New England Trust Co. v. Commissioner of Corporations and Taxation
| Decision Date | 27 March 1944 |
| Parties | THE NEW ENGLAND TRUST COMPANY, trustee, v. COMMISSIONER OF CORPORATIONS AND TAXATION. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
October 2, 1939.
Present: FIELD, C.
J., LUMMUS, QUA & DOLAN, JJ.
Taxation Succession tax. Evidence, Presumptions and burden of proof. Probate Court, Determination of succession tax, Inferences Appeal. Equity Pleading and Practice, Inferences, Appeal. Trust, Taxes. Motive. Words, "In contemplation of death."
After the death of one who in his lifetime had made a transfer of property in trust, the trustee might maintain a petition in the Probate Court under G. L. (Ter. Ed.) c. 65, Section 30, to determine whether the transfer was taxable under c. 65.
Upon a petition under G. L. (Ter. Ed.) c. 65, Section 30, brought by a trustee to determine whether a transfer of property, made in 1935 by the settlor of the trust to the trustee more than six months but less than two years before the settlor's death, was taxable under c. 65, the commissioner of corporations and taxation had the burden of proving his contention that the transfer had been made in contemplation of the settlor's death and therefore was taxable.
In determining, upon an equity or probate appeal with a report of the evidence, the propriety of an ultimate finding by the trial judge which rests upon inferences from facts admitted or from facts specifically found by the judge or, in the absence of specific findings, from findings assumed by this court to have been made by the judge in favor of the decree, this court determines what inferences are proper without regard to inferences drawn by the judge. Per QUA, J. The predominating motive for making a transfer of property must originate
"in contemplation of the death" of the transferor in order that the transfer be taxable on that ground under G. L. (Ter. Ed.) c. 65, Section
1.
The burden of proving that the proper inference was that an inter vivos transfer in trust of a substantial part of the settlor's property almost two years before his death was made "in contemplation of the death" of the settlor within G. L. (Ter. Ed.) c. 65, Section 1, was not sustained by the commissioner of corporations and taxation where, although the settlor was nearly eighty-eight years of age when he made the transfer and a simultaneous will, and the dispositions contained in the trust instrument extended beyond his death, it appeared that he enjoyed extraordinarily good health aside from a few infirmities and had no outward apprehension of approaching death at the time of the transfer, and statements by him and other facts disclosed motives for the transfer associated with his continued living.
PETITION, filed in the Probate Court for the county of Suffolk on August 5, 1938.
The respondent appealed from a decree by Dillon, J. E. O. Proctor, Assistant Attorney General, for the respondent.
E. Field, (H.
P. Moulton with him,) for the petitioner.
This petition is brought under G. L. (Ter. Ed.) c. 65, Section 30 by the trustee named in a trust indenture between James B. Hill and the petitioner, executed on May 22, 1935, whereby Hill transferred certain securities to the petitioner in trust to pay the income to Hill's wife during her life and from and after her decease to pay to Hill's son the income and such portions of the principal "as the Trustee may deem necessary in order to secure his comfort, maintenance and support." Upon the decease of the survivor of the wife and son, the principal is to be distributed among the then living issue of the son, and in default of such issue, in equal shares among such of fourteen nieces and nephews of Hill and of his wife as shall then be living. There are spendthrift provisions for the protection of the beneficiaries. Hill died May 21, 1937, just one day less than two years after the execution of the indenture. The object of the petition is to determine whether any succession tax is due with respect to the indentured property under G. L. (Ter. Ed.) c. 65, Sections 1 and 3, as those sections read at the time of the transfer.
Section 1, as it read at the time of the transfer, and in its present amended form, provides in part that property "which shall pass by will, or by laws regulating intestate succession, or by deed, grant or gift, except in cases of a bona fide purchase for full consideration in money or money's worth, made in contemplation of the death of the grantor or donor . . . to any person, absolutely or in trust . . . shall be subject to a tax . . .." Section 3 at the time of the transfer read as follows: A subsequent amendment by St. 1939, c. 380, has changed the period during which the transfer is prima facie deemed to have been made in contemplation of death from six months prior to the death of the grantor to one year prior thereto. Since the transfer from Hill to the petitioner in trust was made more than six months and less than two years prior to Hill's death, the question is simply one of fact whether Hill made it in contemplation of his own death. The commissioner of corporations and taxation contends that Hill did make the transfer in contemplation of his death, and therefore that it is taxable. The judge of probate found that it was not made in contemplation of death, but was made "for purposes desirable to . . . [Hill] and [sic] had he continued to live and not associated with contemplation of his own death," and ruled that no tax was due.
This is not an appeal from a determination of value. See G. L. (Ter. Ed.) c. 65, Section 25. Nor is it a petition for abatement under Section 27. It is an independent proceeding brought under Section 30 by a trustee to ascertain whether the transfer to it in trust is taxable. It is settled that such a proceeding can be maintained under Section 30. Pratt v. Dean, 246 Mass. 300 , at page 307. It is in the nature of a petition by a fiduciary for instructions. Similar cases have been designated as petitions for instructions. Pratt v. Dean, supra, and cases there cited. Worcester County National Bank v. Commissioner of Corporations & Taxation, 275 Mass. 216 , 217. Whatever may be true in other forms of proceeding, in this proceeding the burden of proof upon issues of fact does not depend upon the circumstance that one party rather than another happens to bring the petition. That burden falls where general principles of law would naturally and logically cause it to fall. The burden of proving the taxability of the transfer is therefore upon the commissioner who seeks to establish the tax. See Oliver v. Colonial Gold Co. 11 Allen, 283; Ricker v. Brooks, 155 Mass. 400 .
This court has not been called upon hitherto to construe the meaning of the words "made in contemplation of the death of the grantor or donor" and "in contemplation of death" as they appear in G. L. (Ter. Ed.) c. 65, Sections 1 and 3. But the Supreme Court of the United States, speaking through Chief Justice Hughes, in United States v. Wells, 283 U.S. 102, has exhaustively considered the meaning of the words "in contemplation of death" in connection with the Federal estate tax. See now U. S. C. (1940 ed.) Title 26, Section 811 (c). In United States v. Wells it was held that the dominant purpose in taxing transfers in contemplation of death is "to reach substitutes for testamentary dispositions and thus to prevent the evasion of the estate tax" (pages 116-117); that "the reference is not to the general expectation of death which all entertain" (page 115); that there must be "a particular concern, giving rise to a definite motive" (page 115), which "must be of the sort which leads to testamentary disposition" (page 117); that the test is "always to be found in motive" (page 117); that the existence or nonexistence of a condition of health that naturally gives rise to the feeling that death is near is of great but not necessarily of decisive importance (page 117) that the determinative motive may be present without consciousness that death is imminent (page 117); that "age in itself cannot be regarded as furnishing a decisive test, for sound health and purposes associated with life, rather than with death, may motivate the transfer" (page 118); that the statute does not embrace gifts which spring from purposes associated with life rather than with the distribution of property in anticipation of death (page 118); that illustrative of purposes associated with life are the desire to be relieved of responsibilities, to have children independently established in the lifetime of the donor without particular consideration of his death, the desire to recognize special needs, or to discharge moral obligations (pages 118-119); and that it is necessary carefully to scrutinize the circumstances of each case "to detect the dominant motive of the donor in the light of his bodily and mental condition" (page 119). We accept this decision as indicating the true interpretation of the words of our own statute. For applications of this interpretation see Becker v. St. Louis Union Trust Co. 296 U.S. 48; McCaughn v. Real Estate Land Title & Trust Co. 297 U.S. 606; Colorado National Bank v....
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