People ex rel. Cohn v. Graves

Decision Date08 July 1936
PartiesPEOPLE ex rel. COHN v. GRAVES et al., State Tax Commission.
CourtNew York Court of Appeals Court of Appeals

271 N.Y. 353
3 N.E.2d 508

PEOPLE ex rel. COHN
v.
GRAVES et al., State Tax Commission.

Court of Appeals of New York.

July 8, 1936.


Proceeding by the People, on the relation of Annie Cohn, against Mark Graves and others, as Commissioners constituting the State Tax Commission. From an order of the Supreme Court, Appellate Division, Third Department (246 App.Div. 335, 286 N.Y.S. 485), which annulled, on certiorari, a final determination of the Tax Commission, denying applications by relator for a refund of taxes paid by relator for a years 1931 and 1932, the State Tax Commission appeals.

Order of the Appellate Division reversed, and determination of State Tax Commission affirmed.

HUBBS, O'BRIEN, and LOUGHRAN, JJ., dissenting.

[3 N.E.2d 508]

Appeal from Supreme Court, Appellate Division, Third department.
John J. Bennett, Jr., Atty. Gen. (Joseph M. Mesning, of Albany, of counsel), for appellants.

Maurice Cohn, of New York City, for respondent.


CRANE, Chief Judge.

Rents from real property located in New Jersey, as well as interest from mortgages on similar property is, in my opinion, taxable income when received by a resident of this state. The tax upon such income is not a tax on the New Jersey real estate. The Pollock Case (Pollock v. Farmers' Loan & Trust Co.), 157 U.S. 429, 15 S.Ct. 673, 39 L.Ed. 759, has not decided otherwise and should not be pushed to cover this point. Many cases have gone through the courts since that decision explaining and clarifying its limitations. What may be a ‘direct’ tax under the Federal Constitution may be income (as it really is) for other purposes.

The order of the Appellate Division should be reversed and the determination of the State Tax Commission affirmed, with costs in this court and in the Appellate Division. A question under the Federal Constitution was presented and necessarily passed upon by this court, viz.: Is section 359 of the Tax Law of the state of New York (Consol.Laws, c. 60), as amended by chapter 933, Laws 1935, in so far as it imposes an income tax upon rents received by a resident of this state from real property located in a foreign state, repugnant to, and violative of, any provision of the Constitution of the United States. This court held the sections of said Tax Law herein involved to be a valid exercise of legislative power.

HUBBS, Judge (dissenting).

The relator, Annie Cohn, during the years 1931 and 1932, while a resident of this state, received, as the beneficiary of a life estate created by the will of her deceased husband, certain income, part of which was derived from rents from real estate located in the state of New Jersey and part from interest on bonds and mortgages upon real property located in that state. There were three executors of the will, two of whom resided in New Jersey, and relator, who resided in this state. The executors qualified in the state of New Jersey. Since 1913 they have been functioning in that state, and the office of the estate is and qlways has been in the city of Paterson, where the securities are kept in

[3 N.E.2d 509]

a bank. The executors have managed the estate properly, collected rents and income from bonds and mortgages, and made repairs to the real property.

The relator filed a state income tax return showing income received from the estate, consisting of rents from certain specified real properties located in New Jersey and interest on mortgages covering real property in that state. She paid an income tax on such income. Thereafter she made application for refund of the taxes paid, as erroneously paid or illegally collected; her contention being that this state was without power to tax either the rental income derived from real property located without the state or the income from bonds and mortgages upon real property located without the state, where the situs of such intangibles was likewise without the state. In making the application for refund, the appellant relied upon Pierson v. Lynch, 237 App.Div. 763, 263 N.Y.S. 259, affirmed People ex rel. Pierson v. Lynch, 263 N.Y. 533, 189 N.E. 684. The appeal in that case was dismissed by the United States Supreme Court. Lynch v. State of New York ex rel. Pierson, 293 U.S. 52, 55 S.Ct. 16, 79 L.Ed. 191.

The Legislature amended the Tax Law (Consol.Laws, c. 60), § 359, by chapter 933 of the Laws of 1935, and provided that the rental income derived by a resident of New York state from real property located without the state constituted...

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