Court Opinion

ID: 8192432
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:15:32.503614+00
Date Added: 2024-06-11T16:40:39.231854
License: Public Domain

Maeshall, J.
(concurring). Because of some changes in the statute, the question here, in respect to which the justices are divided, as to the proper solution of it and again as to the reasons for the conclusion reached by the majority, may not arise again. However, I prefer to state, of record, my reasons for such conclusion. I think the decision is right, tested by the plain letter of the statute, and right by the previous decisions of this court, so far as the subject has been dealt with.
In what I shall say, the prospective annual payments out. of income will be treated as annuity payments, though tech- . nically not such, but that is immaterial.
The income of a trust fund received by an executor is liable to an income tax under sec. 1087m — 10, Stats. State ex rel. Field v. Widule, 161 Wis. 393, 154 N. W. 696; Field v. Milwaukee, 161 Wis. 393, 154 N. W. 698; and State ex rel. Kempsmith v. Widule, 161 Wis. 389, 154 N. W. 695, did not deal with that-question. The subject there, particularly treated in the latter case, was whether the annuitant, who had paid an inheritance tax on the value, in prmsent% of the prospective payments, was assessable for an income tax on the payments when received. That was resolved in the negative on the plain words of the statute, reference being1 had to sec. 1081- — 1, Stats. 1913, providing that an inheritance tax shall he assessed on “any transfer of property, . . . or income therefrom in trust or otherwise;” sub. (4),. sec. 1081 — 1, providing that such tax shall be imposed when the beneficiary becomes “entitled, in possession or expectancy, to any property or the income thereof,” by transfer by will or the intestate laws of the state; sub. 1, sec. 1087 — 5, providing that the inheritance tax, subject to some exceptions, “shall be due and payable at the time of the transfer;” sub. 4,. *1175, sec. 1087 — 15, providing for valuation, in prcesenti, of the right to receive an inheritance, the possession and enjoyment being postponed; sec. 1087 — 9, affording the beneficiary, in such a case, the right to postpone payment of the tax until acquirement of the property in possession, or to pay at the time of transfer of the right; and sub. (i), sec. 1087m — 4, expressly exempting from income taxes “all inheritances, devises and bequests received during the year which are subject to and have complied with the inheritance tax laws of the state.” That left untouched the question now raised and it was expressly reserved by the words “Whether the income of the estate paid ... to the annuitant should form part of the taxable income” to the trustee “is not affected by what is here’ decided.”
The question so reserved is expressly dealt with by sub. 5,, see. 1087m — 10, which requires every person acting in a fiduciary capacity to return the amount of income received by him as such during the year and that he “shall be liable to assessment and taxation therefor, subject to the deductions and exemptions provided in this chapter” (referring to see. 1087m — 4 as to deductions which, at the time of the tax here [see Stats. 1913], specified, at sub. (i), “All inheritances, devises and bequests received during the year which are subject to and have complied with the inheritance tax laws of this state;” and referring to sec. 1087m — 5 for exemptions, which does not include the particular matter), and followed,, as a concluding part of the sentence by these ■ significant words: "provided, that such deductions or exemptions have not been claimed by or for such person, ward or beneficiary in another capacity
To overlook the quoted condition in connection with the proviso, would naturally lead to a misunderstanding of the legislative purpose. There is the condition that “All inheritances, devises and bequests received during the year which are subject to and have complied with the inheritance tax *118laws of tbis state” wbicb is true of tbe particular inheritance, the annuitant having paid an inheritance tax on the full value, in prcesenii, of her prospective annual payments, and the saving words to the effect that, the condition shall not apply and the trust fund income less expenses of administration shall be dealt with in its entirety, if the deduction, to wit, in this case, the annuity payment has “been claimed” by the annuitant “in another capacity
The particular .payment to the annuitant being exempt from an income tax in her hands, and it having been paid to her for the year previous to the one in which the return was made, it must be presumed, since the case proceeded from the start on that theory, that she did not return the same for income tax; in other words that she claimed it as a deduction in her capacity as a beneficiary who, as to such payment, had “complied with the inheritance tax laws of this state” as provided in sub. (i), sec. 1087m — 4, Stats. 1913. Having done so, according to the plain language of the above quoted proviso, in sub. 5, sec. 1087 — -10, the executor was not entitled to deduct such payment from the income received by him as a fiduciary. It was subj ect to an income tax in his hands as the tax commission held.
In dealing with the subject here discussed, danger of confusion and error would exist if the income of the trust fund were not considered apart from the corpus of such fund. They are entirely separate. The fact that an inheritance tax is assessable upon the value, in prcesenti, of the prospective payments to the annuitant out of the income, does not militate against assessment of such a tax upon the corpus; each, as a separate thing, is so assessable under sec. 1087 — 1.. There is nothing in the statute warranting the deduction of the value, in prcesenti> of the future income thereof or therefrom and only assessing a transfer tax upon the residue. Otherwise the entire principal of the fund might be in excess of the present value of the prospective future payments out of the income thereof and such principal finally go to the re-*119maindermen free from any inheritance tax. The statute contains a complete system for inheritance taxes upon the principal of an estate, and where it is held in trust for payment of income to some person or persons, but ultimately to go to another, for an inheritance tax upon the whole estate, and upon the prospective income also, payment, whether of principal or income, to be postponed until right of possession and enjoyment commences with the option to have the future prospective benefits appraised and to pay the tax presently on the value so fixed. Sec. 108? — 9. So, in this case, though the annuitant has paid an inheritance tax on the value of the prospective annuity payments, those who will be entitled to take the principal when the time arrives for them to come into possession thereof, will he chargeable with an inheritance tax thereon.
Thus it will he seen that the position of counsel for respondent, that appellant’s claim, if allowed, will result in double taxation, in that it will impose an inheritance tax and also an income tax on the bequest to Mrs. Field is untenable. The value of the prospective annuity payments, as before indicated, is no part of the corpus. It is a thing of itself. The inheritance tax upon that, expressly exempts it from income taxes against the annuitant. The former is exempt from income taxes, while the latter is not. The tax as to him is part of the expense of administration. In case of its resulting in not leaving sufficient net income to pay the annuity, which is not the case here, the beneficiary would, logically, not receive the full amount of her bequest, because it is to be paid out of the net income.