United States v. Cartwright

PETITIONER: United States
RESPONDENT: Cartwright
LOCATION: Paris Adult Theater

DOCKET NO.: 71-1665
DECIDED BY: Burger Court (1972-1975)
LOWER COURT: United States Court of Appeals for the Second Circuit

CITATION: 411 US 546 (1973)
ARGUED: Jan 16, 1973
DECIDED: May 07, 1973

Erwin N. Griswold - for petitioner
Ralph J. Gregg - for respondent

Facts of the case


Media for United States v. Cartwright

Audio Transcription for Oral Argument - January 16, 1973 in United States v. Cartwright

Warren E. Burger:

We will hear arguments next in number 71-1665, United States against Cartwright.

Mr. Solicitor General.

Erwin N. Griswold:

Mr. Chief Justice and may it please the Court.

This is a federal estate tax case.

This is here on a writ of certiorari to review a decision of the United States Court of Appeals for the Second Circuit.

It involves one of those narrow but recurring questions which have no place to come for final decision except here and which arrive here only after long continued litigation and multiple decisions in the lower courts.

The question relates to the value to be assigned to mutual fund shares held by the estate of a decedent.

Specifically, it involves the validity of Section 20.1031-8 (b) of the Treasury Regulations on Estate Tax which is printed at pages 25 and 26 of our brief.

Beginning at the bottom of page 25 it provides, “The fair market value of a share in an open-end investment company (commonly known as a mutual fund) is the public offering price of a share.”

Then there is a final clause which is not relevant, “adjusted for any reduction in price available to the public in acquiring the number of shares being valued.”

But the significant part is that the regulation provides that, “The fair market value of a share in an open-end investment company is the public offering price of a share.”

Mr. Solicitor General, prior to the issuance of that regulation however, the Department of Justice did not go off --

Erwin N. Griswold:

Prior to the issuance of that regulation, there was confusion and uncertainty.

There was no clear rule or practice.

The Treasury repeatedly endeavored to use the public offering price.

Very frequently, the matter was settled out as one of the numerous things which came up in the final adjustment with the revenue agent.

When suits were brought, the Department of Justice would not defend the public offering price as the value in the state of the law where there was no regulation and no officially stated rule.

And I dare I say that that is one of the reasons why this regulation upon which we rely here, which was issued on October 10, 1963 by final approval by the Commissioner of Internal Revenue and the Assistant Secretary of the Treasury, and Publication in the Federal Register as a Treasury decision while it provides at the bottom of page 26 in our brief, the provisions of this paragraph shall apply with respect to estates of decedents dying after October 10, 1963.

And the public offering price is what the company offers the share?

Erwin N. Griswold:

The public offering price is the price at which the distributor sells the shares.

It is the price which is stated in a prospectus.

Usually, there is a close arrangement between the distributor and the investment company itself.

The investment company receives the net asset value.

The distributor receives the addition which in this case is usually about 8% often referred to as the load.

And a way to look at it and one to which I shall return is that the public offering price is the retail price at which the shares are sold to the public.

But it is never offered at any other price?

Erwin N. Griswold:

They not only are never offered at any other price by the distributor but the --

Or by the company?

Erwin N. Griswold:

Or by the company.

They could be offered by you or me if we own them --