Ferguson v. Commissioner of Corporations and Taxation
| Decision Date | 02 June 1944 |
| Citation | 55 N.E.2d 618,316 Mass. 318 |
| Parties | CARL B. FERGUSON, executor, v. COMMISSIONER OF CORPORATIONS AND TAXATION. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
May 15, 1941.
Present: FIELD, C.
J., LUMMUS, DOLAN & RONAN, JJ.
Taxation Succession tax. Constitutional Law, Taxation. Power. Devise and Legacy, Power. Statute, Construction, Repeal. Executor and Administrator, Appointive property, Succession tax.
An assessment of a succession tax on appointive property passing to a beneficiary in 1936 on the death of the donee of a power created by the will of one who died before 1907, where individual property of the donee also passed to the same beneficiary under the donee's will, could not be sustained under G. L. (Ter. Ed.) c. 65, Section 2.
General Laws (Ter Ed.) c. 65, Section 2, should be construed as not imposing a succession tax on appointive property which in 1936, on the death of the donee of a power created by the will of one who died before
1907, passed to a beneficiary unaccompanied by individual property of the donee.
An additional succession tax could not validly be assessed under St. 1936 c. 397, upon appointive property passing to a beneficiary in 1936 on the death of the donee of powers created by wills of persons who died in
1892 and 1900, respectively.
Property which the donee of powers created by the wills of persons who died in 1892 and 1900, respectively, appointed to strangers to the blood of the donors by an appointment effective on the death of the donee in
1936, became at that time, if of sufficient value, subject to a succession tax under St. 1891, c. 425, as amended, and St. 1902, c. 473.
St. 1891, c.
425, as amended, and St. 1902, c. 473, were not repealed by
St. 1909, c.
527, Section 8, so far as they relate to property passing by the exercise or nonexercise of powers of appointment created by wills of persons dying after the effective date of St. 1891, c. 425, and before September 1, 1907.
The executor of the will of a donee of a general power of appointment, upon receiving for distribution the appointive property from the trustee under the will of the donor and agreeing to pay the taxes thereon and subsequently paying a succession tax assessed thereon, was not entitled, on petition under G. L. (Ter. Ed.) c. 65, Section 27, to have the entire amount of such tax abated, but merely a portion thereof in excess of the amount properly assessable.
PETITION, filed in the Probate Court for the county of Norfolk on October 6, 1937.
The case was heard by Poland, J.
G. L. Dillaway, for the petitioner. H. E. Magnuson, Assistant Attorney General, for the respondent.
This petition was brought in the Probate Court by the executor of the will of Albertina von Arnim, late of Brookline, against the commissioner of corporations and taxation, herein referred to as the commissioner. It was originally in the form of a petition for instructions under G. L. (Ter. Ed.) c 65, Section 30, but by amendment it was changed to a petition for abatement of legacy and succession taxes under Section 27. No question is now raised as to the propriety of this amendment and we consider the petition as a petition for abatement. The case was heard in the Probate Court for final determination upon the petition, as amended, and an agreed statement of facts, which were found to be true, and was reported for the consideration of this court under G. L. (Ter. Ed.) c. 215, Section 13.
The testatrix died October 12, 1936, leaving a will which was duly proved and allowed April 9, 1937. The testatrix had a general power of appointment under the will of her mother, Elizabeth C. von Arnim, who died November 6, 1892, and a general power of appointment under the will of her father, Theodore F. von Arnim, who died December 2, 1900. The will of the testatrix was divided into three sections described respectively as "Section II, Disposition of My Interest in My Mother's Estate," and
Legacy and succession taxes amounting to $14,309.77 were certified to the petitioner and were paid by him. Included in this amount of legacy and succession taxes are such taxes on successions described in five subdivisions of paragraph 11 of the petition, as amended (here numbered for convenience [1], [2], [3], [4] and [5]) -- which, in this respect, the parties agreed were true -- as follows: (1) "Legacy of $3,000 to Xoa M. Shafer under power of appointment by Albertina von Arnim from the estate of Elizabeth C. von Arnim, the tax on which was assessed at the rate of 5% and 10% additional, and paid by your petitioner as executor in the sum of $165"; (2) "Legacy of $2,000 to Margaret E. Gleason under said power of appointment, the tax on which was assessed at the rate of 5% and 10% additional, and paid by your petitioner as executor in the sum of [$] 110"; (3) "Legacy of $5,000 to Edith C. Baker under said power of appointment, the tax on which was assessed at 5% and 10% additional, and paid by your petitioner as executor in the sum of $275"; (4) "Legacy of $5,000 and devise of the residue of $69,731.08 or a total of $74,731.08 to Carl B. Ferguson under said power of appointment on which tax was assessed at the rate of 5% on the first $10,000; 6% on the next $15,000; 7% on $25,000 and 8% on $24,731.08 which with the 10% additional tax, was paid by your petitioner as executor in the total sum of [$] 5,641.34"; (5) "Legacy assessed at $4,575.78 to Xoa M. Shafer under power of appointment by Albertina von Arnim from the estate of Theodore F. von Arnim the tax on which was assessed at 5% and 10% additional, and paid by your petitioner as executor in the sum of [$] 251.67." The petitioner seeks abatement of these legacy and succession taxes.
Each of these beneficiaries was a stranger to the blood of the testatrix. In addition to the property passing by the exercise of the powers of appointment, as above set forth, by section 1 of the testatrix's will, individual property of the testatrix was given to Xoa M. Shafer and Edith C. Baker, and a part of a remainder, after the death of Xoa M. Shafer, in a trust fund of individual property of the testatrix was given to said Carl B. Ferguson. No property passed to said Margaret E. Gleason by the will of the testatrix, except the property passing to her by reason of the exercise by the testatrix of the power of appointment under the will of the testatrix's mother.
First. We consider first whether the legacy and succession taxes here in question -- apart from the additional taxes at the rate of ten per cent -- can be sustained under G. L. (Ter. Ed.) c. 65, Section 2, purporting to impose legacy and succession taxes upon property passing by the exercise or nonexercise of powers of appointment. The legacy and succession taxes here in question are within the terms of said Section 2.
1. The legacy and succession taxes upon the property passing to Xoa M. Shafer, to Edith C. Baker, and to Carl B. Ferguson referred to in subdivisions (1), (3), (4) and (5) of paragraph 11 of the petition, as amended, cannot be sustained under G. L. (Ter. Ed.) c. 65, Section 2. That section, by reference to G. L. (Ter. Ed.) c. 65, Section 1, requires that property passing by reason of the exercise or nonexercise by the testatrix of powers of appointment be aggregated with individual property of the testatrix for the purpose of determining the legacy and succession taxes upon the combined individual and appointive property. But in Binney v. Long, 299 U.S. 280, 292-295, the Supreme Court of the United States held that this provision for aggregation of property and interests was unconstitutional, and in Dexter v. Commissioner of Corporations & Taxation, ante, 31, and in Putnam v. Commissioner of Corporations & Taxation, ante, 73, this decision was followed, and it was held further that there was no statutory authority for taxing, without aggregation, successions to appointive property resulting from the nonexercise of powers of appointment where the same beneficiaries succeeded also to individual property of the donee of such powers. While in those cases the successions to appointive property resulted from the nonexercise of powers of appointment, the principles underlying those cases are equally applicable to a case like the present where the successions resulted from the exercise of powers of appointment. Xoa M. Shafer, Edith C. Baker and Carl B. Ferguson, by reason of the will of the testatrix, each succeeded not only to appointive property but also to individual property of the testatrix. In the case of each of these beneficiaries the principle of aggregation of individual and appointive property, if valid, would have been applicable. This is true of Carl B. Ferguson even though the interest in individual property of the testatrix to which he succeeded was a remainder, after a life estate, in the trust fund. See Pratt v. Dean, 246 Mass. 300 , 308-309. According to the decisions in the Binney, Dexter, and Putnam cases, the legacy and succession taxes here involved upon the successions to appointive property by Xoa M. Shafer, Edith C. Baker and Carl B. Ferguson cannot be sustained under G. L. (Ter. Ed.) c. 65, Section 2.
2. The legacy and succession taxes upon appointive property passing to Margaret E. Gleason, referred to in subdivision (2) of paragraph 11 of the petition, as amended, cannot be sustained under G. L (Ter. Ed.) c. 65, Section 2. No individual property of the testatrix passed to the beneficiary. Consequently there was no occasion for the application of the principle of aggregation of individual property and appointive property passing to the same beneficiaries. The question,...
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