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GRAVES ET AL. v. ELLIOTT ET AL.

decided: May 29, 1939.

GRAVES ET AL., COMMISSIONERS CONSTITUTING THE STATE TAX COMMISSION OF NEW YORK
v.
ELLIOTT ET AL.



CERTIORARI TO THE SURROGATES' COURT OF THE COUNTY AND STATE OF NEW YORK.

Hughes, McReynolds, Butler, Stone, Roberts, Black, Reed, Frankfurter, Douglas

Author: Stone

[ 307 U.S. Page 384]

 MR. JUSTICE STONE delivered the opinion of the Court.

We are asked to say whether the State of New York may constitutionally tax the relinquishment at death, by a domiciled resident of the state, of a power to revoke a trust of intangibles held by a Colorado trustee.

Decedent in 1924, while a resident of Colorado, transferred and delivered to Denver National Bank of Denver, Colorado, certain bonds to be held upon specified trusts with specified powers in the trustee to administer the trust and to invest and reinvest the trust fund. So far as now material, the trust indenture provided that the trustee should pay over the income to decedent's daughter for life and afterward to the daughter's children until

[ 307 U.S. Page 385]

     each had reached the age of twenty-five years, when a proportionate share of the principal of the trust fund was to be paid over to such child. In default of such children the principal was to revert to decedent and pass under her will. She reserved the right to remove the trustee, to change any beneficiary of the trust, and to revoke the trust and revest herself with the title to the property, the trustee in that event undertaking to assign and deliver to her all the securities then constituting the trust fund.

After creating the trust decedent became and remained a domiciled resident of New York, where she died in 1931 without appointing new beneficiaries of the trust or revoking it. Until her death the trust was administered by the bank at its offices in Colorado, and the paper evidences of the intangibles -- corporate bonds -- comprising the trust fund remained in the possession of the trustee in Colorado.

Following her death the taxing authorities of Colorado assessed a tax on the transmission at death of the trust fund. Proceedings in New York for the assessment of estate taxes on the transfer of the trust fund at decedent's death resulted in an order of the Surrogate confirming the assessment under ยงยง 249-n, 249-r of the New York Tax Law. Consol. Laws, ch. 60.*fn1 On appeal the New York

[ 307 U.S. Page 386]

     Court of Appeals reversed the order of the Surrogate, holding that so far as the provisions of the New York Tax Law purport to include the intangible trust property in the gross estate they infringe due process by imposing a tax on property whose situs is outside the state. 274 N. Y. 10. We granted certiorari November 14, 1938, the question involved being of public importance.

The essential elements of the question presented here are the same as those considered in Curry v. McCanless, ante, p. 357. As is there pointed out, the power of disposition of property is the equivalent of ownership. It is a potential source of wealth and its exercise in the case of intangibles is the appropriate subject of taxation at the place of the domicile of the owner of the power. The relinquishment at death, in consequence of the non-exercise in life, of a power to revoke a trust created by a decedent is likewise an appropriate subject of taxation. Saltonstall v. Saltonstall, 276 U.S. 260; Reinecke v. Northern Trust Co., 278 U.S. 339; Helvering v. City Bank Farmers Trust Co., 296 U.S. 85; cf. Keeney v. New York, 222 U.S. 525; Bullen v. Wisconsin, 240 U.S. 625; Chase National Bank v. United States, 278 U.S. 327; Tyler v. United States, 281 U.S. 497; Guaranty Trust Co. v. Blodgett, 287 U.S. 509; Porter v. Commissioner, 288 U.S. 436.

For reasons stated in our opinion in Curry v. McCanless, supra, we cannot say that the legal interest of decedent in the intangibles ...


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