Moulton v. Long

• Citation: 243 Mass. 129,137 N.E. 297
• Parties: MOULTON v. LONG, Com'r of Corporations and Taxation.
• Decision Date: 29 November 1922
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

243 Mass. 129

137 N.E. 297

MOULTON

v.LONG, Com'r of Corporations and Taxation.

Supreme Judicial Court of Massachusetts, Worcester.

Nov. 29, 1922.

Report from Superior Court, Worcester County; James H. Sisk, Judge.

Proceeding by Edward Moulton against Henry F. Long, Commissioner of Corporations and Taxation, to recover the amount of an income tax paid under protest and compulsion. Reserved and reported without decision on the pleadings and agreed statement of all material facts for consideration and determination of the full court. Abatement of tax granted, and repayment ordered.

Defendant, in assessing an income tax against plaintiff, included the amount of $1,500 as a tax on the gain from the sale and transfer of a lease of real estate. Complainant filed an application for an abatement of that part of the tax, and, after defendant's refusal to abate the tax, paid the tax under compulsion and protest, and brought action, alleging that no income tax was assessable or leviable upon the proceeds of such sale.

Smith, Gage & Dresser, of Worcester, for complainant.

J. Weston Allen, Atty. Gen., and Alexander Lincoln, Asst. Atty. Gen., for defendant.

RUGG, C. J.

The plaintiff was the lessee of a business block in Worcester for a term of five years and nine months under an indenture which fixed the rent, required the lessee to pay taxes and other assessments together with other usual obligations and interest on the mortgage, permitted him to underlet and assign his lease, and gave him an option to purchase at a designated price upon specified terms. In 1919 the complainant assigned his ‘lease, the premises thereby demised’ and all his interest therein ‘including the option of purchase,’ receiving therefor fifty thousand dollars. The single question to be decided is whether he was subject to an income tax on the sum so received under St. 1916, c. 269, § 5(c) (now G. L. c. 62, § 5(c), which provides that--

‘Income of the following classes received by any inhabitant of the commonwealth during the preceding calendar year shall be taxed as follows: * * * (c) The excess of the gains over the losses received by the taxpayer from purchases or sales of intangible personal property, whether or not said taxpayer is engaged in the business of dealing in such property, shall be taxed at the rate of three per cent. per annum. * * *’

Succinctly stated, the point for decision is whether a lease of real estate is ‘intangible personal property’ within the meaning of these words in this part of the tax law.

[1] The familiar principle is that tax laws are strictly construed. The power to tax is not to be extended by implication; it must be conferred by the statute in unequivocal terms. All doubts are resolved in favor of the taxpayer. Eaton, Crane & Pike Co. v. Commonwealth, 237 Mass. 523, 530, 130 N. E. 99, and cases there collected.

Without tracing the historical development of the meaning of these terms, property has now come to be divided into two general classes, real estate and personal estate. Bates v. Sparrell, 10 Mass. 323, 324. Apart from statute a lease of hand is in that general sense personal estate. It has been referred to as such in our own decisions. In Gay, Petitioner, 5 Mass. 419, it was held that a lease for 999 years was a chattel, and passed as such to the administrator of the lessee, who could dispose of it as he could of other personal property. To the same effect are Bates v. Sparrell, 10 Mass. 323;Chapman v. Gray, 15 Mass. 439, 444, 445;Minot v. Thompson, 106 Mass. 583, 585;Martin v. Tobin, 123 Mass. 85, 88. It was said in Insurance Co. v. Haven, 95 U. S. 242, 250, 24 L. Ed. 473: ‘Such a lease is a mere chattel interest, being reckoned as part of the personal estate of the lessee, and in case of the death of the lessee goes to his executors, and not to the heirs at law, as appears by all the authorities.’ Brewster v. Hill, 1 N. H. 350;Despard v. Churchill, 53 N. Y. 192, 199;Matter of Altehouse, 63 App. Div. 252, 255,71 N. Y. Supp. 445, affirmed in 168 N. Y. 670, 61 N. E. 1127;Meni v. Rathbone, 21 Ind. 454, 466, 467;Wilgus v. Commonwealth, 9 Bush (Ky.) 556;Eidman v. Baldwin, 206 Fed. 428, 124 C. C. A. 310;Faler v. McRae, 56 Miss. 227;Becker v. Walworth, 45 Ohio St. 169, 12 N. E. 1;McCormaick v. Stephany, 57 N. J. Eq. 264, 41 Atl. 840;Holzman v. Wager, 114 Md. 322, 79 Atl. 205, Ann. Cas. 1912A, 619;Orchard v. Wright-Dalton-Bell-Anchor Store Co., 225 Mo. 414, 433-439, 125 S. W. 486,20 Ann. Cas. 1072;Duff v. Keaton, 33 Okl. 92, 124 Pac. 291,42 L. R. A. (N. S.) 472;Townshend v. Boyd, 217 Pa. 386, 394, 66 Atl. 1099,12 L. R. A. (N. S.) 1148; Lowther v. Fraser, [1904] 1 Ch. 111, 116, 117, affirmed Id. 726, 734.

[3] A lease of real estate is, however, a peculiar kind of personal property. It is indubitable that it constitutes an interest in land. Sanders v. Partridge, 108 Mass. 556, 558. It has long been called a chattel real. Hyatt v. Vincennes Bank, 113 U. S. 408, 415, 5 Sup. Ct. 573, 28 L. Ed. 1009;Harvey Coal & Coke Co. v. Tax Commisioner, 59 W. Va. 605, 609, 53 S. E. 928,6 L. R. A. (N. S.) 628. It was said in this connection in Freedman v. Bloomberg, 225 Mass. 491 at page 493,114 N. E. 827 at page 828:

‘The contention * * * that at common law a term for years is ‘personal property,’ is not accurate. It is true that originally a term for years was regarded as a chattel interest in real estate, and that only freeholds were included in ‘realty’ as being the only things specifically recoverable in the King's Court. But those interests in lands which were reckoned as chattels were distinguished by the name of chattels real because they concerned realty; while the name of...