Comm'r of Corps. & Taxation v. Alford

• Decision Date: 25 February 1933
• Parties: COMMISSIONER OF CORPORATIONS AND TAXATION v. ALFORD et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

282 Mass. 113

184 N.E. 437

COMMISSIONER OF CORPORATIONS AND TAXATION

v.ALFORD et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Feb. 25, 1933.

Proceeding by the Commissioner of Corporations and Taxation against J. Warren Alford and others, as trustees under the will of Janet B. Casey, deceased, for assessment of income taxes. From a decision of the Board of Tax Appeals, the Commissioner appeals.

Abatement of taxes granted in stated sums.

Appeal from Board of Tax Appeals.

J. E. Warner, Atty. Gen., and C. F. Lovejoy, Asst. Atty. Gen., for appellant.

H. R. Bygrave, of Boston, for appellees.

PIERCE, Justice.

These are appeals taken by the tax commissioner in two cases heard together by the Board of Tax Appeals. The cases are the same except that they involve taxes in different years. Resident trustees under a domestic trust sold securities at a gain and held the income so resulting for future distribution under the terms of the will. The tax commissioner ruled that the gains were taxable as ‘income accumulated in trust for the benefit of unborn or unascertained persons or persons with contingent interests,’ as those words are used in G. L. c. 62, § 10. The trustees contend and the Board of Tax Appeals held that the interest in the trust res including the gains here in question was vested in ascertained persons who were not inhabitants of this commonwealth.

At the hearing before the Board of Tax Appeals the tax commissioner requested the following rulings: ‘1. Upon all the evidence in this case the appellee as matter of law is entitled to a decision. 2. The excess of gains over the losses received by the appellants from purchases or sales of intangible personal property was not income payable to or accumulated for persons not inhabitants of the commonwealth within the meaning of G. L. c. 62, § 8(d). 3. The excess of gains over the losses received by the appellants during the calendar year [1928] 1929 from purchases or sales of intangible personal property was income accumulated in trust for the benefit of unborn or unascertained persons or persons with contingent interests within the meaning of G. L. c. 62, § 10 prior to its amendment by Acts 1931, c. 456, § 1.’

The will of Janet B. Casey, late of this commonwealth, gave to her trustees the residue of her estate in trust to pay to her daughter, Grace W. Elms, the net income thereof for life, and after her death to pay the net income equally to her grandchildren, Leonard Brooks Elms, James C. Elms, Jr., and Grace Louise Elms, for their lives. The trust was to last for the lives of the three grandchildren and for twenty years after the death of the last survivor of them. It was further provided that if any grandchild should die leaving no issue the net income of his share in the trust funds should be paid over equally among the surviving grandchildren and the issue of any deceased grandchild by right of representation until the termination of the trust; that in case any issue of a deceased grandchild should die before the termination of the trust his share in the trust funds should be held in equal shares for the benefit of the remaining issue of such deceased grandchild until the termination of the trust, and that if all the issue of a deceased grandchild should die before the termination of the trust the share of such deceased grandchild should be held in equal portions for the benefit of the surviving grandchildren and the issue of any deceased grandchild, such issue taking by right of representation. On the death of any grandchild leaving issue his share of the trust fund was to be held in equal proportions for the benefit of the issue until the termination of the trust. At the termination of the trust the trustees were directed ‘to pay over by right of representation to such issue the share of the principal of said trust funds then held for the benefit of such issue’ and later the direction was repeated that ‘in all cases the principal of the share or shares held for such issue [the issue of any deceased grandchild] to be paid to them at the termination of the trusts as aforesaid.’ During the years 1928 and 1929 the following beneficiaries under the will were alive and were all inhabitants of the state of New Jersey; Grace W. Elms, a daughter of the testatrix; Leonard Brooks Elms, Jr., a minor and great grandchild of the testatrix, and son of Leonard Brooks Elms, deceased, grandson of the testatrix; James C. Elms, Jr., a grandson of the testatrix, and his minor children, Marguerite Elms and James C. Elms, 3rd, great grandchildren of the testatrix; and Grace Louise Elms Corwin, a granddaughter of the testatrix, and her minor children, Alfred H. Corwith, Jr., and Hamilton S. Corwin, great grandchildren of the testatrix. The trustees' objection to the determination and decision of the tax commissioner, appealed from to the Board of Tax Appeals, is upon the ground that the tax commissioner levied a tax upon income accumulated for the benefit of non-resident members of a class, and because there were living members of the class, all nonresidents, in whom the remainder under the aforesaid will was vested, although the time for possession is postponed, and the remainder will open to let in after born members.

The tax commissioner contends that if there are no issue of the grandchildren living twenty years after the death of the surviving grandchild the property will go presumably to the heirs of the testatrix, and if there are issue living at the time of distribution it will go to such issue and only to such issue as are then living, and that it follows consequently that those who will take cannot be ascertained until the time of distribution arrives; that even if the remainder interest is vested in the five grandchildren now living, it does not follow that they are ascertained because their interest is...