TAXATION - JURISDICTION TO TAX - MULTIPLE TAXATION OF INTANGIBLES

Authors

Richard Brawerman, University of Michigan Law SchoolFollow

Abstract

In two recent decisions of the United States Supreme Court, Curry v. McCanless, and Graves v. Elliott, a majority of the justices refused to adhere to the doctrine that the Fourteenth Amendment prohibits taxation of intangibles by more than one state, and subscribed instead to the view that control and benefit are together the only test of jurisdiction of the states to tax. In Curry v. McCanless, the decedent, a resident of Tennessee, had created a trust of intangibles, reserving control over the income during her life and power to revoke the trust by will. The trust was administered in Alabama by a trustee incorporated under the laws of that state. At her death, her executors brought suit in a chancery court in Tennessee against the State Tax Commission of Alabama and the Commissioner of Finance and Taxation of the state of Tennessee, seeking a declaratory judgment determining liability of the trust estate for inheritance taxes. On appeal from a decree of the Supreme Court of Tennessee, declaring that Tennessee could tax and Alabama could not, it was held that both states had power to tax. In Graves v. Elliott, the decedent, while residing in Colorado, established a trust of intangibles to be administered in that state. She reserved power to revoke and modify the trust during her life. Later she removed to New York where she resided until her death. After the state of Colorado had levied an inheritance tax at her death upon the trust estate, proceedings were commenced in New York to assess death taxes under the New York tax law. On certiorari, it was held that New York had power to tax. The theory of the decisions was that legal ownership by the trustee and the power reserved to the settlor were distinct intangible rights, each taxable at the domicile of its owner. Chief Justice Hughes, Justices McReynolds, Butler and Roberts dissented in both cases: they ascribed a tax situs to the corpus of each trust at the domicile of the trustee and invoked the due process clause of the Fourteenth Amendment to prohibit taxation a second time at the settlor's domicile.

Recommended Citation

Richard Brawerman, TAXATION - JURISDICTION TO TAX - MULTIPLE TAXATION OF INTANGIBLES, 38 Mich. L. Rev. 81 (1939).
Available at: https://repository.law.umich.edu/mlr/vol38/iss1/9