Graves v. Elliott

307 U.S. 383, 59 S. Ct. 913, 83 L. Ed. 1356, 1939 U.S. LEXIS 1121, 31 A.F.T.R. (P-H) 950

• Court: Supreme Court of the United States
• Decided: May 29, 1939
• Docket: 372
• Status: Published

Opinions

Mr. Justice Stone

delivered the opinion of the Court.

We are asked to say whether the State of New York may constitutionally tax the relinquishment at death, by .a domiciled resident of the state, hf a power to revoke a trust of intangibles held by a Colorado trustee.

Decedent in 1924, while a resident of Colorado, transferred and delivered to Denver National Bank of Denver, Colorado, certain bonds to be held upon specified trusts with specified powers in the trustee to administer the trust and to invest and reinvest the trust fund. So far as now material, the trust indenture provided that the trustee should pay over the income to decedent’s daughter for life and afterward to the daughter’s children until each had reached the age of twenty-five years, when a proportionate share of the principal of the trust fund was to be paid over to such child. In default of such children the principal was to revert to decedent and pass under her will. She reserved the right to remove the trustee, to change any beneficiary of the trust, and to revoke the trust and revest herself with the title to the property, the trustee in that event undertaking to assign and deliver to her all the securities then constituting the trust fund.

After creating the trust decedent became and remained a domiciled resident of New York, where she died in 1931 without appointing new beneficiaries of the trust or revoking it. Until her death the trust was administered . by the bank at its offices in Colorado, and the paper evidences of the intangibles — corporate bonds — comprising the trust fund remained in the possession of the trustee ip Colorado.

Following her death the taxing authorities of Colorado assessed a tax on the transmission at death of the trust fund. Proceedings in New York for the assessment of estate taxes on the transfer of the trust fund at decedent’s death resulted in an order of the Surrogate confirming the assessment under §§ 249-n, 249-r of the New York Tax Law. Consol. Laws, ch. 60.¹ On appeal the New York Court of Appeals reversed the order of the Surrogate, holding that so far as the provisions of the New York Tax Law purport to include the intangible trust property in the gross estate they infringe due process by imposing a tax on property whose situs is outside the state. 274 N. Y. 10. We granted certiorari November 14, 1938, the question involved being of public importance.

The essential elements of the question presented yhere are the same as those considered in Curry v. McCanless, ante, p. 357. As is there pointed out, the power of dispo- . sition of property is the equivalent of ownership. It is a potential source of wealth and its exercise in the case of intangibles is the appropriate subject of taxation at the place of the domicile of the owner of the power. The relinquishment at death, in consequence of the non-exercise in life, of a power to revoke a trust created by a decedent is likewise an appropriate subject of taxation. Saltonstall v. Saltonstall, 276 U. S. 260; Reinecke v. Northern Trust Co., 278 U. S. 339; Helvering v. City Bank Farmers Trust Co., 296 U. S. 85; cf. Keeney v. New York, 222 U. S. 525; Bullen v. Wisconsin, 240 U. S. 625; Chase National Bank v. United States, 278 U. S. 327; Tyler v. United States, 281 U. S. 497; Guaranty Trust Co. v. Blodgett, 287 U. S. 509; Porter v. Commissioner, 288 U. S. 436.

For reasons stated in our opinion in Curry v. McCanless, supra, we cannot say that the legal interest of decedent in the intangibles held in trust in Colorado was so dissociated from her person as to be beyond the taxing jurisdiction of the state of her domicile more than her other rights in intangibles. Her right to revoke the trust and to demand the transmission to her of the intangibles by the trustee and the delivery to her of their physical evidences was a potential source of wealth, having the attributes of property. As in the case of any other intangibles which she possessed, control over her person and estate at the place of her domicile and her duty to contribute to the support of government there afford adequate constitutional basis for imposition of a tax measured by the value of the intangibles transmitted or relinquished by her at death. Curry v. McCanless, supra, and cases cited.

Reversed.

1 § 249-n imposes a tax at specified rates upon the net estate of every person dying a resident of the state. For the purpose of fixing the amount of the net estate, § 249-r includes in the value of the gross estate of the decedent the value of all property of the decedent “except 'real property situated and tangible personal property having an actual situs outside, this state,”

“3. To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after his death, including a transfer under which the transferor has retained for his life or any period not ending before his death (a) the possession or enjoyment of, or the income from, the property or (b) the right to designate the persons who shall possess or enjoy the property or the income therefrom; ...

“4. To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power, either by the decedent alone or in conjunction with any person, to alter, amend, dr revoke, . . .”