314 Mass. 375 | Mass. | 1943
This is an appeal by the commissioner of corporations and taxation, herein referred to as the commissioner, from a decision of the Appellate Tax Board granting to Margaret D. Thayer, herein referred to as the taxpayer, an abatement in the amount of $23.66 on account of an income tax assessed to her upon her income for the year 1936. (The decision of the Appellate Tax Board also granted an abatement to the taxpayer in the amount of $51.61 on account of an income tax assessed to her upon her income for the year 1937, but no appeal appears to have been taken by the commissioner from the decision granting this abatement.)
The facts are these: The taxpayer was an inhabitant of the Commonwealth during the calendar years 1936 and 1937. She was a stockholder in a certain Canadian corporation, herein referred to as the corporation. The corpo
The issue for determination in this case is whether the amount withheld by the corporation from the dividend declared by it, payable to the taxpayer if it were not for the statutes of Canada, and paid by the corporation to the Canadian government was income “received” by the taxpayer within the meaning of G. L. (Ter. Ed.) c. 62, § 1, so as to be subject to taxation thereunder. The Appellate Tax Board decided that this amount was not so “received” and granted an abatement of the income tax assessed thereon by the commissioner. The commissioner contends that this amount was so “received” and consequently was subject to taxation.
There was no error in the decision of the Appellate Tax Board granting the abatement.
Doubtless the entire dividend declared by the corporation upon the stock therein held by the taxpayer became the property of the taxpayer when the dividend was declared. Nutter v. Andrews, 246 Mass. 224, 227. This is the law of this Commonwealth and no law of Canada to the contrary has been brought to our attention. Seemann v. Eneix, 272 Mass. 189, 195-196. Bradbury v. Central Vermont Railway, 299 Mass. 230, 234. But the tax imposed by G. L. (Ter. Ed.) c. 62, § 1, is imposed only upon income “received,” and the amount withheld by the corporation from the dividend and paid by it to the Canadian government was not taxable thereunder by reason of the declaration of the dividend unless this amount was “received” by the taxpayer either actually or constructively. Lanning v. Tax Commissioner, 247 Mass. 496, 497-498. The amount so paid to the Canadian government by the corporation
However, income need not necessarily actually come into the hands or possession of a taxpayer in order to be “received” by the taxpayer within the meaning of the governing statute and taxable thereunder. The general principle has been recognized that “payments made by a third person to discharge an obligation of a taxpayer must be considered as income of the latter if such payments were made in satisfaction of an indebtedness due from such person to the taxpayer.” Commissioner of Corporations & Taxation v. Dalton, 304 Mass. 147, 152. In such a situation the transaction is “regarded as being the same in substance as if the money had been paid to the taxpayer and he had transmitted it to his creditor.” Douglas v. Willcuts, 296 U. S. 1, 9. See also Old Colony Trust Co. v. Commissioner of Internal Revenue, 279 U. S. 716, 729. If this were the situation created by the Canadian statute, it might well be that the portion of the dividend withheld by the Canadian corporation by reason of the Canadian statute should be regarded as “received” by the stockholder — the taxpayer here — and subject to the Massachusetts income tax.
But we do not think that this is the situation created by the Canadian statute. No decision of the Canadian courts interpreting the statute has been brought to our attention. Nor has there been brought to our attention any statute of Canada that provides for collection of the tax in any manner other than by compelling the withholding of such a tax by the corporation paying a dividend and the payment of the amount so withheld to the Canadian government. Looking at the situation without such assistance, we conclude that the statute does not impose a personal obligation upon a nonresident stockholder. It is true that the statute purports to impose an income tax “on all persons who are non-residents of Canada in respect of” certain forms of income including “dividends received from Canadian debtors.” It is hardly to be thought, however, that the Canadian government intended to exercise its taxing power upon nonresidents apart from the ownership of property in Canada.
It follows that the decision of the Appellate Tax Board was right. Abatement is granted in the amount of $23.66 with costs.
So ordered.