307 U.S. 357 (1939), 339, Curry v. McCanless

Docket Nº:No. 339
Citation:307 U.S. 357, 59 S.Ct. 900, 83 L.Ed. 1339
Party Name:Curry v. McCanless
Case Date:May 29, 1939
Court:United States Supreme Court

Page 357

307 U.S. 357 (1939)

59 S.Ct. 900, 83 L.Ed. 1339




No. 339

United States Supreme Court

May 29, 1939

Argued January 9, 1939

Reargued April 28, 1939



1. Decedent, domiciled in Tennessee, transferred to a trustee in Alabama certain stocks and bonds on specific trusts. The net income was to be paid to her during her lifetime and, upon her death, the property was to be held in trust for specified beneficiaries. She reserved, however, certain powers over the trustee and the handling of the trust, and the power to dispose of the estate as she might direct by will. Until her death, the trust was administered by the trustee in Alabama, and the paper evidences of the intangible property were kept there. Upon her death, in Tennessee, she bequeathed the trust property to the same trustee to be held in trust for the same and other beneficiaries, in different amounts and by different estates from those provided for by the trust indenture. By the will, she appointed a Tennessee executor "as to all property which I may own in the Tennessee at the time of my death," and an Alabama executor

as to all property which I may own in the Alabama and also as to all property which I may have the right to dispose of by last will and testament in said state.

It was probated, and letters testamentary issued to the respective executors, in both States.

Held, that each of the two States could constitutionally impose a

Page 358

tax on the transfer of the intangibles held by the Alabama trustee, but passing under the will of the decedent, domiciled in Tennessee. Pp. 360, 372-373.

2. The opinion considers the grounds for the doctrine that power to tax tangible property is confined to the State in which the property is located. P. 363.

When we speak of the jurisdiction to tax land or chattels as being exclusively in the State where they are physically located, we mean no more than that the benefit and protection of laws enabling the owner to enjoy the fruits of his ownership and the power to reach effectively the interests protected, for the purpose of subjecting them to payment of a tax, are so narrowly restricted to the State in whose territory the physical property is located as to set practical limits to taxation by others. P. 364.

3. Rights in intangible property are but relationships between persons, which the law recognizes by attaching to them certain sanctions enforceable in courts. The power of government over them and the protection which it gives them cannot be exerted through control of a physical thing, but can be made effective only through control over and protection afforded to those persons whose relationships are the origin of the rights. As sources of actual or potential wealth -- which is an appropriate measure of any tax imposed on ownership or its exercise -- they cannot be dissociated from the persons from whose relationships they are derived. P. 366.

4. From the beginning of our constitutional system, control over the person at the place of his domicile and his duty there, common to all citizens, to contribute to the support of government have been deemed to afford an adequate constitutional basis for imposing on him a tax on the use and enjoyment of rights in intangibles measured by their value. P. 366.

5. In cases where the owner of intangibles confines his activity to the place of his domicile, it has been found convenient to substitute a rule for a reason by saying that his intangibles are taxed at their situs, and not elsewhere, or, perhaps less artificially, by invoking the maxim mobilia sequuntur personam. P. 367.

6. But when the taxpayer extends his activities with respect to his intangibles so as to avail himself of the protection and benefit of the laws of another State in such a way as to bring his person or property within the reach of the tax gatherer there, the reason for a single place of taxation no longer obtains, and the rule is not

Page 359

even a workable substitute for the reasons which may exist in any particular case to support the constitutional power of each State concerned to tax. P. 367.

7. The domicile is not deprived, by the taxpayer's activities elsewhere, of its constitutional jurisdiction to tax, and consequently there are many circumstances in which more than one State may have jurisdiction to impose a tax and measure it by some or all of the taxpayer's intangibles. P. 368.

8. Since Alabama may lawfully tax the property in the trustee's hands, the Court perceives no ground for saying that the Fourteenth Amendment forbids that State to tax the transfer of it or an interest in it to another merely because the transfer was effected by decedent's testamentary act in another State. P. 370.

9. Exercise of the decedent's power to dispose of the intangibles was a taxable event in Tennessee. P. 371.

10. In effecting her purposes, the testatrix brought some of the legal interests which she created within the control of one State by selecting a trustee there, and others within the control of the other State by making her domicile there. She necessarily invoked the aid of the law of both States, and her legatees, before they can secure and enjoy the benefits of succession, must invoke the law of both. P. 372.

11. The prohibition of the Fourteenth Amendment against the taxation of property not within the taxing "jurisdiction" of a State is not to be extended by ascribing to intangibles in every case a locus for taxation in a single State despite the control over them or their transmission by any other State and its legitimate interest in taxing the one or the other. The Court can find nothing in the history of the Fourteenth Amendment, and no support in reason, principle, or authority, for saying that it prohibits either State, in the circumstances of this case, from laying the tax. Pp. 373, 372.

174 Tenn. 1, 118 S.W.2d 228, reversed.

Appeal taken by taxing officials of the State of Alabama from a decree of the Supreme Court of Tennessee declaring trust property in Alabama disposed of by a decedent's will to be subject to succession or transfer taxation in Tennessee, but not in Alabama. This suit was brought by the executors in the two States, praying for a declaratory judgment.

Page 360

STONE, J., lead opinion

MR. JUSTICE STONE delivered the opinion of the Court.

The questions for decision are whether the States of Alabama and Tennessee may each constitutionally impose death taxes upon the transfer of an interest in intangibles held in trust by an Alabama trustee but passing under the will of a beneficiary decedent domiciled in Tennessee, and which of the two states may tax in the event that it is determined that only one state may constitutionally impose the tax.

Decedent, a domiciled resident of Tennessee, by trust indenture transferred certain stocks and bonds upon specified trusts to Title Guarantee Loan & Trust Company, an Alabama corporation doing business in that state. So far as now material, the indenture provided that the net income of the trust property should be paid over to decedent during her lifetime. She reserved the power to remove the trustee and substitute another, which was never done; the power to direct the sale of the trust property and the investment of the proceeds, and the power to dispose of the trust estate by her last will and testament, in which event it was to be "handled and disposed of as directed" in her will. The indenture provided further that, in default of disposition by will, the property was to be held in trust for the benefit of her husband, son, [59 S.Ct. 903] and daughter. Until decedent's death, the trust was administered by the trust company in Alabama, and the

Page 361

paper evidences of the intangibles held by the trustee were at all times located in Alabama.

By her last will and testament, decedent bequeathed the trust property to the trust company in trust for the benefit of her husband, son, and daughter, in different amounts and by different estates from those provided for by the trust indenture, with remainder interests over to the children of the son and the daughter respectively, and to his wife and her husband. By her will, testatrix appointed a Tennessee trust company executor "as to all property which I may own in the Tennessee at the time of my death," and an Alabama trust company executor

as to all property which I may own in the Alabama and also as to all property which I may have the right to dispose of by last will and testament in said state.

The will has been probated in Tennessee and in Alabama, and letters testamentary have issued to the two trust companies named as executors in the will.

The present suit was brought by the two executors in a chancery court of Tennessee against appellants, comprising the State Tax Commission of Alabama, and appellee, Commissioner of Finance and Taxation of the State of Tennessee, who are charged with the duty of collecting inheritance or succession taxes in their respective states. The bill of complaint prayed a declaratory judgment pursuant to the Tennessee Declaratory Judgments Act, Tennessee Code 1932, §§ 8835-8847, determining what portions of the estate of decedent are taxable by the State of Tennessee and what portions by the State of Alabama. Appellants and appellee appeared and, by their answers and by stipulation, recited in detail the facts already stated and admitted that the taxing officials of each state had imposed or asserted the right to impose an inheritance or death transfer tax on the trust property passing under decedent's will.

Page 362

The chancery court of Tennessee decreed that the State of Alabama could...

To continue reading