First Nat. Bank of Boston v. Comm'r of Corps. & Taxation

• Citation: 279 Mass. 168,181 N.E. 205
• Parties: FIRST NAT. BANK OF BOSTON v. COMMISSIONER OF CORPORATIONS AND TAXATION.
• Decision Date: 24 May 1932
• Court: United States State Supreme Judicial Court of Massachusetts

279 Mass. 168

181 N.E. 205

FIRST NAT. BANK OF BOSTON

v.COMMISSIONER OF CORPORATIONS AND TAXATION.

Supreme Judicial Court of Massachusetts, Suffolk.

May 24, 1932.

Petition by the First National Bank of Boston, trustee, against the Commissioner of Corporations and Taxation.

Petition dismisses.

G. S. Fuller and C. J. Winkler, Jr., both of Boston, for petitioner.

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

RUGG, C. J.

This is a proceeding for the abatement of an income tax assessed upon the appellant with respect to income received by it in 1929 as trustee under the will of a deceased resident of Vermont for the benefit of and paid to a beneficiary resident in this commonwealth. The testatrix died domiciled in Vermont on December 31, 1927. Her will was duly proved and allowed by the appropriate court of that state. The appellant, a national banking association having its principal place of business at Boston in this commonwealth, was appointed trustee under the will by the court of Vermont and is accountable to that court for the administration of its trust under and pursuant to the laws of that state. The sole present beneficiary as life tenant under the will resides in this commonwealth. The securities which form the corpus of the trust are and have been during the time here material kept in this commonwealth. The trustee received interest and dividends from these securities which if received by an individual resident of this commonwealth would be taxable to him and paid such income to the life beneficiary resident in this commonwealth as directed by the will. Not question is made as to the amount of the tax if any is due. The appellant has conformed to all the requirements of the laws of Vermont precedent to being permitted as a national banking association with its principal place of business in this commonwealth to act as trustee and in general with respect to the trust. The appellant alleges that it is taxable in Vermont under a statute of that state. Taxes were assessed for the years 1929 and 1930 to the appellant in the town in Vermont where the testatrix resided at the time of her death. Such taxes were computed on a percentage of the valuation of the trust estate and ‘were claimed to have been assessed upon the equitable interests of the beneficiaries of the trust by virtue of the authority of subdivision 5 of section 703 of the General Laws, as amended by the Acts of 1929, No. 21,’ It has been found as a fact that the taxes were so assessed to the appellant as trustee upon the equitable interest of the beneficiaries in the town where the tewtatrix last resided in Vermont. The appellant contends that the tax thus imposed is a direct property tax. The appellant has in fact paid such taxes in that state.

The appellant filed with the commissioner of corporations and taxation a return of the income received by the beneficiary for 1929, and was assessed an income tax thereon which it paid. It seasonably petitioned for abatement of this tax on the ground that jurisdiction for taxation of the trust was in Vermont and that this commonwealth was without jurisdiction to levy the tax here in question. That is the contention here presented for consideration.

The statute of Vermont, after providing for the listing for purposes of taxation of personal property held in trust by a resident trustee and by a nonresident trustee for the benefit of a resident beneficiary, so far as material to the facts in this case is in these words: ‘* * * If such trust was created under the laws of this state, or was established under the terms of a will probated in this state, and the person holding the property in trust, or the trustee, and the beneficiary, both reside without the state, then the equitable interest of the beneficiary shall be set in the list to him, or to the trustee, in the town, village, school and fire district where the creator of the trust, or the decedent, last resided in this state.’ General Laws of Vermont, c. 38, § 703 (5), as amended by Acts of 1929, No. 21. The relevant statutes of this commonwealth under which the tax is or might be levied are these sections of G. L. c. 62 (the amendment made by St. 1931, c. 456, being inapplicable to the case at bar): ‘Section 10. The income received by estates held in trust by trustees, any one of whom is an inhabitant of the commonwealth or has derived his appointment from a court of the commonwealth, shall be subject to the taxes assessed by this chapter to the extent that the persons to whom the income from the trust is payable, or for whose benefit it is accumulated, are inhabitants of the commonwealth. * * * Section 11. If an inhabitant of the commonwealth receives income from one or more trustees, none of whom is an inhabitant of the commonwealth of has derived his apppointment 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.’

No decision of the Supreme Court of Vermont has been brought to our attention and we have found none interpreting the quoted statute of that state as applied to facts at all similar to those here presented. The correct comstruction of that statute seems to us to be that it does not purport to establish a situs within the state of Vermont for the purposes of taxation of the corpus of all estates held in trust under wills of deceases residents and in process of administration or settlement by fiduciaries appointed by its courts and thus to make such estates resident trusts. We are of opinion that the words of that statute forbid such interpretation. Their scope is to subject to taxation only the ‘equitable interest of the beneficiary.’ That interest is property different in kind from the legal ownership. That interest belonged to the beneficiary of the trust who was a resident not of Vermont but of this commonwealth. Whatever may be the validity of the statute it falls short of creating a taxable situs in Vermont for the property constituting the trust in the case at bar. The statute does not create a situs in Vermont for taxation over the property which has been subjected to taxation in this commonwealth. The principle on which the decision in Harrison v. Commissioner of Corporations and Taxation, 272 Mass. 422, 172 N. E. 605, 71 A. L. R. 677, rests is inapplicable to the case at bar. In that case a taxable situs for each of the several trusts had been established in the state where it was created by the law of that state and no beneficiary of the several trusts was a resident of this commonwealth.It was held that there was no jurisdiction in this commonwealth to levy a tax under such conditions.

[1] Whatever may be the right interpretation of the statute of Vermont, we think that the tax here in question was rightly levied. The language of G. L. c. 62, § 10, is precisely applicable to the facts here disclosed. The beneficiary of the trust and the recipient of the income sought to be taxed was at all times here material a resident of this commonwealth. That person and not the trustee under the will was the real person in interest. The trustee who held the legal title to the securities from which the income was derived also had its principal place of business within this commonwealth. If the trustee were not a resident of the commonwealth, the income received by the beneficiary would have been taxed directly to the beneficiary, under G. L. c. 62, § 11. The purpose of the General Court to assess the tax ultimately upon the resident recipient of income thus is clear. Where the trustee as well as the beneficiary is within the jurisdiction of this commonwealth, the tax as matter of convenience in administration is assessed to the trustee, but it is so assessed because of the residence of the beneficiary. The appellant as a national banking association was subject to the laws of this commonwealth, where it was located, except as they may conflict with the paramount law of the United States and is to be deemed an inhabitant of this commonwealth. Continental National Bank v. Buford, 191 U. S. 119, 123, 124, 24 S. Ct. 54, 48 L. Ed. 119;First National Bank v. Missouri, 263 U. S. 640, 656, 44 S. Ct. 213, 68 L. Ed. 486;Burnes National Bank v. Duncan, 265 U. S. 17, 44 S. Ct. 427, 68 L. Ed. 881;First National Bank of Boston v. Commissioner of Corporations and Taxation, 274 Mass. 583, 175 N. E. 97. If the trustee were not within the jurisdiction of the commonwealth, the tax would be assessed directly to the beneficiary.

The case at bar appears to us to be governed by Maguire v. Trefry, 253 U. S. 12, 40 S. Ct. 417, 64 L. Ed. 739, where Maguire v. Tax Commissioner, 230 Mass. 503, 120 N. E. 162, was affirmed. In that case...