others.

The Court also fails to discuss the anomalies that today’s decision will create in the tax laws. For instance, the Tax Code expressly provides that gifts are excluded from the gross income of the recipients for income tax purposes. IRC § 102. Under the Court’s holding, a gift will be imputed with respect to each interest-free loan, with potential gift tax consequences for the lender. In many, perhaps most, cases, however, the borrowed funds will not generate specifically identifiable income. As a result, the lender may have gift tax liability, but the borrower is unable to exclude a commensurate amount from his income under § 102. Also, under the Court’s reasoning, an interest-free loan to a charity entails a gift equal to the use-value of the funds loaned. Ordinarily, a gift to a charity is not subject to gift taxes and is deductible from a taxpayer’s gross income. IRC §§170 and 2522. Under the provisions of the Tax Code and regulations, however, an interest-free loan does not generate an income tax deduction and is subject to gift taxes. IRC § 2522(c); Treas. Reg. § 1.170A-7(d). Thus, an outright gift to a charity would provide an income tax deduction and would not be subject to gift tax, while a no-interest loan of the same amount would generate no income tax benefits and might generate gift tax liability.

None of the problems and anomalies I have outlined is insurmountable. They do involve, however, delicate issues of policy that should be addressed in the legislative forum. Instead of recognizing the longstanding practice of attaching no gift tax consequences to interest-free loans of money and property, and leaving these difficult issues to the body responsible for legislating tax policy, the Court now allows the Commissioner to decide these questions without guidance. That course is ill-advised and inequitable.

I dissent.

       One exception was a loan made to Lyle on “open account” and payable on demand; the parties have agreed that the gift tax consequences of this “open account” loan are identical to those of the loans evidenced by the demand notes. 41 TCM 620, 623, n. 4 (1980), ¶80,575 P-H Memo TC, at 2427, n. 4. The other exception was a loan made to Artesian and memorialized by a no-interest note having a term of 10 years, the characterization of which has been a matter of dispute. Although the Tax Court held that this loan to Artesian was in substance a demand loan, id., at 624, ¶80,575 P-H Memo TC, at 2428, the Court of Appeals declined to reach the issue, suggesting that the Tax Court consider the valuation consequences of the loan’s characterization on remand. 690 F. 2d 812, 814, n. 3 (CA11 1982). For present purposes, we shall refer to all the loans from Paul and Esther Dickman to Lyle and Artesian as demand loans.

       In valuing the gifts, the Commissioner multiplied the loan balances outstanding at the end of each taxable quarter by interest rates ranging from six percent to nine percent per annum. These interest rates were taken from § 6621 of the Internal Revenue Code of 1954, 26 U. S. C. § 6621, made applicable by Code § 6601 to underpayments of tax.

       The Commissioner asserted a $42,212.91 deficiency against Paul Dick-man’s estate and a $41,109.78 deficiency against Esther Dickman.

       The comprehensive scope of the gift tax, reflected by its statutory language and legislative history, is analogous to that of § 61 of the Code, 26 U. S. C. § 61, which defines gross income as “all income from whatever source derived.” Section 61 has long been interpreted to include all forms of income except those specifically excluded from its reach. See, e. g., Commissioner v. Glenshaw Glass Co., 348 U. S. 426 (1955). Similarly, the gift tax applies to any “transfer of property by gift,” Code § 2501(a)(1), “[s]ubjeet to the limitations contained in this chapter,” Code § 2511(a). Accordingly, absent an express exclusion from its provisions, any transfer meeting the statutory requirements must be held subject to the gift tax.

       The Commissioner’s tax treatment of interest-free demand loans may perhaps be best understood as a two-step approach to such transactions. Under this theory, such a loan has two basic economic components: an arm’s-length loan from the lender to the borrower, on which the borrower pays the lender a fair rate of interest, followed by a gift from the lender to the borrower in the amount of that interest. See Crown v. Commissioner, 585 F. 2d 234, 240 (CA7 1978).

       See also Barker v. Publishers’ Paper Co., 78 N. H. 571, 573, 103 A. 757, 758 (1918) (“In its final analysis, the property in any thing consists in the use”); 1 G. Thompson, Commentaries on the Modern Law of Real Property § 5, p. 31 (J. Grimes ed. 1980) (“The use of a given object is the most essential and beneficial quality or attribute of property”).

       Petitioners argue that no gift tax consequences should attach to interest-free demand loans because no “transfer” of property occurs at the time the loan is made. Petitioners urge that the term “transfer” “connotes a discrete, affirmative act whereby a person conveys something to another person, not a continuous series of minute failures to require return of something loaned.” Brief for Petitioners 22. We decline to adopt that construction of the statute.
      In order to make a taxable gift, a transferor must relinquish dominion and control over the transferred property. Treas. Reg. § 25.2511 — 2(b), 26 CFR § 25.2511-2(b) (1983). At the moment an interest-free demand loan is made, the transferor has not given up all dominion and control; he could terminate the transferee’s use of the funds by calling the loan. As time passes without a demand for repayment, however, the transferor allows the use of the principal to pass to the transferee, and the gift becomes complete. See ibid.; Rev. Rul. 69-347, 1969-1 Cum. Bull. 227; Rev. Rul. 69-346, 1969-1 Cum. Bull. 227. As the Court of Appeals realized, 690 F. 2d, at 819, the fact that the transferor’s dominion and control over the use of the principal are relinquished over time will become especially relevant in connection with the valuation of the gifts that result from such loans; it does not, however, alter the fact that the lender has made a gratuitous transfer of property subject to the federal gift tax.

       During the taxable periods involved in this case, Code § 2503(b) provided an annual exclusion of $3,000 per year, per donee. Section 441(a) of the Economic Recovery Tax Act of 1981, Pub. L. 97-34, 95 Stat. 319, amended § 2503(b) by raising the annual exclusion to $10,000 for transfers made after December 31, 1981.

       Under Code § 2513(a), 26 U. S. C. § 2513(a), a husband and wife may elect to treat a gift in fact made by one spouse as having been made one-half by each spouse. Simply put, the net effect of this “gift-splitting” provision is to double the gift tax exclusions and exemptions applicable to each gift by the donor. In some states, of course, community property laws achieve the same “gift-splitting” result. See generally C. Lowndes, R. Kramer, & J. McCord, Federal Estate and Gift Taxes §35.1 (3d ed. 1974).

       Under the gift tax system in effect during the taxable periods involved in this case, former Code § 2521 provided a lifetime gift tax exemption of $30,000 for each taxpayer. Section 2001(b)(3) of the Tax Reform Act of 1976, Pub. L. 94-455, 90 Stat. 1849, replaced the lifetime exemption with a unified credit. As modified by the Economic Recovery Tax Act of 1981, supra, the unified credit provided by Code § 2505 is scheduled to increase each year until 1987; at that time, the credit will total $192,800, the equivalent of a lifetime exemption of $600,000 per taxpayer. See Code § 2505(b), 26 U. S. C. § 2505(b) (1982 ed.).

       The Treasury Regulations implementing the gift tax provisions have always reflected the broad scope of the statutory language. See Treas. Regs. 79, Art. 2 (1933); Treas. Regs. 79, Art. 2 (1936); Treas. Regs. 108, § 86.2(a) (1943). The regulation presently in force is virtually identical to those in effect during the preceding five decades; it provides:
      “The gift tax also applies to gifts indirectly made. Thus, all transactions whereby property or property rights or interests are gratuitously passed or conferred upon another, regardless of the means or device employed, constitute gifts subject to tax.” Treas. Reg. § 25.2511 — 1(c), 26 CFR § 25.2511-l(c) (1983).
      The longstanding interpretation of the statute embodied in these regulations indicates that the Commissioner’s allegedly novel assertion in 1966 regarding the gift taxability of interest-free demand loans was not without a reasonable and well-established foundation.

       Indeed, the explanation for the dearth of pre-1966 cases presenting this precise issue is probably economic; the low interest rates that prevailed until recent years diminished the attractiveness of the interest-free demand loan as a tax-planning device and reduced the likelihood that the value of such loans would exceed the annual gift tax exclusion.

       Petitioners’ detrimental reliance argument must fail for an additional reason. The interest-free demand loans challenged by the Commissioner in this case were made between 1971 and 1976. The Commissioner first litigated the question of the gift taxability of such loans in Johnson v. United States, 254 F. Supp. 73 (ND Tex. 1966). Six years later, in Rev. Rui. 78-61, 1973-1 Cum. Bull. 408, the Commissioner formally announced the position that interest-free demand loans give rise to taxable gifts. Because approximately half the loans in this case were made after the Commissioner had issued Rev. Rui. 73-61, petitioners are hardly in a position to argue that they relied to their detriment on a different interpretation of the gift tax statute.

       In determining the value of the gifts made by Paul and Esther Dickman to Lyle Dickman and Artesian, the Commissioner applied to the loan balances outstanding during each taxable quarter certain interest rates derived from § 6621 of the Code, 26 U. S. C. § 6621. See n. 2, supra. The Court of Appeals declined to address the question, but remanded to the Tax Court for consideration of the method by which the gifts associated with interest-free demand loans should be valued. 690 F. 2d, at 820, and n. 11. The valuation issue is therefore not presented on the record before us. We note, however, that to support a gift tax on the transfer of the use of $100,000 for one year, the Commissioner need not establish that the funds lent did in fact produce a particular amount of revenue; it is sufficient for the Commissioner to establish that a certain yield could readily be secured and that the reasonable value of the use of the funds can be reliably ascertained.

       In United States v. Byrum, 408 U. S. 125 (1972), the Court stated:
      “Courts properly have been reluctant to depart from an interpretation of tax law which has been generally accepted when the departure could have potentially far-reaching consequences. When a principle of taxation requires re-examination, Congress is better equipped than a court to define precisely the type of conduct which results in tax consequences.” Id., at 135.

       See Revenue Act of 1932, ch. 209, 47 Stat. 169. The provisions of the gift tax code at issue in this case, 26 U. S. C. §§ 2501(a)(1) and 2511(a), have remained virtually unchanged since its original enactment in 1932. Section 501 of the 1932 Act provided:
      “(a) For the calendar year 1932 and each calendar year thereafter a tax, computed as provided in section 502, shall be imposed upon the transfer during such calendar year by any individual, resident or nonresident, of property by gift.
      “(b) The tax shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, tangible or intangible . . . .”

       The Court purports to find a “reasonable and well-established foundation” for that position in Treas. Reg. §25.2511-l(c). Ante, at 343, n. 11. The Court relies on the term “gift indirectly made” as contemplating an interest-free loan. The flaw in this reliance is that the regulations explicitly express a contrary intent: “A gift is incomplete in every instance in which a donor reserves the power to revest the beneficial title to the property in himself.” Treas. Reg. § 25.2511 — 2(c) (emphasis added). The language in both sections originated in the 1933 regulations. See Treas. Reg. 79, Arts. 2 and 3 (1933).

         The Commissioner has met with an equal'lack of success in his attempts to impute interest on interest-free loans and include it in the gross income of the borrower. Each of the seven Federal Courts of Appeals that has considered the question has refused to attach federal income tax consequences to interest-free loans in the absence of congressional action on the subject. See Hardee v. United States, 708 F. 2d 661 (CA Fed. 1983); Parks v. Commissioner, 686 F. 2d 408 (CA6 1982); Baker v. Commissioner, 677 F. 2d 11 (CA2 1982); Commissioner v. Greenspun, 670 F. 2d 123 (CA9 1982); Beaton v. Commissioner, 664 F. 2d 315 (CA1 1981); Martin v. Commissioner, 649 F. 2d 1133 (CA5 1981); Suttle v. Commissioner, 625 F. 2d 1127 (CA4 1980).

       During the period between the Johnson decision and the Court of Appeals’ decision in this case, Congress amended the gift tax statute on eight separate occasions. See Economic Recovery Tax Act of 1981, Pub. L. 97-34, 95 Stat. 172; Revenue Act of 1978, Pub. L. 95-600, 92 Stat. 2763; Tax Reform Act of 1976, Pub. L. 94-455, 90 Stat. 1520; Internal Revenue Code Amendments of 1974, Pub. L. 93-625, 88 Stat. 2108; Excise, Estate, and Gift Tax Adjustment Act of 1970, Pub. L. 91-614, 84 Stat. 1836; Tax Reform Act of 1969, Pub. L. 91-172, 83 Stat. 487; Foreign Investors Tax Act of 1966, Pub. L. 89-809, 80 Stat. 1539; Pub. L. 89-365, 80 Stat. 32. Although Congress is presumed to be aware of judicial interpretations of a statute, none of the eight amending Acts altered the Johnson and Crown courts’ interpretation of the statute.

       See, e. g., Edwards, What Planning Opportunities Does CA-7’s No-Gift-Tax Holding in Crown Open Up?, 50 J. Tax. 168,170 (1979); Mitchell, Interest-Free Loans: Opportunities For Tax Planning, 65 A. B. A. J. 634, 636 (1979); Taicher, How to Use Interest-Free Loans in Family Tax Planning, 11 Practical Accountant 24 (Sept. 1978); Cooper, A Voluntary Tax? New Perspectives on Sophisticated Estate Tax Avoidance, 77 Colum. L. Rev. 161, 186 (1977); Tidwell, Lester Crown Points the Way to Estate Tax Reduction Under the 1976 Tax Reform Act, 55 Taxes 651, 655 (1977).

       One indication of the role that tax counselors have played in the use of tax-free loans is the fact that two law firms filed amicus briefs in this case on behalf of themselves and in support of petitioners’ position.

       As noted supra, at 346, the Commissioner did not appeal the District Court’s holding in Johnson, delayed for seven years before deciding to announce his nonacquiescence, and did not seek review by this Court of the Seventh Circuit’s opinion in Crown.

       In Johnson v. United States, 254 F. Supp. 73 (ND Tex. 1966), the Service apparently computed the amount of the gift using the interest rate specified in the regulations for valuing annuities, life estates, terms for years, remainders, and reversions. Id., at 76; see Treas. Reg. §25.2512-5. In Crown v. Commissioner, 67 T. C. 1060 (1977), the Service used a rate that it considered reasonable under the circumstances. Id., at 1061. In this case, the rate was that specified in IRC § 6621 for determining interest due on underpayments or refunds of taxes. 690 F. 2d 812, 814, n. 4 (CA11 1982). The Service has urged yet another method in a recently docketed Tax Court case, LaRosa v. Commissioner, No. 29632-82. In LaRosa, the Service has arrived at a separate interest rate for each month the loan was outstanding. The monthly interest rates were provided by an “expert” who relied on estimated fair market interest rates considering the creditworthiness of the borrowers. On an annualized basis, the rates used in LaRosa range from 12.5% to 31.1%.

       I am not addressing the tax policy question whether there is a “loophole” that should be closed. It is my view that a long accepted interpretation of a tax statute should be changed only by Congress.

       In addition to my disagreement with the Court’s interpretation of § 2501(a), I find the application of that interpretation to petitioners particularly unfair. The Commissioner first announced his nonacquiesence in the Johnson decision in early 1973. The loans at issue here spanned from 1971 to 1976. Thus, for two of the years for which the Commissioner assessed gift taxes, petitioners would have had no way of knowing that the outstanding interest-free loans might have gift tax consequences. In my view, retroactive application of the Court’s holding in cases such as this is so fundamentally unfair that it would constitute an abuse of the Commissioner’s discretion. See Central Illinois Public Service Co. v. United States, 435 U. S. 21, 34 (1978) (Brennan, J., concurring).


author: Chief Justice Burger

text:
    UNITED STATES v. ONE ASSORTMENT OF 89 FIREARMS
    No. 82-1047.
    Argued November 30, 1983
    Decided February 22, 1984

      Burger, C. J., delivered the opinion for a unanimous Court.

      Richard G. Wilkins argued the cause for the United States. With him on the briefs were Solicitor General Lee, Assistant Attorney General Jensen, Deputy Solicitor General Frey, Sidney M. Glazer, and Vincent Gambale.

      Herbert W. Louthian argued the cause for respondent. With him on the brief was Richard E. Gardiner

        John L. Pottenger, Jr., and Steven Wizner filed a brief for the Jerome N. Frank Legal Services Organization of the Yale Law School as amicus curiae urging affirmance.

   Chief Justice Burger

delivered the opinion of the Court.

We granted certiorari to decide whether a gun owner’s acquittal on criminal charges involving firearms precludes a subsequent in rem forfeiture proceeding against those same firearms.

I-H

<3

On January 20, 1977, the Bureau of Alcohol, Tobacco, and Firearms seized a cache of firearms from the home of Patrick Mulcahey. Mulcahey was subsequently indicted on charges that he had knowingly engaged in the business of dealing in firearms without a license, in violation of 18 U. S. C. § 922(a)(1). At his criminal trial, Mulcahey admitted that he had no license to deal in firearms and that he had bought and sold firearms during the period set forth in the indictment. His defense was that he had been entrapped into making the illegal firearms transactions. The jury returned a verdict of not guilty.

Following Mulcahey’s acquittal of the criminal charges, the United States, pursuant to its authority under 18 U. S. C. § 924(d), instituted this in rem action for forfeiture of the seized firearms. On the basis of his earlier acquittal, Mul-cahey asserted the defenses of res judicata and collateral es-toppel. The United States District Court for the District of South Carolina struck Mulcahey’s defenses, reasoning that an in rem forfeiture proceeding under 18 U. S. C. § 924(d) is remedial in nature and is therefore properly characterized as a civil proceeding. 463 F. Supp. 365, 367 (1978). The District Court then concluded that “the firearms here in question were involved in, used or intended to be used in violation of 18 U. S. C. § 922(a)(1). Such firearms are rendered subject to forfeiture under 18 U. S. C. § 924(d), which forfeiture is hereby ordered.” 511 F. Supp. 133, 139 (1980).

B

A divided United States Court of Appeals for the Fourth Circuit, sitting en banc, reversed. 685 F. 2d 913 (1982). The en banc majority relied upon two theories for its conclusion that the forfeiture proceeding against these firearms was barred by Mulcahey’s prior acquittal, although it did not sharply distinguish between the two. Because the majority considered the § 924(d) forfeiture proceeding to be criminal and punitive in nature, the Court of Appeals concluded that it was barred by double jeopardy principles. Looking to Coffey v. United States, 116 U. S. 436 (1886), as authority, the Court of Appeals also determined that the forfeiture action was barred by collateral estoppel, because it was based upon the same facts as the earlier criminal action. In dissent, four judges argued that neither collateral estoppel nor double jeopardy should preclude forfeiture proceedings brought under § 924(d). 685 F.2d, at 918-919 (Winter, J., joined by Butzner, Russell, and Murnaghan, JJ., dissenting). We granted certiorari, 459 U. S. 1199 (1983), and we reverse.

I

In Coffey v. United States, supra, this Court held that a forfeiture action brought against certain distilling equipment was barred by the owner’s prior acquittal on charges of removing and concealing distilled spirits with the intent to defraud the revenue. The Court stated:

“[W]here an issue raised as to the existence of the act or fact denounced has been tried in a criminal proceeding, instituted by the United States, and a judgment of acquittal has been rendered in favor of a particular person, that judgment is conclusive in favor of such person, on the subsequent trial of a suit in rem by the United States, where, as against him, the existence of the same act or fact is the matter in issue, as a cause for the forfeiture of the property prosecuted in such suit in rem. It is urged as a reason for not allowing such effect to the judgment, that the acquittal in the criminal case may have taken place because of the rule requiring guilt to be proved beyond a reasonable doubt, and that, on the same evidence, on the question of preponderance of proof, there might be a verdict for the United States, in the suit in rem. Nevertheless, the fact or act has been put in issue and determined against the United States; and all that is imposed by the statute, as a consequence of guilt, is a punishment therefor. There could be no new trial of the criminal prosecution after the acquittal in it; and a subsequent trial of the civil suit amounts to substantially the same thing, with a difference only in the consequences following a judgment adverse to the claimant.” Id., at 443.

Although the language quoted above incorporates notions of both collateral estoppel and double jeopardy, the Coffey Court did not identify the precise legal foundation for the rule of preclusion it announced. Perhaps for this reason, later decisions of this Court have reflected uncertainty as to the exact scope of the Coffey holding.

In Helvering v. Mitchell, 303 U. S. 391 (1938), the Court considered the preclusive effect of a prior criminal acquittal on a subsequent action for a monetary penalty. The defendant taxpayer in Mitchell was acquitted of charges that he willfully attempted to evade and defeat the income tax by fraudulently misstating certain items on his income tax return. When the Commissioner of Internal Revenue then brought an action to recover a substantial monetary penalty for fraudulent avoidance of income tax, the taxpayer argued that the subsequent penalty action was barred by res judicata, collateral estoppel, and the Coffey rule of preclusion.

This Court, speaking through Justice Brandéis, disagreed. Although the taxpayer argued and the Government conceded that the factual matters at issue in the penalty proceeding had been litigated and determined in the prior criminal action, the Court concluded that “[t]he difference in degree of the burden of proof in criminal and civil cases precludes application of the doctrine of res judicata303 U. S., at 397. The Mitchell Court viewed the criminal acquittal as nothing more than a determination that the evidence in the criminal setting was not sufficient to overcome all reasonable doubt that the accused was guilty. See Lewis v. Frick, 233 U. S. 291, 302 (1914). The Court went on to state:

“That acquittal on a criminal charge is not a bar to a civil action by the Government, remedial in its nature, arising out of the same facts on which the criminal proceeding was based has long been settled. Stone v. United States, 167 U. S. 178, 188; Murphy v. United States, 272 U. S. 630, 631, 632. Compare Chantangco v. Abaroa, 218 U. S. 476, 481, 482.” 303 U. S., at 397-398 (footnote omitted).

Turning to the taxpayer’s argument that double jeopardy barred the assessment of a monetary penalty following his acquittal on related criminal charges, the Court noted:

“Congress may impose both a criminal and a civil sanction in respect to the same act or omission; for the double jeopardy clause prohibits merely punishing twice, or attempting a second time to punish criminally, for the same offense. The question for decision is thus whether [the monetary penalty] imposes a criminal sanction. That question is one of statutory interpretation.” Id., at 399.

In concluding that the monetary penalty was merely a remedial civil sanction authorized by Congress to be assessed at the discretion of those administering the tax law, the Court observed that forfeiture of goods or their value and the payment of fixed or variable sums of money are sanctions that have long been recognized as enforceable by civil proceedings. Id., at 400.

Finally, the Mitchell Court considered the effect of the holding in Coffey upon the facts before it. The Court distinguished Coffey on the ground that the Coffey rule did not apply where an acquittal on a criminal charge was followed by a civil action requiring a different degree of proof. The Mitchell Court concluded that the monetary penalty imposed by the revenue laws was a civil administrative sanction; it therefore found Coffey no obstacle to the recovery of the penalty from the taxpayer. 303 U. S., at 405-406.

Most recently, in One Lot Emerald Cut Stones v. United States, 409 U. S. 232 (1972) (per curiam), the Court held that a civil action for forfeiture of a ring and stones was not barred by the owner’s prior acquittal on charges of willfully and knowingly, with intent to defraud the United States, smuggling articles into the United States without complying with customs procedures. Reaffirming the principles articulated in Helvering v. Mitchell, supra, the Court reasoned that the difference between the burdens of proof in the criminal and civil cases precluded the application of the doctrine of collateral estoppel. Double jeopardy was equally inapposite, the Court continued, because the forfeiture asserted against the ring and stones was a civil, not a criminal, sanction. The Court distinguished Coffey on the ground that acquittal on the criminal charges in One Lot Emerald Cut Stones did not necessarily resolve the issues in the later forfeiture action. 409 U. S., at 235, n. 5.

In focusing on Coffey v. United States, the Court of Appeals appears to have overlooked the significance of Mitchell and One Lot Emerald Cut Stones. At the very least, Mitchell signaled that an acquittal of a criminal charge does not automatically bar an action to enforce sanctions by way of forfeiture of goods or other civil penalties. Whatever the validity of Coffey on its facts, its ambiguous reasoning seems to have been a source of confusion for some time. As long ago as Mitchell, this Court was urged to disapprove Coffey so as to make clear that an acquittal in a criminal trial does not bar a civil action for forfeiture even though based on the identical facts. Indeed, for nearly a century, the analytical underpinnings of Coffey have been recognized as less than adequate. The time has come to clarify that neither collateral estoppel nor double jeopardy bars a civil, remedial forfeiture proceeding initiated following an acquittal on related criminal charges. To the extent that Coffey v. United States suggests otherwise, it is hereby disapproved.

r — H HH I — I

A

The disposition of the instant case follows readily from the principles articulated in Mitchell and One Lot Emerald Cut Stones. Mulcahey first argues that, because of his earlier criminal acquittal, the doctrine of collateral estoppel operates to preclude the § 924(d) forfeiture action. But an acquittal on criminal charges does not prove that the defendant is innocent; it merely proves the existence of a reasonable doubt as to his guilt. We need not be concerned whether the jury decided to acquit Mulcahey because he was entrapped into making an illegal sale or whether the jurors were not convinced of his guilt beyond a reasonable doubt for other reasons. In either case, the jury verdict in the criminal action did not negate the possibility that a preponderance of the evidence could show that Mulcahey was engaged in an unlicensed firearms business. Mulcahey’s acquittal on charges brought under § 922(a)(1) therefore does not estop the Government from proving in a civil proceeding that the firearms should be forfeited pursuant to § 924(d). It is clear that the difference in the relative burdens of proof in the criminal and civil actions precludes the application of the doctrine of collateral es-toppel. Helvering v. Mitchell, 303 U. S., at 397; One Lot Emerald Cut Stones v. United States, supra, at 235.

B

Mulcahey next contends that a forfeiture proceeding under § 924(d) is barred by the Double Jeopardy Clause of the Fifth Amendment. Unless the forfeiture sanction was intended as punishment, so that the proceeding is essentially criminal in character, the Double Jeopardy Clause is not applicable. Helvering v. Mitchell, 303 U. S., at 398-399. The question, then, is whether a § 924(d) forfeiture proceeding is intended to be, or by its nature necessarily is, criminal and punitive, or civil and remedial. Resolution of this question begins as a matter of statutory interpretation. Id., at 399. As the Court noted in United States v. Ward, 448 U. S. 242, 248 (1980):

“Our inquiry in this regard has traditionally proceeded on two levels. First, we have set out to determine whether Congress, in establishing the penalizing mechanism, indicated either expressly or impliedly a preference for one label or the other. See One Lot Emerald Cut Stones v. United States, supra, at 236-237. Second, where Congress has indicated an intention to establish a civil penalty, we have inquired further whether the statutory scheme was so punitive either in purpose or effect as to negate that intention. See Flemming v. Nestor, 363 U. S. 603, 617-621 (1960).”

Applying the first prong of the Ward test to the facts of the instant case, we conclude that Congress designed forfeiture under § 924(d) as a remedial civil sanction. Congress’ intent in this regard is most clearly demonstrated by the procedural mechanisms it established for enforcing forfeitures under the statute. Section 924(d) does not prescribe the steps to be followed in effectuating a forfeiture, but rather incorporates by reference the procedures of the Internal Revenue Code of 1954 (Code), 26 U. S. C. §§7321-7328. The Code in turn provides that an action to enforce a forfeiture “shall be in the nature of a proceeding in rem in the United States District Court for the district where such seizure is made.” 26 U. S. C. § 7323. In contrast to the in personam nature of criminal actions, actions in rem have traditionally been viewed as civil proceedings, with jurisdiction dependent upon seizure of a physical object. See Calero-Toledo v. Pearson Yacht Leasing Co., 416 U. S. 663, 684 (1974). In addition to establishing the in rem nature of the action, the Code authorizes a summary administrative proceeding for forfeiture of items valued at $2,500 or less, for which notice of a seizure may be by publication. See 26 U. S. C. § 7325. By creating such distinctly civil procedures for forfeitures under § 924(d), Congress has “indicate[d] clearly that it intended a civil, not a criminal, sanction.” Helvering v. Mitchell, supra, at 402.

Moreover, § 924(d) is somewhat broader in scope than the criminal provisions of 18 U. S. C. § 922. Section 924(d) subjects to forfeiture “[a]ny firearm or ammunition involved in or used or intended to be used in, any violation of the provisions of this chapter.” (Emphasis added.) But § 922(a)(1), the substantive criminal provision under which Mulcahey was prosecuted, does not render unlawful an intention to engage in the business of dealing in firearms without a license; only the completed act of engaging in the prohibited business is made a crime. See n. 1, supra. Whatever the actual scope of the conduct embraced by § 924(d), it is apparent from the differences in the language of these two statutes that the forfeiture provisions of § 924(d) were meant to be broader in scope than the criminal sanctions of § 922(a)(1).

Finally, the forfeiture provision of § 924(d) furthers broad remedial aims. Section 924(d) was enacted as part of the Omnibus Crime Control and Safe Streets Act of 1968, Pub. L. 90-351, 82 Stat. 233, and later retained without alteration in the Gun Control Act of 1968, Pub. L. 90-618, 82 Stat. 1224. In enacting the 1968 gun control legislation, Congress “was concerned with the widespread traffic in firearms and with their general availability to those whose possession thereof was contrary to the public interest.” Huddleston v. United States, 415 U. S. 814, 824 (1974). Accordingly, Congress sought to “control the indiscriminate flow” of firearms and to “assist and encourage States and local communities to adopt and enforce stricter gun control laws.” H. R. Rep. No. 1577, 90th Cong., 2d Sess., 8 (1968). Section 924(d) plays an important role in furthering the prophylactic purposes of the 1968 gun control legislation by discouraging unregulated commerce in firearms and by removing from circulation firearms that have been used or intended for use outside regulated channels of commerce. Keeping potentially dangerous weapons out of the hands of unlicensed dealers is a goal plainly more remedial than punitive. Accordingly, we hold that Congress viewed § 924(d) forfeiture as a remedial civil sanction rather than a criminal punishment.

We now turn to the second aspect of our inquiry: “whether the statutory scheme [is] so punitive either in purpose or effect as to negate” Congress’ intention to establish a civil remedial mechanism. United States v. Ward, 448 U. S., at 248-249. “ ‘Only the clearest proof’ ” that the purpose and effect of the forfeiture are punitive will suffice to override Congress’ manifest preference for a civil sanction. Id., at 249 (quoting Flemming v. Nestor, 363 U. S. 603, 617 (1960)). In Kennedy v. Mendoza-Martinez, 372 U. S. 144, 168-169 (1963), we set forth a list of considerations that has proved helpful in the past in making such determinations. See, e. g., United States v. Ward, supra, at 249-251; Bell v. Wolfish, 441 U. S. 520, 537-538 (1979).

Only one of the Mendoza-Martinez factors — whether or not the proscribed behavior is already a crime — lends any support to Mulcahey’s position that § 924(d) imposes a criminal penalty. The fact that actions giving rise to forfeiture proceedings under § 924(d) may also entail the criminal penalties of § 922(a)(1) admittedly suggests that § 924(d) is criminal in nature. But that indication is not as strong as it might seem at first blush. United States v. Ward, supra, at 250. Clearly “Congress may impose both a criminal and a civil sanction in respect to the same act or omission,” Helvering v. Mitchell, 303 U. S., at 399; indeed, it has done so on other occasions. Moreover, Congress in fact drafted § 924(d) to cover a broader range of conduct than is proscribed by the criminal provisions of § 922(a)(1). See supra, at 363-364. Because the sanction embodied in § 924(d) is not limited to criminal misconduct, the forfeiture remedy cannot be said to be coextensive with the criminal penalty. What overlap there is between the two sanctions is not sufficient to persuade us that the forfeiture proceeding may not legitimately be viewed as civil in nature.

In short, an analysis of the Mendoza-Martinez factors in no way undermines Congress’ classification of the § 924(d) forfeiture action as a civil sanction. Mulcahey has failed to establish by the “clearest proof” that Congress has provided a sanction so punitive as to “transfor[m] what was clearly intended as a civil remedy into a criminal penalty.” Rex Trailer Co. v. United States, 350 U. S. 148, 154 (1956). We accordingly conclude that the forfeiture mechanism set forth in § 924(d) is not an additional penalty for the commission of a criminal act, but rather is a separate civil sanction, remedial in nature. Because the § 924(d) forfeiture proceeding brought against Mulcahey’s firearms is not a criminal proceeding, it is not barred by the Double Jeopardy Clause.

> I — I

We hold that a gun owner’s acquittal on criminal charges involving firearms does not preclude a subsequent in rem forfeiture proceeding against those firearms under § 924(d). Neither collateral estoppel nor the Double Jeopardy Clause affords a doctrinal basis for such a rule of preclusion, and we reject today the contrary rationale of Coffey v. United States, 116 U. S. 436 (1886). The judgment of the United States Court of Appeals for the Fourth Circuit is accordingly reversed, and the case is remanded for proceedings consistent with this opinion.

It is so ordered.

       Title 18 U. S. C. §922(a)(1) provides:
      “It shall be unlawful ... for any person, except a licensed importer, licensed manufacturer, or licensed dealer, to engage in the business of importing, manufacturing, or dealing in firearms or ammunition, or in the course of such business to ship, transport, or receive any firearm or ammunition in interstate or foreign commerce.”

       Title 18 U. S. C. § 924(d) provides:
      “Any firearm or ammunition involved in or used or intended to be used in, any violation of the provisions of this chapter or any rule or regulation promulgated thereunder, or any violation of any other criminal law of the United States, shall be subject to seizure and forfeiture and all provisions of the Internal Revenue Code of 1954 relating to the seizure, forfeiture, and disposition of firearms, as defined in section 5845(a) of that Code, shall, so far as applicable, extend to seizures and forfeitures under the provisions of this chapter.”

       The number of firearms involved in this action has varied somewhat with time. Federal agents originally seized 105 firearms from Mulcahey, but later learned that 13 of them had been stolen. The stolen items were returned to their rightful owners, and the forfeiture action proceeded against the remaining 92 items. Later an additional automatic pistol was found, bringing the total to 93. Still later, for reasons not relevant here, 4 of the seized firearms were returned to Mulcahey’s wife, leaving 89 firearms as the subject of the forfeiture proceeding.

       A divided panel of the Fourth Circuit had previously reversed the District Court’s forfeiture order. 669 F. 2d 206 (1982).

       See, e. g., United States v. Burch, 294 P. 2d 1, 3, n. 2 (CA5 1961); United States v. One Dodge Sedan, 113 F. 2d 552, 553, and n. 1 (CA3 1940) (collecting cases and law review articles); IB J. Moore, J. Lucas, & T. Currier, Moore’s Federal Practice ¶ 0.418[3], pp. 587-589, and n. 12 (1983) (collecting cases).

       Mulcahey relies heavily upon Congress’ labeling of §924 with the appellation “Penalties,” arguing that inclusion of the forfeiture provision in that section demonstrates Congress’ intention to create an additional criminal sanction. This argument is unavailing; both criminal and civil sanctions may be labeled “penalties.” Moreover, the congressional Reports accompanying § 924 describe it as “containing] the penalty and forfeiture provisions,” H. R. Rep. No. 1577, 90th Cong., 2d Sess., 17 (1968); S. Rep. No. 1097, 90th Cong., 2d Sess., 117 (1968), indicating that Congress was cognizant of the important differences between criminal punishment and in rem forfeiture.

       In Kennedy v. Mendoza-Martinez, the Court enumerated “the tests traditionally applied to determine whether an Act of Congress is penal or regulatory in character.” 372 U. S., at 168.
      “Whether the sanction involves an affirmative disability or restraint, whether it has historically been regarded as a punishment, whether it comes into play only on a finding of scienter, whether its operation will promote the traditional aims of punishment — retribution and deterrence, whether the behavior to which it applies is already a crime, whether an alternative purpose to which it may rationally be connected is assignable for it, and whether it appears excessive in relation to the alternative purpose assigned are all relevant to the inquiry, and may often point in differing directions.” Id., at 168-169 (footnotes omitted).
      This list of considerations is, however, “neither exhaustive nor dispos-itive.” United States v. Ward, 448 U. S. 242, 249 (1980).