People of the State of New York Cohn v. Graves, No. 404

CourtUnited States Supreme Court
Writing for the CourtSTONE
Citation81 L.Ed. 666,300 U.S. 308,57 S.Ct. 466
Decision Date01 March 1937
Docket NumberNo. 404
PartiesPEOPLE OF THE STATE OF NEW YORK ex rel. COHN v. GRAVES et al., Commissioners Constituting the State Tax Commission of the State of New York

300 U.S. 308
57 S.Ct. 466
81 L.Ed. 666
PEOPLE OF THE STATE OF NEW YORK ex rel. COHN

v.

GRAVES et al., Commissioners Constituting the State Tax Commission of the State of New York.

No. 404.
Argued Feb. 3, 1937.
Decided March 1, 1937.

Appeal from the Supreme Court of the State of New York.

Mr. Maurice Cohn, of New York City, for appellant.

[Argument of Counsel from pages 308-310 intentionally omitted]

Page 310

Mr. Joseph M. Mesnig, of Albany, N.Y., for appellees.

Mr. Justice STONE delivered the opinion of the Court.

This case presents the question whether a state may constitutionally tax a resident upon income received from rents of land located without the state and from interest on bonds physically without the state and secured by mortgages upon lands similarly situated.

Page 311

Section 351 of article 16 of the New York Tax Law, Consol.Laws c. 60 (as added by N.Y.Laws 1919, c. 627), imposes a tax upon the 'entire net income' of residents of the state. By section 359 gross income is defined as including interest and rent. The same section, as amended by N.Y. Laws 1935, c. 933, enumerates among the items of taxable income 'rent (including rent derived from real property situated outside the state) * * * it being intended to include all of the foregoing items, without regard to the source thereof, location of the property involved, or any other factor, except only a case where the inclusion thereof would be violative of constitutional restrictions.'

Appellant, a resident of New York, brought the present certiorari proceeding in the courts of New York to review a determination of the State Tax Commission, appellees, denying her application for a refund of state income taxes assessed and paid for the years 1931 and 1932, so far as the taxes were attributable to rents received by appellant from New Jersey land, and interest paid on bonds secured by mortgaged real estate in New Jersey, where the bonds and mortgages were physically located. A ground for recovery of the tax assigned by appellant's petition was that the tax was in substance and effect a tax on real estate and tangible property located without the state, in violation of the Fourteenth Amendment of the Constitution of the United States. Judgment for appellant (see 246 App.Div. 335, 286 N.Y.S. 485), was reversed by the New York Court of Appeals, 271 N.Y. 353, 3 N.E.(2d) 508. The case comes here on appeal under section 327(a) of the Judicial Code, as amended (28 U.S.C.A. § 344(a).

The stipulation of facts on which the case was tried in the state court does not indicate that appellant's income has been taxed by New Jersey, and it does not define the precise nature of her interest in the properties producing the income. It sets out that appellant's husband died testate, his will duly probated in New

Page 312

Jersey 'devising and bequeathing to said taxpayer the entire net income from his estate for and during her widowhood,' and that the taxed income included 'rents from testator's real estate' and 'interest from testator's real estate mortgages,' all located in New Jersey. The terms of the will and the status of the estate during the tax years do not otherwise appear. There is nothing to show that the incomeproducing properties were in those years held upon an active trust, or that appellant did not receive the income as life tenant of the legal interest. See Paletz v. Camden Safe Deposit & Trust Co., 109 N.J.Eq. 344, 157 A. 456; cf. Passman v. Guarantee Trust & Safe-Deposit Co., 57 N.J.Eq. 273, 41 A. 953; Westfield Trust Co. v. Beekman, 97 N.J.Eq. 140, 128 A. 791. Any uncertainty arising from the ambiguity of the stipulation, if it has any present significance, is put at rest by the concession of appellant in brief, and in open court on the argument, that she is the owner of a life estate or interest in the properties, and that she received, as a part of her income in the tax years, the rents and interest which have been collected by the executors acting, not in their capacity as executors, but as her agents for an annual compensation.

In any case we may assume, for present purposes, that New York may not levy a property tax upon appellant's interest, whether it be legal or equitable, see Senior v. Braden, 295 U.S. 422, 55 S.Ct. 800, 79 L.Ed. 1520, 100 A.L.R. 794; Safe Deposit & Trust Co. v. Virginia, 280 U.S. 83, 50 S.Ct. 59, 74 L.Ed. 180, 67 A.L.R. 386. We accordingly limit our review to the question considered and decided by the state court, whether there is anything in the Fourteenth Amendment which precludes the State of New York from taxing the income merely because it is derived from sources, which, to the extent indicated, are located outside the state.

Income from rents. That the receipt of income by a resident of the territory of a taxing sovereignty is a

Page 313

taxable event is universally recognized. Domicil itself affords a basis for such taxation. Enjoyment of the privileges of residence in the state and the attendant right to invoke the protection of its laws are inseparable from responsibility for sharing the costs of government. 'Taxes are what we pay for civilized society,' see Compania General de Tabacos v. Collector, 275 U.S. 87, 100, 48 S.Ct. 100, 105, 72 L.Ed. 177. A tax measured by the net income of residents is an equitable method of distributing the burdens of government among those who are privileged to enjoy its benefits. The tax, which is apportioned to the ability of the taxpayer to pay it, is founded upon the protection afforded by the state to the recipient of the income in his person, in his right to receive the income and in his enjoyment of it when received. These are rights and privileges which attach to domicil within the state. To them and to the equitable distribution of the tax burden, the economic advantage realized by the receipt of income and represented by the power to control it, bears a direct relationship. See Lawrence v. State Tax Comm., 286 U.S. 276, 52 S.Ct. 556, 76 L.Ed. 1102, 87 A.L.R. 374; Maguire v. Trefry, 253 U.S. 12, 14, 40 S.Ct. 417, 418, 64 L.Ed. 739; Virginia v. Imperial Coal Sales Co., 293 U.S. 15, 19, 55 S.Ct. 12, 13, 79 L.Ed. 171; compare Shaffer v. Carter, 252 U.S. 37, 50, 40 S.Ct. 221, 224, 64 L.Ed. 445.

Neither the privilege nor the burden is affected by the character of the source from which the income is derived. For that reason income is not necessarily clothed with the tax immunity enjoyed by its source. A state may tax its residents upon net income from a business whose physical assets, located wholly without the state, are beyond its taxing power. Lawrence v. State Tax Comm., supra; see Shaffer v. Carter, supra, 252 U.S. 37, at page 50, 40 S.Ct. 221, 224, 64 L.Ed. 445. It may tax net income from bonds held in trust and administered in another state, Maguire v. Trefry, supra, although the taxpayer's equitable interest may not be subjected to the tax, Safe Deposit & Trust Co. v. Virginia, supra. It may tax net income from operations in interstate commerce,

Page 314

although a tax on the commerce is forbidden, United States Glue Co. v. Town of Oak Creek, 247 U.S. 321, 38 S.Ct. 499, 62 L.Ed. 1135, Ann.Cas.1918E, 748; Shaffer v. Carter, supra. Congress may lay a tax on net income derived from the business of exporting merchandise in foreign commerce, although a tax upon articles exported is prohibited by constitutional provision (article 1, § 9, cl. 5). Peck & Co. v. Lowe, 247 U.S. 165, 38 S.Ct. 432, 62 L.Ed. 1049;...

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161 practice notes
  • St. Louis Union Trust Co. v. State of Missouri, No. 37563.
    • United States
    • United States State Supreme Court of Missouri
    • July 21, 1941
    ...in this case," citing New York ex rel. Whitney v. Graves, 299 U.S. 366, 57 Sup. Ct. 237, 81 L. Ed. 285; New York ex rel. Cohn v. Graves, 300 U.S. 308, 57 Sup. Ct. 466, 81 L. Ed. 666, 668; Worcester County Trust Co. v. Riley, 302 U.S. 292, 58 Sup. Ct. 185, 82 L. Ed. 268. [See also Graves et ......
  • Md. State Comptroller of the Treasury v. Wynne, No. 107
    • United States
    • Court of Special Appeals of Maryland
    • January 28, 2013
    ...of the Fourteenth Amendment. Oklahoma Tax Comm'n v. Chickasaw Nation, 515 U.S.450, 462-63 & n. 11 (1995); New York ex rel. Cohn v. Graves, 300 U.S. 308, 312-13 (1937). However, they raise thePage 5possibility of what might be termed "double taxation" when both the state of the taxpayer's re......
  • United States v. Boyce, Case No. CV 13–00601 MMM (JEMx).
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
    • July 8, 2014
    ...for the costs of government,” citing Cook v. Tait, 265 U.S. 47, 44 S.Ct. 444, 68 L.Ed. 895 (1924), and New York ex rel. Cohn v. Graves, 300 U.S. 308, 57 S.Ct. 466, 81 L.Ed. 666 (1937)). The Fourteenth Amendment provides that “[a]ll persons born and naturalized in the United States, and subj......
  • United States v. Boyce, Case No. CV 13–00601 MMM JEMx.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
    • July 8, 2014
    ...for the costs of government,” citing Cook v. Tait, 265 U.S. 47, 44 S.Ct. 444, 68 L.Ed. 895 (1924), and New York ex rel. Cohn v. Graves, 300 U.S. 308, 57 S.Ct. 466, 81 L.Ed. 666 (1937) ).The Fourteenth Amendment provides that “[a]ll persons born and naturalized in the United States, and subj......
  • Request a trial to view additional results
161 cases
  • St. Louis Union Trust Co. v. State of Missouri, No. 37563.
    • United States
    • United States State Supreme Court of Missouri
    • July 21, 1941
    ...in this case," citing New York ex rel. Whitney v. Graves, 299 U.S. 366, 57 Sup. Ct. 237, 81 L. Ed. 285; New York ex rel. Cohn v. Graves, 300 U.S. 308, 57 Sup. Ct. 466, 81 L. Ed. 666, 668; Worcester County Trust Co. v. Riley, 302 U.S. 292, 58 Sup. Ct. 185, 82 L. Ed. 268. [See also Graves et ......
  • Md. State Comptroller of the Treasury v. Wynne, No. 107
    • United States
    • Court of Special Appeals of Maryland
    • January 28, 2013
    ...of the Fourteenth Amendment. Oklahoma Tax Comm'n v. Chickasaw Nation, 515 U.S.450, 462-63 & n. 11 (1995); New York ex rel. Cohn v. Graves, 300 U.S. 308, 312-13 (1937). However, they raise thePage 5possibility of what might be termed "double taxation" when both the state of the taxpayer's re......
  • United States v. Boyce, Case No. CV 13–00601 MMM (JEMx).
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
    • July 8, 2014
    ...for the costs of government,” citing Cook v. Tait, 265 U.S. 47, 44 S.Ct. 444, 68 L.Ed. 895 (1924), and New York ex rel. Cohn v. Graves, 300 U.S. 308, 57 S.Ct. 466, 81 L.Ed. 666 (1937)). The Fourteenth Amendment provides that “[a]ll persons born and naturalized in the United States, and subj......
  • United States v. Boyce, Case No. CV 13–00601 MMM JEMx.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
    • July 8, 2014
    ...for the costs of government,” citing Cook v. Tait, 265 U.S. 47, 44 S.Ct. 444, 68 L.Ed. 895 (1924), and New York ex rel. Cohn v. Graves, 300 U.S. 308, 57 S.Ct. 466, 81 L.Ed. 666 (1937) ).The Fourteenth Amendment provides that “[a]ll persons born and naturalized in the United States, and subj......
  • Request a trial to view additional results

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