Commonwealth v. Stewart

The application of the tax to appellee is unconstitutional as an attempt to reach property not within the territorial jurisdiction of this state. The trust property is effectively localized in New York. Unlike the beneficiaries involved in the inheritance tax cases of Curry v. McCanless, 307 U.S. 357, andGraves v. Elliott, 307 U.S. 383, appellee possesses absolutely no power of disposition over the corpus, nor does she enjoy a single thread of control which in the eyes of the law would operate to transport the situs of the property to her domicile and thereby confer jurisdiction upon this state to levy a property tax. She merely has the bare right to receive, during her lifetime, the income which the trustees collect in New York. It is fundamental that it is violative of due process for a state to levy a property tax upon property situated elsewhere: Safe Deposit and Trust Company of Baltimore v.Commonwealth of Virginia, 280 U.S. 83; Commonwealth v. Madden'sEx'r., 265 Ky. 684; see Senior v. Braden, 295 U.S. 422. If the state wishes to effectively tax appellee for the benefits flowing from its protection of her receipt of income, an income tax provides the method: see New York ex rel. Cohn v. Graves,300 U.S. 308, 312.

Moreover, the tax is only nominally limited to the actual worth of appellee's equitable interest. In practical effect, it is a tax on the value of the corpus. By its very terms the value of the equitable interest is "measured by ascertaining the value of the personal property in which such resident has the sole equitable interest, or in case of divided equitable interests in the same personal property, then by ascertaining such part of the value of the whole of such personal property as represents the equitable interest of such resident therein." (Italics ours). Without further legislative authority, the Department of Revenue assessed appellee by capitalizing the income which she received from the trust during the year 1936 according to her life expectancy. The resulting figure represented 53.9% of the market value of the securities constituting the corpus. Either income or principal must be the subject of the tax. There is no third or middle ground for taxation between the two. While it is true, as stated in the majority opinion, some doubt may have been cast upon the soundness of Mayor and City Council of Baltimorev. Gibbs, 166 Md. 364; certiorari denied, 293 U.S. 559, in so far as it forbids multiple taxation, nevertheless, the proposition contained therein (pp. 371, 372), that the process adopted in the instant case of taxing appellee on the capitalized value of her income is equivalent to a tax on a part of the corpus, has never been repudiated.

For the foregoing reasons, I believe the application of the tax to appellee is at war with the clear mandate of the Fourteenth Amendment, as well as the guaranty of due process which is embedded in our own State Constitution: Brooke v. Cityof Norfolk, 277 U.S. 27; followed in Craine v. Commonwealth ofVirginia, 278 U.S. 562; Commonwealth of Virginia v. AppalachianElectric Power Company, 159 Va. 462; certiorari denied,288 U.S. 613. I would affirm the judgment given below.

Mr. Chief Justice SCHAFFER joins in this dissent.