Spaeth v. Hallam, 32795.

• Citation: 300 N.W. 600,211 Minn. 156
• Decision Date: 31 October 1941
• Docket Number: No. 32795.,32795.
• Parties: SPAETH, Com'r of Taxation, v. HALLAM.
• Court: Minnesota Supreme Court

300 N.W. 600

211 Minn. 156

SPAETH, Com'r of Taxation, v. HALLAM.

No. 32795.

Supreme Court of Minnesota.

October 31, 1941.

Proceeding by G. Howard Spaeth, Commissioner of Taxation, relator, against Oscar Hallam, to review an order of the Board of Tax Appeals holding that the respondent was entitled to deduct, in the computation of his state income tax for 1937, certain real estate taxes paid by him in that year.

Order affirmed.

J. A. A. Burnquist, Atty. Gen., P. F. Sherman, Asst. Atty. Gen., and Franklin B. Stevens, Special Counsel, of St. Paul, for relator.

Oscar Hallam and Harry G. Costello, Jr., both of St. Paul, for respondent.

STONE, Justice.

The one question is whether respondent is entitled to deduct, in the computation of his state income tax for 1937, certain real estate taxes paid by him in that year.

In September of 1936 he purchased and took title to the real estate in question. The 1935 taxes thereon had been paid by the vendors. The 1936 taxes were not payable until the first Monday in January, 1937. Respondent paid them after that day and in 1937.

The theory of the state is that the 1936 taxes so paid by respondent were a part of what he had to pay to get unencumbered title and, hence, really a part of the purchase price and a capital expenditure.

The argument is that, inasmuch as under 1 Mason Minn.St.1927, § 2191, taxes on real estate are a lien in favor of the state "from and including May 1 in the year in which they are levied," respondent took title subject to that lien. Section 2191, after declaring the lien and that it shall continue until the taxes are paid, concludes thus: "but, as between grantor and grantee, such lien shall not attach until the first Monday of January of the year next thereafter." So, too plainly for argument, the state's lien for the 1936 taxes was not an encumbrance "as between grantor and grantee" upon the real estate purchased by respondent in September of that year. He got from the grantor a title which, between them, was free from that lien and remained so until the tax became payable on the first Monday of January of the succeeding year.

The state's lien is for the state's protection and takes hold before the taxes are levied and assessed. May 1 simply happens to be the date as of which in respect to value (and ownership of personal property) they are levied. The processes of assessment and levy are long and complicated. They are incomplete, both practically and legally, until the tax accrues in the sense of becoming payable. That determinative event does not take place until the first Monday of January in the succeeding year. It is so provided in 1 Mason Minn.St.1927, § 2074, reading thus: "On or before the first Monday in January in each year, the county auditor shall deliver the lists of the several districts of the county to the county treasurer, taking therefor his receipt, showing the total amount of taxes due upon the lists. Such lists shall be authority for the treasurer to receive and collect taxes therein levied."

The declaration that the lists shall be the treasurer's authority for receiving payment necessarily implies that until he has the lists, which normally is not before the first Monday in January, he has no authority to receive payment. There being nobody with authority to receive payment, there is no opportunity for the taxpayer to pay....