Beals v. Commissioner of Corporations and Taxation

• Decision Date: 10 August 1976
• Citation: 370 Mass. 781,352 N.E.2d 692
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: E. Mauran BEALS, trustee, et al., executors & trustees, 1 v. COMMISSIONER OF CORPORATIONS AND TAXATION.

Page 692

352 N.E.2d 692

370 Mass. 781

E. Mauran BEALS, trustee, et al., executors & trustees,

¹

v. COMMISSIONER OF CORPORATIONS AND TAXATION.

Supreme Judicial Court of Massachusetts, Norfolk.

Argued May 7, 1976.

Decided Aug. 10, 1976.

Samuel B. Potter, Boston (Edward O. Proctor, Jr., Boston, with him), for plaintiffs.

Paula R. Rosen, Asst. Atty. Gen., for Commissioner of Corporations and Taxation.

Before REARDON, BRAUCHER, KAPLAN and WILKINS, JJ.

WILKINS, Justice.

The plaintiffs challenge the imposition of inheritance taxes on transfers of property to certain adopted children where no such tax would be imposed in similar circumstances if the recipients were natural descendants of the decedent. They argue that recent legislative changes equalizing the rights of adopted and natural children under probate law should be read as requiring, by implication, a similar result with respect to the level of inheritance taxes payable on the transfer of property to adopted and natural children in identical circumstances. They argue further that, if the applicable inheritance tax statutes do distinguish between the decedent's natural descendants and the adopted children of lineal descendants, the additional tax burden on an inheritance by an adopted child of a lineal descendant would unconstitutionally deny the equal protection of the laws to the adopted child. Unpersuaded by these arguments, we conclude that such a tax is valid.

The decedent, Arthur Hunnewell, died in 1904. He created a testamentary trust, the income of which was payable to his wife for life. On her death, a trust share was created for each surviving daughter. The income of each daughter's share was payable to her during her life, and, on her death, her share was to be distributed as she appointed by will. See BEALS V. STATE ST. BANK & TRUST CO., --- MASS. ---, 326 N.E.2D 896 (1975)^A, for a case concerning the distribution of a trust share not involved here, where these testamentary provisions are described more fully. In her will Jane B. Hunnewell, one of the testator's three surviving daughters, exercised her power of appointment in favor of her two adopted children. She gave each child $50,000 outright and the balance in trust.

The plaintiffs commenced this proceeding against the Commissioner of Corporations and Taxation in the Probate Court for the county of Norfolk pursuant to G.L. c. 65, § 30, requesting a determination whether the tax on so callled collateral legacies and successions imposed by R.L. (1902) c. 15, §§ 1 and 2, the inheritance tax statute in effect at the decedent's death, is payable with respect to the property disposed of by his daughter's exercise of her power of appointment under his will. The probate judge reserved decision and reported the case to the Appeals Court for decision. See G.L. c. 215, § 13. We granted the plaintiffs' application for direct review.

1. The plaintiffs concede that a literal application of the inheritance tax laws in effect at the testator's death requires the payment of an inheritance tax with respect to the property passing to Jane B. Hunnewell's adopted children. ² The plaintiffs argue, however, that the distinction between lineal descendants and adopted children of lineal descendants has been removed by implication by several recent legislative enactments which have changed aspects of the probate law with respect to adopted children with the apparent purpose of putting 'adopted children in the same position as natural children.' Katz v. Koronchik, --- Mass. ---, ---, ^b 338 N.E.2d 339 (1975). The Legislature, as part of this general revision of the statutory treatment of adopted children, has amended G.L. c. 65, § 1, to eliminate the distinction in the inheritance tax tables between lineal descendants and adopted children of lineal descendants. St.1967, c. 463, §§ 1, 2.

However, St.1967, c. 463, equalizing the tax burden, has no application to the transfer involved in this case because § 3 of that statute provides that the revised rates for adopted children apply to 'property or interests therein passing or accruing upon the deaths of persons who die after the effective date of the act.' St. 1967, c. 463, § 3. Although this 1967 statute applies by its terms only to G.L. c. 65, § 1, governing the inheritance tax with respect to persons dying after 1920, the fact that the higher tax rates on property passing to adopted children of lineal descendants were continued for decedents dying between 1920 and 1967 indicates that the Legislature intended that the previous rates should continue with respect to decedents dying before 1920 as well. ³ When the Legislature has stated so clearly when the equalized inheritance tax rates shall take effect, a different intent cannot be derived from other 'equalizing' statutes dealing with the rights of adopted children.

In support of their contention that the Legislature has impliedly amended the inheritance tax statutes, the plaintiffs rely heavily on St.1969, c. 27, § 2. That statute made retroactive, as far as is constitutionally permissible, the revised rule of construction appearing in G.L. c. 210, § 8, which provides that an adopted child shall be included within the words 'child,' grandchild,' 'issue,' 'heir' and their equivalents unless a contrary intent plainly appears in the terms of the instrument. ⁴ By its terms, St.1969, c. 27, § 2, is restricted to the applicability of G.L. c. 210, § 8. Statute 1969, c. 27, § 2 (making the presumption of inclusion of adopted children retroactive), and St.1967, c. 463, § 3 (making equalized inheritance tax treatment prospective only), are not so inconsistent as to suggest an intention to amend the 1967 statute to make equalization of inheritance tax consequences applicable retrospectively. See Colt v. Fradkin,361 Mass 447, 449, 281 N.E.2d 213 (1972); Golden v. Selectmen of Falmouth, 358 Mass. 519, 524, 265 N.E.2d 573 (1970); Gregoire, petitioner,355 Mass. 399, 400, 245 N.E.2d 241 (1969); Shelist v. Boston Redevelopment Authority, 350 Mass. 530, 533, 215 N.E.2d 748 (1966); Haffner v. Director of Pub. Safety of Lawrence, 329 Mass. 709, 713--714, 110 N.E.2d 369 (1953). Cf. Rennert v. Trustees of State Colleges, 363 Mass. 740, 743, 297 N.E.2d 60 (1973); Doherty v. Commissioner of Administration, 349 Mass. 687, 690, 212 N.E.2d 485 (1965). The construction of a will or other document as required by G.L. c. 210, § 8, would not be impaired by the imposition of an inheritance tax which is higher as to property passing to an adopted child of a lineal descendant (pursuant to that construction) than as to property passing to a natural descendant.

2. The discrimination in the applicable tax statute, as we have interpreted it, imposing an inheritance tax when an adopted child of a lineal descendant receives property and no such tax when a natural child of a lineal descendant receives property in the same circumstances does not deny equal protection of the laws. ⁵

Classifications drawn by the Legislature in allocating the tax burden are accorded considerable deference and will be held to satisfy the requirements of equal protection if 'supported on any conceivable basis.' Frost v. Commissioner of Corps. & Taxation, 363 Mass. 235, 248, 293 N.E.2d 862, appeal dismissed, 414 U.S. 803, 94 S.Ct. 51, 38 L.Ed.2d 40 (1973). See Mary C. Wheeler School, Inc. v. Assessors of Seekonk, --- Mass. ---, ---, ^c 331 N.E.2d 888 (1975); Weinstock v. Town of Hull, --- Mass. ---, ---, ^d 323 N.E.2d 867, appeal dismissed, 423 U.S. 805, 96 S.Ct. 14, 46 L.Ed.2d 26 (1975).

The plaintiffs grant that this discrimination against adopted children may have had a rational basis in the past but argue that this rational basis disappeared when other aspects of the probate law were changed to treat adopted children as natural children of their adoptive parents. However, the Legislature has provided for equal taxation as set forth in St.1967, c. 463, and the plaintiffs' challenge must be to that part of St.1967, c. 463, which does not make equal taxation applicable to the receipt of property from decedents dying before the effective date of that act. Legislative line drawing, based either on the date of the testator's death or on the date of the transfer of possession, may produce different tax consequences in nearly identical situations, but such lines must be drawn to make a tax system...