Coulter v. Wisconsin Dept. of Taxation

• Decision Date: 03 April 1951
• Citation: 259 Wis. 115,47 N.W.2d 303
• Parties: COULTER et al. v. WISCONSIN DEPARTMENT OF TAXATION.
• Court: Wisconsin Supreme Court

Page 303

47 N.W.2d 303

259 Wis. 115

COULTER et al. v. WISCONSIN DEPARTMENT OF TAXATION.

Supreme Court of Wisconsin.

April 3, 1951.

Rehearing Denied June 15, 1951.

Vernon W. Thomson, Atty. Gen., Harold H. Persons, E. Weston Wood, Asst. Attys. Gen., for appellant.

Bradford, Derber & Gabert, Appleton, for respondents.

GEHL, Justice.

Mr. Peabody died in 1909 leaving a will. The will sets up a trust out of the income of which testator's daughter, Emma Peabody Harper, who is still living, is to receive $6,000 annually during her life. Then follow directions for payments out of the residue of the estate, each being contingent upon there being funds remaining after payment of the preceding bequests, as follows:

Article II: $1,000 to the Appleton cemetery association, in trust for perpetual care of decedent's grave. (Annually $50 as income on $1,000 has been paid.)

Article IV: $30 monthly for ten years to Mrs. Richmond or her two daughters. (This amount has been paid, and although Mrs. Richmond died prior to 1946, her heirs were still living in 1946.)

Article V: $30 monthly for ten years to Mrs. Castle. (This amount has been paid. She died in 1928.)

Article VI: (1) $50,000 for the establishment, endowment and maintenance of an Old Ladies Home to be incorporated by the trustees, open to indigent elderly women residing in Outagamie County and in cities of Neenah and Menasha, provided that it be a model institution of its kind, that the building and complete fittings cost no more than $25,000, that the site be contributed by the City of Appleton or the citizens of Appleton and neighboring cities, and that the grounds be conveniently accessible by streetcar line.

(2) Not less than $25,000 and not exceeding $50,000 to such Old Ladies Home, as a trust fund, the income to be used to establish and maintain a bureau of visiting nurses.

(3) Such sums as trustees think proper to needy persons who have been employed by decedent or The Pettibone-Peabody Company, but not exceeding $10,000 in all.

(4) $5,000 to Mrs. Richmond or her two daughters, if she be then dead, and $5,000 to Mrs. Castle.

(5) $25,000 to endow an Appleton YMCA provided an additional $25,000 is raised within two years after Mrs. Harper's death for the erection of a building for said YMCA.

(6) $5,000 to Lawrence University, Appleton, Wis., for improving the grounds, and $25,000 to it to build and maintain a girls' infirmary, not to exceed $15,000 thereof to be used in erecting a modern up-to-date structure, entirely separate and apart from other buildings.

(7) $50,000 to a parkway association, if such an organization is formed, to build a park and drive along a specified section of the Fox River, upon the express limitation that the City of Appleton or the association first provides a permanent endowment of at least $1,200 annually for maintenance thereof.

(8) $2,500 to the public schools of Appleton for landscaping.

(9) Any residue remaining after all of the foregoing to be distributed pro rata among the beneficiaries already provided for in proportion to the sums already paid them.

The board found that during the year 1946 the trustees received as net income from the assets of the estate the sum of $131,373.04 out of which they paid to Emma Harper, pursuant to the provisions of the will, $6,000; that the balance, $125,373.04, was retained by the trustees, and that no part of the balance was permanently set aside to be used exclusively by or for the beneficiaries named in the will. It concluded that the balance should be assessed to the trustees as income.

Respondents contend that the bequests contained in Articles VI(1), (2), (3), (5), (6), (7) and (8) of the will are to agencies designated in sec. 71.08(9), that they were during the year 1946, pursuant to the terms of the will, permanently set aside to be used exclusively for such agencies, and are therefore exempt from the tax imposed upon trustees by the provisions of sec. 71.08(8) Stats.

Sec. 71.08 Stats. imposed a tax upon incomes received by fiduciaries. Subsection (9) provides: '* * * There shall be exempt from such taxation any part of the gross income, without limitation, which pursuant to the terms of the will, deed or other trust instrument creating the trust, is during the taxable year permanently set aside to be used exclusively by or for the state of Wisconsin or any city, village, town, county or school district therein or any agency of any of them or any corporation, community chest fund, foundation or association operating within this state, organized and operated exclusively for religious, charitable, scientific or educational purposes or for the prevention of cruelty to children or animals, no part of the net income of which inures to the benefit of any private stockholder or individual. Such exemption shall be operative retroactively except in those instances in which an assessment has become final and conclusive under the provisions of chapter 71.'

The books of the trustees do not indicate that the trustees ever treated any of the income as having been manually or physically set aside for the beneficiaries generally or for any of them specifically. It would make no difference if they had, for it is important to note that the statutory exemption applies to income 'which pursuant to the terms of the will * * * is during the * * * year permanently set aside * * *.' The will contains no provision requiring that the trustees set aside by any physical act any part of the income for any purpose or for the benefit of any of the named beneficiaries. The fact that they do or do not do so has not been considered an important element by the federal...