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Timestamp: 2019-05-25 05:04:17
Document Index: 491313045

Matched Legal Cases: ['§ 1', '§ 2', '§ 1', '§ 2', '§ 2', '§ 1', '§ 7', '§ 25']

BINNEY V. LONG, 299 U. S. 280 (1936) - US SUPREME COURT DECISIONS ON-LINE
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1. Massachusetts succession tax (Gen.Laws, Ter. Ed., c. 65, § 1), on transfers made to take effect in possession and enjoyment after the donor's death held consistent with the contract clause of the Federal Constitution and the due process clause of the Fourteenth Amendment, as applied upon the death, intestate, of a life tenant, to remainders then vesting but theretofore contingent, under a trust inter vivos antedating the taxing legislation. Coolidge v. Long, 282 U. S. 582, distinguished. P. 299 U. S. 286. chanroblesvirtualawlibrary
Appeal from a judgment of a Probate Court in Massachusetts entered in pursuance of a rescript from the Supreme Judicial Court of the Commonwealth. The judgment was on a petition of trustees and an administrator for abatement of succession taxes. chanroblesvirtualawlibrary
In 1877, Mrs. Cunningham (then Hetty Sullivan Lawrence) conveyed property in trust reserving a life estate in the income but no power to revoke, alter or amend. chanroblesvirtualawlibrary
Sarah E. Lawrence, the intestate's mother, died May 27, 1891. Her will bequeathed property in trust to pay the income to each of her six children, two of whom still survive, and to the issue, per stirpes, of any deceased child so long as any of her children should live. For twenty years after the death of the last survivor of her children, the income was to be paid to her grandchildren and their issue, per stirpes, and at the expiration of that period, the principal was to be divided between the grandchildren, per capita, descendants of a deceased grandchild to divide his or her share per stirpes. Each child of Sarah E. Lawrence was empowered to "appoint the shares in which" the income given to his or her children and issue "shall be apportioned among such children and issue," and further to appoint the proportions in which the principal "shall be divided among such children and issue." Under this provision, the four children of Mrs. Cunningham, who are appellants, succeeded to equal life estates in their mother's share, she having failed to exercise her power. chanroblesvirtualawlibrary
In 1909, provision was made for a succession tax upon the occasion of the exercise of, or nonexercise of, powers of appointment. [Footnote 7] This, in its present form, is § 2 of chapter 65 of the General Laws. [Footnote 8] The effective date of this provision was declared to be September 1, 1907, which was the effective date of the 1907 act, and was twenty-one months prior to the effective date of the 1909 act, in which the provision is embodied. It is conceded that there are no other statutes purporting to tax succession under nontestamentary gifts. chanroblesvirtualawlibrary
The trust created by the intestate in 1877, by deed inter vivos, reserved no power of revocation or alteration and, in this respect, differed from that, under consideration in Saltonstall v. Saltonstall, 276 U. S. 260. The appellants chanroblesvirtualawlibrary
The Supreme Judicial Court, following an unbroken line of authority in Massachusetts, and in accordance with the common law [Footnote 9] and the law as declared by this Court, [Footnote 10] holds that the appellants' estates, under the trust instrument of 1877 were, at most, contingent remainders which did not vest until after the intestate's death, and hence the transfers to them fell clearly within the statutory definition as made to take effect in possession or enjoyment after the donor's death. The appellants urge that, in imposing a succession tax, the state should disregard technical rules relating to the vesting of interests and look to the substance and they insist that, for many chanroblesvirtualawlibrary
The act of 1907 (§ 1, supra) does not purport to tax complete and irrevocable transfers inter vivos, not in contemplation of the donor's death, made subsequent to the effective date of the act. The 1862 contract was not made in contemplation of the grantor's death; it became effective when executed. Such a transfer, made today, would result in no tax upon the interest acquired by the chanroblesvirtualawlibrary
life tenant or upon those interests resulting from her exercise or nonexercise of her power of appointment. By the act of 1909, however (§ 2, supra), the legislature, while not attempting to tax the interests of the appellants as derived in succession to Amos A. Lawrence, does essay to tax those interests as derived from the intestate as the holder of a power of appointment under Amos A. Lawrence's contract. But the statutes do not tax similar interests the enjoyment of which depends upon the exercise or nonexercise of a power embodied in a deed effective after September 1, 1907. The law therefore creates two classes -- the one composed of beneficiaries who take at the death of the donee of a power created by an instrument antedating 1907, who are taxed, and the other of beneficiaries who take in succession to the donee of a power conferred by a deed executed subsequent to 1907, who are not taxed. Upon its face, the statute arbitrarily selects a past date, taxing the beneficiaries of an act if done prior to, and leaving untaxed beneficiaries of a precisely similar act if done subsequent to that date. In justification of the discrimination, the court below suggests that any change in the state's policy of taxation must take effect at some point of time. The truth of this statement is obvious, but the appellants' complaint is not directed at the fact that inheritances occurring prior to the effective date of the act of 1907 have escaped taxation, while those happening thereafter are subjected to the exaction. The claim that the statutes deny equal protection is based upon quite another sort of discrimination. Succession consequent upon testamentary gifts (that is, those made by will or in contemplation of death or to take effect in possession or enjoyment after death) made or to take effect after the date of the act is the subject of the excise. The succession to nontestamentary gifts made subsequent to the effective date of the act of 1907 is not taxed whether the chanroblesvirtualawlibrary
Instead of assigning any reason for the discrimination, the statement merely points out that two classes are created, those who are taxed and those who are not, and since all who are taxed are treated alike and all who are exempt are treated alike, the statute is uniform in operation chanroblesvirtualawlibrary
It is said that, prior to the passage of the act of 1909, succession derived through a power granted by an instrument effective before September 1, 1907, escaped taxation although the interest of the beneficiary really had its origin subsequent to that date, and thereby the Commonwealth unfairly lost taxes which were its due and discrimination resulted between beneficiaries under trusts created before and after September 1, 1907. The argument, however, overlooks the fact that a transfer through a power created after September 1, 1907, is, notwithstanding the act of 1909, still wholly untaxed where, as in the case of the trust under consideration, the power is to be exercised by a third party, and the gift is not made in contemplation of the settlor's death. We fail to see how fairness, either to the Commonwealth or its citizens, is promoted by taxing the appellants, the beneficiaries of a trust made many years before the succession tax laws were adopted, while exempting beneficiaries similarly situated in all respects save only that the trust was created after September 1, 1907. The discrimination becomes the more glaring when it is remembered that the tax is increased by the aggregation of the interest passing to the beneficiaries under the 1862 contract with that which they derive by inheritance from the intestate. Thus, a chanroblesvirtualawlibrary
When Mrs. Lawrence died in 1891, the interests created in her lineal descendants were wholly exempt from taxation. When, in 1907, the Commonwealth adopted a policy of taxing succession by lineals, the statute said nothing of powers of appointment. Nevertheless, under that act, had it been in force when Mrs. Lawrence died, the intestate, her daughter, would have paid a tax upon the value of the life estate given her by her mother's will, and the appellants, when they came into possession of remainder interests upon the intestate's death, would likewise have been compelled to pay a tax upon their succession to Mrs. Lawrence's estate. The act of 1909 (§ 2, supra), recognizing that the act of 1907 (§ 1, supra) does not apply to the succession generated at the death of Mrs. Lawrence, nevertheless pitches upon the fact that, under her will, the intestate had a power of appointment, and chanroblesvirtualawlibrary
The argument that the act of 1909 tends to render collection of taxes more certain by accelerating the time of payment and making the executors the collectors of the tax is answered by the provisions of § 7 of chapter 65 of the General Laws (Ter.Ed.). Remaindermen become liable for the tax not at the death of the donor, but when they come into possession and enjoyment of the property at the expiration of a life estate or term of years. The tax on their succession is then payable by any fiduciary who then holds the property, and, if none is in office, by the beneficiaries themselves. It cannot, chanroblesvirtualawlibrary
The Commonwealth seeks to support the statutes upon well known principles: that the guaranty of equal protection does not compel adoption of an iron rule of equal taxation, preclude variety in taxation, or forbid classification of subjects if the discrimination is founded upon a reasonable distinction, or if any state of facts reasonably can be conceived to sustain it, and that, where the evident purpose is to deal fairly and equitably in classifying the subjects of taxation, a statute will not be condemned because of minor and incidental hardships or inequalities due not to a hostile purpose, but to inherent difficulties or inadvertence. The claim is that the discrimination against the appellants is justified by either or both of these principles. While this Court always accords great weight to the judgment of a state legislature, we cannot agree that there is here a fair basis for difference of treatment. All that is said in defense of the statute is that it treats alike all those who take under instruments executed prior to an arbitrary past date, and treats alike all those who take under instruments made subsequent to the same arbitrary date, and that the legislature may have found some reason for the discrimination in the state's policy of taxation. But this is merely to say that arbitrary classification which is the result of the exercise of the legislative will must be sustained. The alternative and inconsistent contention that the discrimination is the result of inadvertence cannot prevail. The act of 1907 was prospective in its operation. Knowing that that act did not reach successions under deeds or wills effective prior to September 1, 1907, the legislature adopted the acts of 1909 and 1924 to put those who succeeded to remainder interests created prior to September 1, 1907, into a taxable class, while chanroblesvirtualawlibrary
On September 1, 1907, the Commonwealth of Massachusetts laid a tax upon the subject of any transfer to take effect in possession or enjoyment after the death of a donor, whether the succession was brought about by will or intestacy or gift inter vivos. Acts 1907, c. 563. This Court held in Coolidge v. Long, 282 U. S. 582, that, as to remainders already vested but dependent upon an estate for life, the tax so imposed is a denial of due process, though the life estate did not end until after the passage of the statute. In 1909, the legislature of the Commonwealth enacted another statute providing in substance that, where the transfer becomes complete through the exercise or nonexercise of a power of appointment (cf. Saltonstall v. Saltonstall, 276 U. S. 260, 276 U. S. 270-271; Guaranty Trust Co. v. Blodgett, 287 U. S. 509, 287 U. S. 511) the succession shall be deemed to have been derived from the donee of the power, if the power had its origin in a disposition of property made before September 1, 1907, and, chanroblesvirtualawlibrary
Matter of Dows, 167 N.Y. 227, 231, 60 N.E. 439, aff'd sub. nom. Orr v. Gilman, 183 U. S. 278, 183 U. S. 287; Matter of Delano, 176 N.Y. 486, 68 N.E. 871, aff'd sub. nom. Chanler v. Kelsey, 205 U. S. 466, 205 U. S. 478. This Court has held that a legislature does not violate the Fourteenth Amendment by giving heed to these realities when taxing a succession. Orr v. Gilman, supra; Chanler v. Kelsey, supra. The cases that have been cited had their origin in New York. For a time, the tax laws of Massachusetts were drawn along stricter lines. Emmons v. Shaw, 171 Mass. 410, 413, 50 N.E. 1033. Until the act of 1909, a transfer through a power, if made under an instrument effective before September, 1907, escaped taxation altogether, though the gift, in substance and reality, may have had its origin thereafter. Acts 1907, c. 563, § 25; cf. Saltonstall v. Saltonstall, supra; also Saltonstall v. Saltonstall, 256 Mass. 519, 522, 525, 153 N.E. 4. This was unfair to the Commonwealth. It was perhaps unfair to legatees who were taxable under gifts of later date. But the evil, however patent, was not subject to correction through the medium of a uniform rule taxing the succession under every power of appointment exercised thereafter, and taxing it as derived from the primary donor. Such a method of assessment would be adequate in its application to instruments to be executed in the chanroblesvirtualawlibrary
The rule is elementary that a state, in adopting a system of taxation, is not confined to a formula of rigid uniformity. Swiss Oil Corp. v. Shanks, 273 U. S. 407, 273 U. S. 413. It may tax some kinds of property at one rate, and others at another, and exempt others altogether. Bell's Gap R. Co. v. Pennsylvania, 134 U. S. 232; Stebbins v. Riley, 268 U. S. 137, 268 U. S. 142; Ohio Oil Co. v. Conway, 281 U. S. 146, 281 U. S. 150. It may lay an excise on the operations of a chanroblesvirtualawlibrary
From all this, it follows that a distinction between wills or deeds effective before 1907 and those effective afterwards -- the exercise or nonexercise of powers under instruments of the first class giving rise to a succession to be taxed as a bequest from the donee, and the exercise or nonexercise of powers under instruments of the second class to be taxed as a bequest from the donor -- is not rooted in caprice. The point of time which separates the classes is not interjected arbitrarily or by an exertion of brute force, but corresponds to the behests of a rational taxonomy. This being so, the division ought not to fail because the deed of 1862 was framed in such a way that succession thereunder would not have been taxable to anyone, either the estate of the donor or that of the donee, if a like deed had been executed after the passage of the statute. A legislature cannot be expected, in drafting legislation, to think out every conceivable situation in which the members of one class will bear a heavier burden than the members of another. Under the statute challenged as invalid, many deeds inter vivos continue to be taxable irrespective of their date. An interest in remainder chanroblesvirtualawlibrary