Bowring v. Bowers

• Decision Date: 19 March 1928
• Docket Number: No. 84.,84.
• Citation: 24 F.2d 918
• Parties: BOWRING v. BOWERS, Collector of Internal Revenue.
• Court: U.S. Court of Appeals — Second Circuit

24 F.2d 918 (1928)

BOWRING v. BOWERS, Collector of Internal Revenue.

No. 84.

Circuit Court of Appeals, Second Circuit.

March 19, 1928.

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Cohen, Gutman & Richter, of New York City (Julius Henry Cohen, Kenneth Dayton, and William Victor Goldberg, all of New York City, of counsel), for plaintiff in error.

Charles H. Tuttle, U. S. Atty., of New York City (Thomas J. Crawford and Frank Chambers, Asst. U. S. Attys., both of New York City, of counsel), for defendant in error.

Before MANTON, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

AUGUSTUS N. HAND, Circuit Judge (after stating the facts as above).

It may be doubted whether, in view of such cases as Winans v. Attorney General, 1904 A. C. 287, Depuy v. Wurtz, 53 N. Y. 556, and McDonald v. Hartford Trust Co., 104 Conn. 169, 132 A. 902, the plaintiff did not retain his English domicile. The testimony indicates a desire on his part to do this, and while a purpose to retain his original status would not alone be enough to prevent the acquisition of a domicile of choice, unless (in spite of his long abode in New York) he still intended England to be his real home, and did not intend to reside permanently, or for an indefinite period, in the United States (Williamson v. Osenton, 232 U. S. 619, 34 S. Ct. 442, 58 L. Ed. 758; Gilbert v. David, 235 U. S. 561, 35 S. Ct. 164, 59 L. Ed. 360), yet there is some basis for the claim that his intention to return to England, when recalled by his company, and his expectation that he would be so recalled, prevented the acquisition of a domicile in New York (Dicey 3d Ed. p. 113). The determining question here would seem to be whether the intention to return was so contingent or fleeting as to amount to little more than a hope or reasonable possibility (Attorney General v. Pottinger, 30 L. J. Ch. Ex. at p. 294; United States v. Knight D. C. 291 F. 129; aff'd C. C. A. 299 F. 571), or whether, on the contrary, the intention was capable of probable fulfillment.

But all the limitations applicable to acquiring a new domicile, particularly when a domicile of national origin is to be abandoned, do not necessarily attach to taking out a new residence, either in this country or England. The United States Income Tax Acts, from the act of 1913 (38 Stat. 114) on, have been uniform in levying a tax on the entire income of aliens, if resident here, and residence has been construed by the Commissioner in all his rulings as something which may be less than a domicile, which fixes the law of the devolution of property and determines the incidence of estate and succession taxes. It is true that "residence" is ordinarily used as the equivalent of domicile in statutes relating to probate, administration, and succession taxes. So, as might be expected, in the Revenue Acts, the word "resident," when employed in the portions of these acts dealing with the Estate Tax Law, means "domiciled," and has been so construed by the practice and regulations of the department.

It is contended that the same words, when used in the titles of the same acts dealing with the income tax, must have the same meaning. But the estate tax provisions were first introduced in the Revenue Act in 1916 (39 Stat. 756), after the construction of the word "resident" in that act had already become fixed by the ruling of the department at least as early as Treasury Decision 2242 of September 17, 1915, infra. Moreover, the incidence of estate and succession taxes has historically been determined by domicile and situs, and not by the fact of actual residence. Frick v. Pennsylvania, 268 U. S. 473, 45 S. Ct. 603, 69 L. Ed. 1058, 42 A. L. R. 316. As Justice Holmes said in Bullen v. Wisconsin, 240 U. S. at page 631, 36 S. Ct. 474 (60 L. Ed. 830):

"* * * As the states where the property is situated, if governed by the common law, generally recognize the law of the domicile as determining the succession, it may be said that, in a practical sense at least, the law of the domicile is needed to establish the inheritance. Therefore the inheritance may be taxed at the place of domicile, whatever the limitations of power over the specific chattels may be. * * *"

As was said, also, in the Matter of Martin, 173 App. Div. at page 3, 158 N. Y. S. 916:

"* * * in many instances there is a difference between the legal intendment of the terms `residence' and `domicile' * * * but in the matter of succession and transfer taxes the theory of the action of the taxing power renders the terms synonymous. In the case of succession the intestate's personalty is distributed according to the Statute of Distributions of the State of the domicile. Therefore, that State which permits the inheritance is entitled to impose a duty on that privilege. * * *"

But in personal and income taxes domicile has played no necessary part, and residence at a fixed date has determined the liability for the tax. Bell v. Pierce, 51 N. Y. 12; Douglas v. Mayor, 9 N. Y. Super. Ct. 110; Matter of Austen, 13 App. Div. 247, 42 N. Y. S. 1097; Finley v. Philadelphia, 32 Pa. 361. In the New York Income Tax law (Consol. Laws, c. 60), which is largely based on the federal acts, section 350 defines a "resident" as "any person domiciled in the state of New York, and any other person who maintains a permanent place of abode within the state, and spends in the aggregate more than seven months of the taxable year within the state."

Likewise under the English income tax laws, prior to 1914, residence, and not domicile, was the test of liability (Inland Revenue v. John Lambert Caldwalader, 1904 7 Session Cases, 146; Attorney General v. Coots, 4 Price, 183), though income, unless derived from a trade or employment carried on in England, had to be received there in order to render one subject to taxation upon it (Liverpool, London & Globe Ins. Co. v. Bennett, 1913 A. C. 610). But since 1914 a resident of more than six months (though not domiciled) has had to pay an income tax on all income received in the United Kingdom, and a domiciled person a tax on income derived from all sources. Thus, under all the British income tax laws, a resident, though having no domicile in England, had to pay a tax on all income received in England whatever its source. Whether he received all his income there, of course, depended on circumstances, but whatever he received was taxable against a resident, irrespective of his domicile.

In the federal act of 1913, income taxes are imposed upon "the entire net income arising or accruing from all sources in the preceding calendar year to every citizen of the United States, whether residing at home or abroad, and to every person residing in the United States, though not a citizen thereof, * * * and a like tax shall be assessed, levied, collected, and paid annually upon the entire net income from all property owned and of every business, trade, or profession carried on in the United States by persons residing elsewhere." 38 Stat. 166.

The Treasury Department made its ruling as to the meaning of "residing" in the foregoing act in Treasury Decision 2242, in which occurred the following language:

"`Residence,' as used in subdivision 1 of paragraph A of the Act of October 3, 1913, and T. D. 2109, is held to be —

"That place where a man has his true, fixed, and permanent home and principal establishment, and to which, whenever he is absent, he has the intention of returning, and indicates permanency of occupation as distinct from lodging or boarding or temporary occupation.

"For the purposes of the income tax it is held that where for business purposes or otherwise, an alien is permanently located in the United States, has there his principal business establishment, and is there permanently occupied or employed, even though his domicile may be without the United States, he will be held to be within the definition of `every person residing in the United States, though not a citizen thereof, * * *' while aliens who are physically present in the United States but only temporarily resident or employed therein (as for a season or other similarly definite term, and with the expectation or intention of leaving the United States upon the termination of employment or accomplishment of the purpose which necessitated presence in the United States) are within the class of `persons residing elsewhere. * * *'"

The Revenue Act of September 8, 1916, chapter 463 (39 Stat. 756), as amended by the Act of March 3, 1917 (39 Stat. 1000), as further amended by the Act of October 3, 1917 (40 Stat. 300), provides in part:

"Sec. 1. (a) That there shall be levied, assessed, collected, and paid annually upon the entire net income received in the preceding calendar year from all sources by every individual, a citizen or resident of the United States, a tax of two per centum upon such income; and a like tax shall be levied, assessed, collected, and paid annually upon the entire net income received in the preceding calendar year from all sources within the United States by every individual, a nonresident alien, including interest on bonds, notes, or other interest-bearing obligations of residents, corporate or otherwise.

"(b...