186 Tenn. 228 | Tenn. | 1948
delivered the opinion of the Court.
Mr. Carson, Commissioner of Finance and Taxation, was of the opinion that the transaction above stated was a taxable transfer under the Tennessee Inheritance Tax Law. This law is chapter 29 of the Extra Session of 1929, and is carried in code commencing at section 1259. Accordingly, the Commissioner exacted payment of the tax. The executors of Miss Mitchell paid under protest and then instituted this suit to recover the amount paid. They have appealed from the decree of the Chancellor sustaining the Commissioner’s demurrer, thereby holding that the transaction is a transfer taxable under this law.
Considered in logical order, the first insistence of the executors is that “an inheritance tax is not imposed upon government bonds by section 1259 et seq. of the code.” Section 1259 provides that “a tax is imposed . . . upon transfers ... of the following property . . . when the transfer is from a resident of this state. (1) Real property ... (2) Tangible personal property, except such as has an actual situs without this state. (3) All intangible personal property.” This language is all comprehensive and, therefore, includes United States Savings Bonds. As observed by the Chancellor, any other construction would enable the purposes of the act to be defeated by the simple pro
It is next contended that Congress has prohibited states from imposing a tax on these bonds in order that the borrowing power of the Federal Government may be maintained to its fullest extent. The prohibition mentioned is to the assessment of an ad valorem tax upon government bonds. Our Inheritance Tax Law is not a tax upon these bonds. It is a tax upon the privilege of acquiring them by transfer within the provisions of that law. Hutchison v. Montgomery, 172 Tenn. 375, 384, 112 S. W. (2d) 827; Bergeda v. State, supra; State v. Alston, 94 Tenn. 674, 681, 30 S. W. 750, 28 L. R. A. 178. Therefore, the applicable rule is that stated in 28 American Jurisprudence, page 52, as follows: “A state may tax a bequest of United States bonds. This is true, even though the bonds on their face declare, in the terms of the act authorizing their issuance, that they are exempt from state taxation in any form, since such provision is regarded as relating exclusively to ad valorem or other direct taxes on property.”
Appellants insist that an inheritance tax upon these bonds is likewise prohibited by necessary implication, in that the imposition of the tax “would be in vio
The final point sought to be made is that the transaction under consideration was not “a transfer taking effect at death of purchaser, and subject to the state inheritance tax . . . ” (1) “because said bonds . . . did not form part of decedent’s . . . estate,” but (2) “vested in the named beneficiaries immediately upon issuance.”
It is a fact that these bonds did not form a part of Miss Mitchell’s estate. This, however, did not make inapplicable to this property the provisions of the Inheritance Tax Law. Bergeda v. State, supra. If it were
The statement that these bonds vested in the beneficiaries named therein “immediately npon issuance” is not entirely accurate from a practical point of view. As stated in appellants’ brief there was reserved to Miss Mitchell the “right of cashing them during life” so long as they remained in her possession. This, no doubt, is responsible for the further statement of appellants that the beneficiaries took a vested interest “subject only to be defeated by the purchaser cashing them during her life time” if they remained in her possession, as they did. Nor did the beneficiaries have any right to demand of Miss Mitchell that she surrender possession. So, as to the question involved in this suit two controlling facts exist, to-wit: (1) Miss Mitchell owned an interest in these bonds which at her option was determinable only by her death, and (2) by reason of the retention (which we must presume was intentional) of possession by Miss Mitchell, the possession and enjoyment of these bonds by the beneficiaries took effect only upon the death of Miss Mitchell. These two facts bring these bonds squarely within the provisions of our Inheritance Tax Law.
In Baker v. McCanless, 177 Tenn. 571, 575, 151 S. W. (2d) 1082, 1084, this Court, after calling attention to the title of the act, said: “The tax is imposed ‘on transfers of property . . . intended to take effect in possession or enjoyment at or after death . . .’ That is to say, the tax is on the transfer of possession and enjoyment.” The retention of possession by Miss Mitchell until her death conclusively establishes it to have been her intention that the ownership of these bonds by the beneficiaries should take effect in possession or enjoyment upon her death.
Code Section 1261 provides that “whenever property was held jointly by the decedent and one or more persons as joint tenants ... or otherwise . . . , so that, upon the death of the decedent, the survivors became entitled to the immediate possession, ownership or enjoyment of snch property, there shall be included for taxation such part as may be clearly shown to have belonged to decedent . . . ” These bonds were paid for entirely by decedent. The beneficiary survivors became entitled to the possession, ownership and enjoyment thereof immediately upon her death, but not prior thereto.
By the express provisions of the code sections above quoted, this transaction was a transfer talcing effect in possession, ownership and enjoyment at the death of the purchaser, Miss Mitchell. The bonds were, therefore, subject to the State Inheritance Tax, as decreed by the Chancellor.
Affirmed with costs adjudged against appellants.