Coolidge v. Comm'r of Corp. & Taxation (In re Coolidge's Estate)

• Decision Date: 13 September 1929
• Citation: 167 N.E. 757,268 Mass. 443
• Parties: COOLIDGE et al. v. COMMISSIONER OF CORPORATIONS AND TAXATION. In re COOLIDGE'S ESTATE (two cases).
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

268 Mass. 443

167 N.E. 757

COOLIDGE et al.

v.COMMISSIONER OF CORPORATIONS AND TAXATION.

In re COOLIDGE'S ESTATE (two cases).

Supreme Judicial Court of Massachusetts, Norfolk.

Sept. 13, 1929.

Petitions by Harold J. Coolidge and another, trustees of the estates of Julia Coolidge and of J. Randolph Coolidge, against the Commissioner of Corporations and Taxation, for abatement of state inheritance tax. Denied.R. G. Dodge and H. S. Davis, both of Boston, for petitioners.

J. S. Eastham, Asst. Atty. Gen., for respondent.

RUGG, C. J.

These are petitions brought, under G. L. c. 65, § 30, to determine the validity of succession taxes. The petitioners are trustees under a deed and declaration of trust executed on July 29, 1907, by J. Randolph Coolidge and Julia Coolidge and the petitioners. By that deed a large amount of real and personal estate was transferred to the trustees by the settlors voluntarily and not as a bona fide purchase for full consideration in money or in money's worth. The trustees were given extensive powers of management, investment and reinvestment with the right to determine finally what receipts and payments should be credited to income or principal. The part of the trust fund furnished by J. Randolph Coolidge was four-sevenths, and the part furnished by Julia Coolidge was three-sevenths. By the terms of the trust the income was to be paid in these proportions to each of the settlors during their joint lives and then the entire income to the survivor, and, upon the death of the survivor, the principal was to be divided equally among their five sons, provided that, if any of the sons should predecease the survivor of the settlors, his share should go to those entitled to take his intestate property under the statute of distributions in force at the death of such survivor, with a further provision to the effect that in no event should a widow of such deceased son take as distributee more than half of such share. There was in the declaration of trust no power of revocation or modification or termination prior to the death of the survivor of the settlors. Coolidge v. Loring, 235 Mass. 220, 126 N. E. 276. By instrument executed on April 6, 1917, the settlors assigned their interest in the trust to the five sons, all of whom eventually survived the termination of the trust. Julia Coolidge died in January, 1921, and J. Randolph Coolidge on November 10, 1925, both being residents of this commonwealth. The defendant determined that the petitioners were subject to excise taxes under G. L. c. 65, § 1, as amended, upon the four-sevenths and upon the three-sevenths of the trust estate furnished respectively by each settlor as of November 10, 1925. There is no controversy as to the amount of the excise, if any is due.

When the declaration of trust was executed, no statute was operative under which the trust property could have been subjected to an excise because the succession was to direct descendants of the settlors. Statutes then in force provided for levy of an excise only where the succession was to collateral relatives and to strangers. There had been approved, on June 27, St. 1907, c. 563, which took effect on September 1, 1907, about five weeks after the date of the declaration of trust. This is the first relevant statute. Its provisions were:

Section 1: ‘All property within the jurisdiction of the commonwealth * * * which shall pass by * * * deed, grant, or gift, except in cases of a bona fide purchase for full consideration in money or money's worth, made or intended to take effect in possession or enjoyment after the death of the grantor, to any person * * * shall be subject to a tax. * * *’

Section 25: ‘This act shall not apply to estates of persons deceased prior to the date when it takes effect, or to property passing by deed, grant, sale, or gift made prior to said date. * * *’

Said section 1 was amended in particulars not here material by St. 1912, c. 678, § 1. It was provided by section 3 of the latter statute: ‘The provisions of section one of this act shall apply to the estates of all persons dying subsequent to the passage hereof, and to all property passing by deed, grant or gift except in cases of a bona fide purchase for full consideration in money or money's worth, made or intended to take effect in possession or enjoyment after the death of the grantor or donor, if such death occurs subsequent to the passage hereof. * * *’

Said section 25 was amended by St. 1914, c. 563, § 1, so as to read: ‘This part shall not apply to * * * property passing by deed, grant, sale or gift made or intended to take effect in possession or enjoyment after the death of the grantor when such death occurred prior to said date [September 1, 1907]. * * *’

The relevant statutory provisions operative since January 1, 1921, are in G. L. c. 65, as follows:

Section 1: ‘All property within the jurisdiction of the commonwealth * * * which shall pass by * * * deed, grant or gift, except in cases of a bona fide purchase for full consideration in money or money's worth, * * * made or intended to take effect in possession or enjoyment after his death * * * to any person, absolutely or in trust * * * shall be subject to a tax * * *’

Section 36: ‘This chapter shall apply only to property or interests therein passing or accruing upon the death of persons dying on or after May fourth, nineteen hundred and twenty. * * *’

The question for decision is whether the net trust estate passing to the sons on the death of the surviving settlor is subject to excise taxes under these statutes.

The ‘tax authorized by these statutes is a tax upon ‘succession’ which includes the ‘privileges enjoyed by the beneficiary of succeeding to the possession and enjoyment of property.’ See Attorney General v. Stone, 209 Mass. 186, 190, 95 N. E. 395;Minot v. Winthrop, 162 Mass. 113, 124, 38 N. E. 512,26 L. R. A. 259;Crocker v. Shaw, 174 Mass. 266, 267, 54 N. E. 549. * * * We are here concerned, not with a tax on the privilege of transmission, not with an attempt to tax a donor's estate for an absolute gift made when no tax was thought of, * * * but with a tax on the privilege of succession, which also may constitutionally be subjected to a tax by the state whether occasioned by death, Stebbins v. Riley, supra [268 U. S. 137, 45 S. Ct. 424, 69 L. Ed. 884, 44 A. L. R. 1454]; or effected by deed, Keeney v. New York, 222 U. S. 525, 32 S. Ct. 105, 56 L. Ed. 299,38 L. R. A. (N. S.) 1139;Chanler v. Kelsey, supra [205 U. S. 466, 27 S. Ct. 550, 51 L. Ed. 882];Nickel v. Cole, supra [256 U. S. 222, 41 S. Ct. 467, 65 L. Ed. 900]. The present tax is not laid on the donor, but on the beneficiary; the gift taxed is not one long since completed, but one which never passed to the beneficiaries beyond recall until the death of the donor. * * * So long as the privilege of succession has not been fully exercised it may be reached by the tax.' Saltonstall v. Saltonstall, 276 U. S. 260, 269, 270, 271, 48 S. Ct. 225, 226, 227, 72 L. Ed. 565, affirming Saltonstall v. Treasurer and Receiver General, 256 Mass. 519, 153 N. E. 4, where earlier Massachusetts decisions are reviewed; Boston Safe Deposit & Trust Co. v. Commissioner of Corporations and Taxation (Mass.) 166 N. E. 729.

The settlors by the deed of July, 1907, divested themselves of all power of disposition over the principal of the trust. It then passed irrevocably from their control. After that they possessed only rights to the income. Thus they did not divest themselves of all interest in the property. They stripped themselves of those rights in April, 1917. That is not pertinent to the issues here involved because before that time the statute had been changed as to taxation of successions so as to include the kind of succession established by the deed of July, 1907. Confessedly at the time of the execution of the trust deed there was no statute exacting an excise on the transfer of the property or on succession to it. This, however, in our opinion is not a decisive factor. The present excise under the statute was levied on the succession, not on the transmission, of the trust fund. As already pointed out succession is a quite different thing from transmission. It is manifest from the terms of the declaration of trust that the death of the survivor of the settlors was expresslyfixed as the effective date of succession by the final beneficiaries to the enjoyment of the principal and income of the trust estate. The excise statute here controlling and already quoted is designed to include within its sweep all methods of succession to property to take effect in possession or enjoyment after the death of the grantor or donor other than those made inter vivos for a bona fide consideration. By express words it embraces succession created by deed. Whenever property is conveyed upon such limitation that it will vest in interest, possession or enjoyment by reason of the death of the grantor or donor, such succession falls within the descriptive words of the statute. The succession to any of these attributes of property occurring as the result of the death of the grantor or donor constitutes the taxable commodity. Magee v. Commissioner of Corporations and Taxation, 256 Mass. 512, 515, 153 N. E. 1.

The assignment of their life interest in the income of the trust by the settlors to their sons in 1917 did not operate to alter the nature of the trust instrument or of the transaction out of which spring the rights of the final beneficiaries. It is obvious that this assignment did not, even in combination with the trust instrument of July, 1907, vest the entire interest in the trust in the five sons. That was recognized by the position of the trustees, settlors and sons in Coolidge v. Loring, 235 Mass. 220, 222, 126 N. E. 276, where reformation of the trust instrument of July, 1907, was sought, because the demand on the trustees by the sons after the assignment for immediate distribution of the fund had been...