Commissioner of Corporations and Taxation v. Simmon

• Decision Date: 26 November 1935
• Citation: 292 Mass. 507,198 N.E. 741
• Parties: COMMISSIONER OF CORPORATIONS AND TAXATION v. SIMMON.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

292 Mass. 507

198 N.E. 741

COMMISSIONER OF CORPORATIONS AND TAXATION v. SIMMON.

Supreme Judicial Court of Massachusetts, Suffolk.

November 26, 1935

Appeal from Board of Tax Appeals.

Proceeding by David A. Simmon for abatement of an income tax. From a decision of the Board of Tax Appeals abating the income tax, Commissioner of Corporations and Taxation appeals.

Order in accordance with opinion.

C. F Lovejoy, Asst. Atty. Gen., for Commissioner of Corporations & taxation.

A. P Lowell, of Boston, for appellee.

RUGG Chief Justice.

This is an appeal by the commissioner of corporations and taxation from a decision of the Board of Tax Appeals abating an income tax. The case involves the validity of a tax on income alleged to have been received during the year 1930 by David A. Simmon, the applicant for abatement. The relevant facts are these: A resident of New York died in 1923 leaving a will whereby funds were bequeathed in equal sums to each of two trust companies in New York in trust to invest and keep invested for his grandnephew, said David A. Simmon, ‘ until he reaches the age of twenty-one, and then to be paid to him with all the accumulations,’ with power in the trustees to make proper allowance for his ‘ comfort, maintenance, education and support.’ If the grandnephew died under the age of twenty-one leaving no surviving child or children, there were gifts over. David A. Simmon was at the time of the death of the testator, and has been ever since, a resident of this commonwealth. The New York trustees in 1924 received the funds from the executors of the testator, less inheritance taxes thereon. The funds were invested and kept invested by the trustees in mortgages and bonds, and the interest was collected and accumulated by them; payments were made from time to time by them to the guardian of David A. Simmon for his support; and the expenses of the trust, including income taxes, counsel fees and trustees' compensation, were paid out of the trust funds.

The record does not show the amount of income received by the trustees during 1930. The income of the preceding years had been expended as stated above, or reinvested and capitalized. David A. Simmon reached the age of twenty-one in March, 1930, and received the funds with accumulations. The total income accumulated by the trustees from 1924 to 1930, less certain expenses and deductions, was treated as his income received during 1930 by the commissioner of corporations and taxation and a tax was assessed upon it.

The issue of law presented by the parties to the Board of Tax Appeals was ‘ whether the accumulations of income received by the trustees over a series of years and paid to’ David A. Simmon ‘ in 1930 as a part of the principal of the trust funds were income received by him during that year, taxable under G. L. c. 62, § 11.’ No other issue of law can be considered by this court. G. L. (Ter. Ed.) c. 58A, § 13.

The words of G. L. c. 62, § 11, which was applicable to income received in 1930, were these: ‘ If an inhabitant of the commonwealth receives income from one or more trustees, none of whom is an inhabitant of the commonwealth or has derived his appointment from a court of the commonwealth, such income shall be subject to the taxes imposed by this chapter, according to the nature of the income received by the trustees.’

Whatever may be the precise nature of the interest of David A. Simmon in the trust funds and their accumulations in other connections (see Minot v. Tappan, 127 Mass. 333; Clarke v. Fay, 205 Mass. 228, 91 N.E. 328,27 L.R.A. [N. S.] 454), it is plain that he had no right to enjoyment in possession of any part of the funds, as to either principal or accumulations, until he reached the age of twenty-one years. The allowances for his support and education rested in the discretion of the trustees. However his interest may be described, it was subject to be utterly divested if he should die before reaching that age. The income was not paid to him year by year and it was not paid to him as income. It was converted into capital in New York as received year by year by the New York trustees, acting pursuant to the will. Tax Commissioner v. Putnam, 227 Mass. 522, 526, 116 N.E. 904, L.R.A. 1917F, 806; Maguire v. Tax Commissioner, 230 Mass. 503, 512, 120 N.E. 162,Springdale Finishing Co. v. Commonwealth, 242 Mass. 37, 41, 136 N.E. 250.That which ...