Harvard Trust Co. v. Commissioner of Corp. & Taxation

• Decision Date: 25 October 1933
• Parties: HARVARD TRUST COMPANY, trustee, v. COMMISSIONER OF CORPORATIONS AND TAXATION.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

284 Mass. 225

HARVARD TRUST COMPANY, trustee, v. COMMISSIONER OF CORPORATIONS AND TAXATION.

Supreme Judicial Court of Massachusetts, Suffolk.

October 25, 1933

November 23, 1932.

Present: RUGG, C.

J., CROSBY, PIERCE FIELD, & LUMMUS, JJ.

Tax, On income. Trust Company. Conflict of Laws. Corporation, Domicil. Jurisdiction. Trust, Situs. A trust company which had been incorporated under the laws of this

Commonwealth, had its usual place of business at a city here and had been appointed by a court of another State trustee under the will of one who died domiciled in that State, where the will had been probated, was an inhabitant of this Commonwealth within the meaning of G.L.c. 62,

Section 10.

Said trust company having contended in proceedings here that a certain statute of the other State prevented the imposition here of a tax upon certain gains received by the trust, and that statute not having been interpreted, with respect to the particular facts appearing, by the court of last resort of that State it became the duty of this court to construe the statute as it applied to those facts. General Laws of Vermont, Section 703, V, as amended by Acts of 1929, No.

21; and Sections 5013, 5014, 5015, as amended by Acts of 1925, No. 84, did not establish a situs in Vermont for taxation of the corpus of a trust created under the will of one who died domiciled in that State, where the will was probated and the trustee appointed in a court of that

State, but the trustee was a trust company organized under the laws of this Commonwealth and having its usual place of business here, the property of the trust was located here, the persons entitled to the income from the trust fund were residents of this Commonwealth, of

Vermont and of Illinois, and the persons entitled to the principal upon termination of the trust were persons unknown or unascertained.

In the circumstances, the assessment and payment of a tax in Vermont upon the corpus of such trust was not a bar to the assessment in this

Commonwealth of a tax under G.L.c. 62, Section 10, upon gains received by the trustee in 1929 from sales of intangible personal property constituting a part of the principal of the trust fund. It was stated that it would have been within the power of the State of

Vermont to establish a situs in that State for the taxation of the corpus of such trust fund. In the circumstances, such gains were taxable in this Commonwealth under

G.L.c. 62, Section 10. The propriety of so taxing such gains here was not affected by St. 1928, c.

128, which does not purport to change the laws relating to taxation.

APPEAL, filed in the Supreme Judicial Court for the county of Suffolk on July 25, 1932, by a taxpayer from a decision by the Board of Tax Appeals refusing an abatement of a certain tax on income.

Material facts are stated in the opinion. W. Noyes, for the appellant.

J. E. Warner Attorney General, & C.

F. Lovejoy, Assistant Attorney General, for the commissioner of corporations and taxation, submitted a brief.

RUGG, C.J. This is a proceeding for the abatement of an income tax assessed to a trustee with respect to gains from purchases and sales of securities belonging to the principal of a trust estate. The appellant is a trust company organized under the laws of this Commonwealth and having its usual place of business in Cambridge. In 1928 it was appointed by the appropriate probate court of the State of Vermont trustee under the will of a deceased resident of that State whose will had been duly proved and allowed by that court. By the will the residue of the testator's estate was given to the appellant in trust, after an annuity to a sister, to pay the balance of the net income in equal parts to three children of the testator and to distribute the principal upon the termination of the trust among their issue. The sister and one of the children are residents of this Commonwealth, another child is a resident of Vermont, and the third of Illinois. The persons entitled to the remainder are persons unknown or unascertained. The securities were kept by the appellant in this Commonwealth. Under the laws of Vermont the appellant filed a stipulation that property held by it by virtue of its appointment should be taxed in the same manner and to the same extent as funds of the same character held by a trust company in that State, and it received a certificate of authority to act as trustee in Vermont. Taxes were assessed to and paid by the appellant in Vermont, which were computed on a percentage of the valuation of the trust estate and amounted for 1929 to $2,561.56 and for 1930 to $3,790.37. The appellant during 1929 received gains from sales of intangible personal property constituting a part of the corpus of the trust on which a tax, after the allowance of a partial abatement, amounting to something more than $2,300, was assessed by the commissioner of corporations and taxation and is here sought to be abated.

This tax was assessed under G.L.c. 62, Section 10, as it stood prior to its amendment by St. 1931, c. 456, Section 1. Its material words were: "The income received by estates held in trust by trustees, any one of whom is an inhabitant 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. Income accumulated in trust for the benefit of unborn or unascertained persons or persons with contingent interests shall be taxed as if accumulated for the benefit of inhabitants of the commonwealth."

The gains on which the tax was assessed belonged to the principal of the trust estate. If subject to taxation in this Commonwealth such gains were taxable as income accumulated for the benefit of those interested in the remainder, who confessedly were persons unborn or unascertained. The appellant, being incorporated under the laws of, and having its usual place of business at Cambridge within, this Commonwealth, is an inhabitant of and domiciled in this Commonwealth. Collector of Taxes of Boston v. Mount Auburn Cemetery, 217 Mass. 286 , 290. National Leather Co. v. Commonwealth, 256 Mass. 419 , 424. Cream of Wheat Co. v. Grand Forks County, 253 U.S. 325, 328.

The appellant contends, however, that the statutes of Vermont, in which State the appellant has been assessed and has paid a property tax, prevent a legal assessment of the income in this Commonwealth. This contention rests in part upon subsection V of the Vermont General Laws, Section 703, as amended by Acts of 1929, No. 21, which is in these words: "Trust estate. Personal estate held in trust, except such as shall be so held by banking institutions and taxed under the provisions of chapter forty-six or forty-eight, the income of which is to be paid to or expended for the benefit of another person or beneficiary, shall be set in the list to the person holding it in trust or to the trustee, in the town, village, school and fire district where such other person, or beneficiary, resides, if he resides in this state, otherwise to the person holding it in trust, or to the trustee, in the town, village, school and fire district where he resides, or if the trustee is a corporation, where such corporation has its principal office; but if the person holding it in trust, or the trustee, resides without the state, the equitable interest of such other person, or beneficiary, in such trust property shall be set in the list to such other person, or beneficiary, in the town, village, school and fire district where he resides; and 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...