Staples v. Commissioner of Corporations and Taxation

• Court: Supreme Judicial Court of Massachusetts
• Citation: Staples v. Commissioner of Corporations and Taxation, 305 Mass. 20, 24 N.E.2d 641 (Mass. 1940)
• Decision Date: 04 January 1940
• Parties: MAUDE STAPLES v. COMMISSIONER OF CORPORATIONS AND TAXATION.

305 Mass. 20

24 N.E.2d 641

MAUDE STAPLES v. COMMISSIONER OF CORPORATIONS AND TAXATION.

Supreme Judicial Court of Massachusetts, Suffolk.

January 4, 1940

January 2, 1940.

Present: FIELD, C.

J., QUA, DOLAN COX, & RONAN, JJ.

Tax, On income. Evidence, Presumptions and burden of proof.

Annual payments made to an inhabitant of this Commonwealth from income of a nature taxable under G.L. (Ter. Ed.) c. 62, Section 1, and received by foreign trustees under a will, were taxable to the inhabitant at six per cent under Sections 1, 11, not at one and one half per cent under Section

5 (a), even though such payment to the inhabitant was in the form of an annuity.

A taxpayer, upon his petition for abatement of an income tax assessed at six per cent under Sections 1, 11, of G.L. (Ter. Ed.) c. 62, upon payments received from foreign trustees under a will instead of at one and one half per cent under Section 5 (a), has the burden of establishing a contention that the amounts taxed were not payments by the trustees from income but were from principal.

APPEAL from a decision by the Appellate Tax Board.

J. W. Kelleher, (G.

Alpert & L. R Cohen with him,) for the taxpayer.

E. O. Proctor, Assistant Attorney General, for the Commissioner of Corporations and Taxation.

FIELD, C.

J. This is an appeal by Maude Staples, herein referred to as the taxpayer from a decision of the Appellate Tax Board.

G.L. (Ter. Ed.) c. 58A; St. 1937, c. 400.

The taxpayer is an inhabitant of this Commonwealth. In her income tax return, filed in the year 1937, for the calendar year 1936, she reported the sum of $18,000 as "Income received during the year from taxable annuities," and the sum of $8,817.92 as "interest or dividends taxable and received by an executor, administrator, trustee or other fiduciary not subject to taxation in Massachusetts and paid to me during the year." The commissioner of corporations and taxation assessed an income tax on the taxpayer on the basis of income so reported. See G.L. (Ter. Ed.) c. 62, Sections 1, 5, 11, 35. See also St. 1937, c. 422. Later he made an additional assessment (see G.L. [Ter. Ed.] c. 62, Section 37, as amended) on the basis that the amount reported by the taxpayer as income received from annuities was taxable at the rate of six per cent (apart from the tax imposed by St. 1937, c. 422) under the provisions of G.L. (Ter. Ed.) c. 62, Sections 1, 11, as income received from trustees not subject to taxation under said c. 62. The taxpayer duly applied by petition to the commissioner for an abatement of the additional tax so assessed. See G.L. (Ter. Ed.) c. 62, Section 43, as amended. Abatement was denied and the taxpayer appealed to the Appellate Tax Board (see G.L. [Ter. Ed.] c. 62, Section 45; see also c. 58A, 6-13, as amended; St. 1937, c. 400), which decided that the taxpayer was not entitled to an abatement. The taxpayer appealed to this court.

There was no error of law in the decision of the Appellate Tax Board. No question is raised with respect to the tax imposed by St. 1937, c. 422. The amount of this tax depends upon the amount of the tax for which the taxpayer was liable under other governing statutes, and need not be referred to again. Nor is any question raised as to the propriety of the tax assessed upon the sum of $8,817.92, reported by the taxpayer. The sole question presented relates to the tax assessed upon the sum of $18,000 reported by the taxpayer as income received from an annuity.

G.L. (Ter. Ed.) c. 62, Section 1, as amended, imposes a tax of six per cent per annum upon income of certain described classes received by an inhabitant of the Commonwealth during the preceding calendar year. Section 5 (a) provides as follows: "Income from an annuity shall be taxed at the rate of one and one half per cent per annum. The income of property held in trust shall not be exempted from taxation under section one nor shall payments to beneficiaries be taxed under this section, because of the fact that the whole or any part of the payments to the beneficiaries is in the form of an annuity." Section 11 provides as follows: "Any inhabitant of the commonwealth who receives income from one or more trustees or other fiduciaries who are not subject to taxation under this chapter, shall be subject to the taxes imposed by this chapter upon such income according to the nature of the income received by such trustees or other fiduciaries, and shall include such income in a return as required by section twenty-two."

The sum of $18,000, the tax upon which is now in question, was received by the taxpayer from trustees residing in Pennsylvania under a provision of the will of her husband, late of Scranton, Pennsylvania, that "After providing for my mother and sister, as aforesaid, I direct that one-half (1/2) of the income from my estate shall be paid in quarterly instalments to my wife, Maude Staples, for and during the term of her natural life, for the support and maintenance of herself, and the support, maintenance and education of our minor children during their minority; and I further direct that the payments to my said wife shall not be less than the sum of eighteen thousand dollars ($18,000) per year for the period of ten (10) years after my death, and from and after the expiration of the said ten (10) years, that the payments to my wife shall not be less than the sum of ten thousand dollars ($10,000) per year. Should the income from my estate at any time be insufficient to provide the said sum of eighteen thousand dollars ($18,000) per year for the period of ten (10) years after my death and the sum of ten thousand dollars ($10,000) per year thereafter, then I direct my said trustees, the survivors, survivor and successors of them, to draw upon the principal of my estate annually for such sums, if any, as may be required to provide the said annual payments herein provided for my wife; provided, however, that in any years when the income from my estate exceeds the annual payments herein provided for my wife, a sufficient sum shall be placed in the principal and corpus of my trust estate as will equal the payments from principal that have theretofore been made to my said wife. The provision herein made for my said wife is due to the fact that in all probability the income from my estate will decrease in future years, and I am endeavoring to provide an income for her for as long a period as I possibly can, in order to insure her continued comfort and happiness." The record does not disclose the date of the death of the taxpayer's husband, but in the view that we take of the case this date is not important.

The sum of $18,000 in question, if it was income of any of the classes of income taxable under G.L. (Ter. Ed.) c. 62, Section 1, clearly was income received by the taxpayer "from one or more trustees or other fiduciaries who are not subject to taxation under this chapter," within the terms of G.L. (Ter. Ed.) c. 62, Section 11. The taxpayer contends, however, that income so received by the taxpayer constituted an annuity within the meaning of G.L. (Ter. Ed.) c. 62, Section 5 (a), and, consequently, was taxable only under the provisions of that section imposing a tax at the rate of one and one half per cent. But we need not consider whether this sum of $18,000 received by the taxpayer constituted an annuity. Even if it did it was none the less taxable under the provisions of G.L. (Ter. Ed.) c. 62, Sections 1, 11, by reason of the provision in said Section 5 (a) that "The income of property held in trust shall not be exempted from taxation under section one nor shall payments to beneficiaries be taxed under this section, because of the fact that the whole or any part of the payments to the beneficiaries is in the form of an annuity."

The conclusion above stated follows necessarily from the decision in the case of ...