Burnet v. Brooks

• Decision Date: 13 March 1933
• Docket Number: No. 496,496
• Citation: 288 U.S. 378,86 A.L.R. 747,53 S.Ct. 457,77 L.Ed. 844
• Parties: BURNET, Commissioner of Internal Revenue, v. BROOKS et al
• Court: U.S. Supreme Court

288 U.S. 378

53 S.Ct. 457

77 L.Ed. 844

BURNET, Commissioner of Internal Revenue,

v BROOKS et al.

No. 496.

Argued Feb. 9, 1933.

Decided March 13, 1933.

[Syllabus from pages 378-380 intentionally omitted] The Attorney General and Mr. Thomas D.Thacher, Sol. Gen., of Washington, D.C., for petitioner.

[Argument of Counsel from pages 380-382 intentionally omitted] Mr. Francis B. Hamlin, of New York City, for respondents.

[Argument of Counsel from pages 382-386 intentionally omitted] Mr. Chief Justice HUGHES delivered the opinion of the Court.

Respondents contested the determination of the Commissioner of Internal Revenue in including in the gross estate of decedent certain intangible property. Decedent, who died in October, 1924, was a subject of Great Britain and a resident of Cuba. He was not engaged in business in the United States. The property in question consisted of securities, viz., bonds of foreign corporations, bonds of foreign governments, bonds of domestic corporations and of a domestic municipality, and stock in a foreign corporation, and also of a balance of a cash deposit.¹ Some of the securities, consisting of a stock certificate and bonds, were in the possession of decedent's son in New York City, who collected the income and placed it to the credit of decedent in a New York bank. Other securities were in the possession of Lawrence Turnure & Co., in New York City, who collected the income and credited it to decedent's checking account, which showed the above-mentioned balance in his favor. None of the securities was pledged or held for any indebtedness. Finding these facts, the Board of Tax Appeals decided that the property should not be included in the decedent's gross estate for the purpose of the federal estate tax (22 B.T.A. 71), and the decision was affirmed by the Circuit Court of Appeals. 60 F.(2d) 890. This Court granted certiorari, 287 U.S. 594, 53 S.Ct. 222, 77 L.Ed. —-.

The provisions governing the imposition of the tax are found in the Revenue Act of 1924, c. 234, 43 Stat. 253, 303—307, and are set forth in the margin. ² Two questions are presented: (1) Whether the property in question is covered by these provisions; and (2) whether, if construed to be applicable, they are valid under the Fifth Amendment of the Federal Constitution. The decisions below answered the first question in the negative.

First. The first question is one of legislative intention. In the case of a nonresident of the United States, that part of the gross estate was to be returned and valued 'which at the time of his death is situated in the United States.' In interpreting this clause, regard must be had to the purpose in view. The Congress was exercising its taxing power. Defining the subject of its exercise, the Congress resorted to a general description referring to the situs of the property. The statute made no distinction between tangible and intangible property. It did not except intangibles. It did not except securities. Save as stated, it did not except debts due to a nonresident from resident debtors. As to tangibles and intangibles alike, it made the test one of situs, and we think it is clear that the reference is to property which, according to accepted principles, could be deemed to have a situs in this country for the purpose of the exertion of the federal power of taxation. Again, so far as the intention of the Congress is concerned, we think that the principles thus impliedly invoked by the statute were the principles theretofore declared and then held. It is quite inadmissible to assume that the Congress exerting federal power was legislating in disregard of existing doctrine, or to view its intention in the light of decisions as to state power which were not rendered until several years later.³ The argument is pressed that the reference to situs must, as to intangibles, be taken to incorporate the principle of mobilia sequunter personam and thus, for example, that the bonds here in question though physically in New York should be regarded as situated in Cuba where decedent resided. But the Congress did not enact a maxim. When the statute was passed it was well established that the taxing power could reach such securities in the view that they had a situs where they were physically located. As securities thus actually present in this country were regarded as having a situs here for the purpose of taxation, we are unable to say that the Congress in its broad description, embracing all property 'situated in the United States,' intended to exclude such securities from the gross estate to be returned and valued.

The general clause with respect to the property of nonresidents 'situated in the United States' is found in the provisions for an estate tax of the Revenue Act of 1916, § 203(b), 39 Stat. 778, and was continued in the Revenue Acts of 1918, § 403(b), 40 Stat. 1098; of 1921, § 403(b), 42 Stat. 280; and of 1924, § 303(b), 26 USCA § 1095 note, the provision now under consideration. Before the phrase was used in the act of 1916, this Court, in passing upon questions arising under the inheritance tax law of June 13, 1898, § 29, 30 Stat. 464 (in a case where the decedent had left 'certain federal, municipal and corporate bonds' in the custody of his agents in New York), recognized that the property would not have escaped the tax, had it been imposed in apt terms, in the view that the property was intangible and belonged to a nonresident. Eidman v. Martinez, 184 U.S. 578, 582, 22 S.Ct. 515, 46 L.Ed. 697. While that statute was found to be inapplicable, as the property had not passed, within the limitations of the statute, 'by will or by the intestate laws of any state or territory,' the opinion conceded the power of Congress 'to impose an inheritance tax upon property in this country, no matter where owned or transmitted.' Id., page 592 of 184 U.S., 22 S.Ct. 515, 516, 521, 46 L.Ed. 697. We see no reason to doubt that it was with this conception of its power that the Congress enacted the later provisions for an estate tax in the case of nonresidents. And before the Revenue Act of 1921 was passed, we had stated the principles deemed controlling in De Ganay v. Lederer, 250 U.S. 376, 39 S.Ct. 524, 525, 63 L.Ed. 1042, in construing the provision of the Income Tax Law of 1913, 38 Stat. 166, imposing a tax upon the net income 'from all property owned * * * in the United States by persons residing elsewhere.' The decision was upon a certified question with respect to the income of a citizen and resident of France from stocks, bonds, and mortgages secured upon property in the United States, where the owner's agent in the United States collected and remitted the income and had 'physical possession of the certificates of stock, the bonds and the mortgages.' The Court said: 'The question submitted comes to this: Is the income from the stock, bonds, and mortgages, held by the Pennsylvania Company (the agent), derived from property owned in the United States? A learned argument is made to the effect that the stock certificates, bonds, and mortgages are not property, that they are but evidences of the ownership of interests which are property; that the property, in a legal sense, represented by the securities, would exist if the physical evidences thereof were destroyed. But we are of opinion that these refinements are not decisive of the congressional intent in using the term 'property' in this statute. Unless the contrary appears, statutory words are presumed to be used in their ordinary and usual sense, and with the meaning commonly attributable to them. To the general understanding and with the common meaning usually attached to such descriptive terms, bonds, mortgages, and certificates of stock are regarded as property. By state and federal statutes they are often treated as property, not as mere evidences of the interest which they represent.' Having no doubt 'that the securities, herein involved, are property,' the Court proceeded to the question, 'Are they property within the United States? It is insisted that the maxim 'mobilia sequuntur personam' applies in this instance, and that the situs of the property was at the domicile of the owner in France. But this Court has frequently declared that the maxim, a fiction at most, must yield to the facts and circumstances of cases which require it, and that notes, bonds, and mortgages may acquire a situs at a place other than the domicile of the owner, and be there reached by the taxing authority.' Then, describing the location of the certificates of stock, bonds and mortgages in question in the possession of the agent in Philadelphia, the Court concluded that the securities constituted 'property within the United States within the meaning of Congress as expressed in the statute under consideration.' The reference in the state- ment of this conclusion to the authority of the agent to sell, invest, and reinvest was by way of emphasis and is not to be taken as importing a necessary qualification. The Court, answered the certified question in the affirmative. Id., pages 380—383 of 250 U.S., 39 S.Ct. 524, 525, 63 L.Ed. 1042.

Under the Revenue Act of 1916, the Commissioner of Internal Revenue ruled 'that Congress has the power and evidenced an intention' in that act 'to impose a tax upon bonds, both foreign and domestic, owned by a non-resident decedent, which bonds are physically situate in the United States,' and that 'such bonds must be returned as a portion of his gross estate.' T.D. 2530. The regulations promulgated by the Treasury Department under the Revenue Act of 1918, interpreting the words 'situated in the United States,' contained the following: 'The situs of property, both real and personal, for the purpose of the tax is its actual situs. Stock in a domestic corporation, and insurance payable by a domestic insurance company, constitute property situated in the United States, although owned by, or payable to, a nonresident. A domestic...