Fred Keeney v. Comptroller of the State of New York

• Decision Date: 09 January 1912
• Docket Number: No. 81,81
• Citation: 222 U.S. 525,56 L.Ed. 299,32 S.Ct. 105
• Parties: FRED. C. KEENEY, Individually and as Administrator of the Estate of Susan A. Keeney, Deceased, Seth A. Keeney and Angie Keeney Schwegel, Plffs. in Err., v. COMPTROLLER OF THE STATE OF NEW YORK
• Court: U.S. Supreme Court

222 U.S. 525

32 S.Ct. 105

56 L.Ed. 299

FRED. C. KEENEY, Individually and as Administrator of the Estate of Susan A. Keeney, Deceased, Seth A. Keeney and Angie Keeney Schwegel, Plffs. in Err.,

v COMPTROLLER OF THE STATE OF NEW YORK.

No. 81.

Argued December 6, 1911.

Decided January 9, 1912.

On June 13, 1903, Susan A. Keeney, a resident of New York, being in good health, executed in Kings county a deed, whereby she conveyed a cattle ranch in Texas and certain stocks and bonds to the Fidelity Trust Company of Newark, New Jersey, in trust, to hold the same during her lifetime, and to divide the net income equally between herself and her three children, two of whom reside out of the state of New York. The deed further provided that after her death the trustees should pay the entire income, or transfer the property, to her children, or their issue, on terms and limitations not material to this investigation. In the deed she 'reserved the right to revoke or alter the whole or any part of the trust conveyance, at any time after six months' notice in writing.' She died March 29, 1907, being at the time a resident of Kings county, leaving an estate of the value of $25,000 and the three children as sole heirs at law.

In tax proceedings the proper officers found that the stocks and bonds were of the then value of $773,600, one fourth ($193,400) being for the use of Mrs. Keeney for life, and the remainder to her children, being intended to take effect at her death. It was held that their in- terest was subject to the tax imposed by the New York statute of 1896, which provides:

'A tax shall be and is hereby imposed upon the transfer of any property, real or personal . . . or of any interest therein or income therefrom, in trust or otherwise. . . . 3. When the transfer is of property made by a resident, or by a nonresident, when such nonresident's property is within this state, by deed, grant, bargain, sale, or gift made in contemplation of the death of the grantor, vendor, or donor, or intended to take effect in possession or enjoyment at or after such death.' [Laws of 1896, chap. 908, § 220.]

Mrs. Keeney's administrator and children appealed on the ground that the taxable transfer act of New York, in so far as it imposes a tax upon property transferred inter vivos, violated the 14th Amendment, in that it took the property without due process of law, and the different rates of taxation and classification were of such discriminatory a character as to deny the equal protection of the law.

The judgment was affirmed. The case is here on writ of error from the final order of the surrogate court, entered in pursuance of the mandate of the court of appeals. 194 N. Y. 281, 87 N. E. 428.

Messrs. George F. Canfield and Karl T. Frederick for plaintiffs in error.

[Argument of Counsel from pages 527-529 intentionally omitted] Mr. William Law Stout for defendant in error.

[Argument of Counsel from pages 529-533 intentionally omitted] Mr. Justice Lamar, after making the foregoing statement, delivered the opinion of the court:

So much of the New York statute as imposes an inheritance tax was sustained in Plummer v. Coler, 178 U. S. 115, 44 L. ed. 998, 20 Sup. Ct. Rep. 829, and in several decisions of the court of appeals of that state. But the plaintiffs insist that there is a radical difference between an inheritance tax and one on transfers inter vivos. The first, they say, is an excise imposed on a privilege; while that complained of here is really on property, though called a tax on a transfer. They argue that inheritance taxes have been sustained on the ground (United States v. Perkins, 163 U. S. 625, 41 L. ed. 287, 16 Sup. Ct. Rep. 1073) that no one has the natural right to acquire property by will or descent, and if the state permits such acquisition, it may require the payment of a tax as a condition precedent to the right of using that privilege. On the other hand, they contend that the right to convey or come into possession does not depend upon a statutory or taxable privilege, but is a right incident to the ownership of property, and that the tax imposed by this statute on that right is in effect a tax on the property itself, and void because lacking in the elements of uniformity and equality required in the assessment of property taxes.

But, if any such distinction could be made between taxing a right and taxing a privilege, it would not avail plaintiffs in the present case. There is no natural right to create artificial and technical estates with limitations over, nor has the remainderman any more right to succeed to the possession of property under such deeds than legatees and devisees under a will. The privilege of acquiring property by such an instrument is as much dependent upon the law as that of acquiring property by inheritance, and transfers by deed to take effect at death have frequently been classed with death duties, legacy and inheritance taxes. Some statutes go further than that of New York, and tax gratuitous acquisitions under marriage settlements, trust conveyances, or other instruments where the transfer of property takes effect upon the death, not merely of the grantor, but of any person whomsoever.

This was true under the internal revenue act of 1864 [13 Stat. at L. 223, chap. 173]. It imposed a succession tax on 'all dispositions of real estate, taking effect upon the death of any person.' It was not apportioned, and would have been void if a tax on property. But it was held that 'it was not a tax on land,' since 'the succession or devolution of the real estate is the subject-matter of the tax . . . whether . . . effected by will, deed, or law of descent.' Scholey v. Rew, 23 Wall. 347, 23 L. ed. 101, cited and followed, Knowlton v. Moore, 178 U. S. 78-81, 44 L. ed. 984-986, 20 Sup. Ct. Rep. 747.

Wherever the amount of a tax is, as here, to be measured by the value of property, it has been earnestly argued that it was...