116 P.2d 204 | Colo. | 1941
THIS controversy involves the validity of inheritance and succession taxes on transfer inter vivos made in trust to the town of Waitsfield, Vermont, and the University of Vermont. *265
August 26, 1937, the inheritance tax commissioner filed his amended report in the county court of Denver, in which there were included as assessable items a $2,000 gift to the town of Waitsfield and the remainder of the trust corpus, at a valuation of $801,539.78, to the University of Vermont. Upon the filing of this report the county court entered its formal order assessing a tax upon these transfers. There is no controversy as to the correctness of the amount of the tax. To this report defendants in error — hereinafter called objectors — filed objections, claiming nonliability of succession tax, on the ground, among others: (1) That the assessment on the transfer constituted an impairment of the obligations of contracts, contrary to and in violation of section 10 of article I of the Constitution of the United States and of section 11 of article II of the Constitution of the state of Colorado; (2) that to subject objectors to the succession tax would deprive them of liberty and property without due process of law, and deny to each of them the equal protection of the law, contrary to and in violation of section 1 of the Fourteenth Amendment to the Constitution of the United States, and of section 25 of article II of the Constitution of the State of Colorado, which provide that no person shall be deprived of life, liberty or property without due process of law; (3) that they constitute a law retrospective in its operation, contrary to and in violation of section 11 of article II of the Constitution of the State of Colorado; and (4) that the taxes payable upon the transfers here involved must be limited to those prescribed by the act of 1927. These objections were sustained by the county court and the assessments modified accordingly. Plaintiff in error — hereinafter designated as the state — assigns error and seeks reversal. The pertinent facts are as follows:
Charles W. Waterman, a resident of Colorado, to whom we hereinafter refer as settlor or decedent, on or about March 24, and April 11, 1932, executed and delivered to the City Bank Farmers Trust Company, a New York *266 corporation, and Elroy N. Clark, a resident of Colorado, as trustees, two trust indentures, designated as Trusts "A" and "B", respectively. Both documents are to the same effect. Under them the trustees were to manage, invest and reinvest trust property, and after deducting all charges and expenses of the trust, pay the net income from the trust property to settlor during his natural life, and after his death, to pay the same to settlor's wife during her natural life, and under certain conditions, the principal. Each indenture provides that the corpus of the trust fund "shall immediately on the death of the Settlor's said wife, or upon the death of the Settlor, if his said wife shall predecease him, be forthwith delivered to and paid over to the University of Vermont." Each of the indentures also provided, "After the Settlor's death the Trustees may apply to the use of the Settlor's said wife so much of the principal of the trust and at such time or times, as in their discretion they may deem advisable for her proper care, comfort and support." In each of the documents settlor reserved the right to amend or revoke the trust, in whole or in part. Decedent died August 27, 1932, survived by his wife, Anna R. Waterman, who died some time after the trial of the instant case in the county court. The corpus of the trust is now in the hands of the trustees, and no part thereof ever has been delivered or paid by them to the beneficiaries here involved. The property upon which the tax valuation is based consists entirely of intangibles, the situs of which, since the creation of the trust, has been in the custody of the corporate trustee in New York City. After the death of settlor no transactions involving the trust property could be undertaken without the written consent and approval of Elroy N. Clark, trustee, at all times a resident of Colorado. No administration proceedings of the estate of decedent ever have been instituted in any court anywhere. At the time of the execution of the trust deeds, and at the time of decedent's death, the succession tax law in effect was *267 chapter 114, Session Laws of 1927, page 391, which provided for an exemption upon all transfers to educational institutions and political subdivisions of the state wheresoever situated (subdivision 2 [a], section 3, chapter 114, supra). It is agreed that the transfers here involved are to a bona fide political subdivision and educational institution without the state of Colorado. In 1933 the legislature amended this section, limiting such exemptions to property situated in this state and limited for use within this state (subdivision 2 [a], section 3, chapter 106, Session Laws of 1933). In 1935 it again considered such exemptions and amended the 1927 act limiting the exemptions to property for use within this state, withdrawing the exemptions granted as to all transfers made prior to the 1935 act, then pending, for collection of any taxes due the state and where the property had not been delivered to the distributees and received by them, whether the decedent died before or after the passage of the act (subdivision 2 [a], section 3, chapter 134, Session Laws of 1935, section 15, chapter 85, Colorado Statutes Annotated, 1935).
The state, in support of its assignments of error, contends: (1) That the inheritance and succession-tax statutes of Colorado provide a tax upon the privilege of succession; (2) that so long as the privilege of succession has not been fully exercised it may be reached by the imposition of a tax or the removal of an exemption; (3) that the privilege of succession to the transfers had not been fully exercised prior to the death of the survivor of the life interest, and the delivery of the property, and that therefore, the transfer was fully taxable at the time of the adoption of the 1935 act; (4) that the remainder of the gift does not vest at any time prior to the actual transfer of the trust property to the beneficiaries; (5) that title to the property was at all times in the trustees, where it still is, and that the right of the beneficiaries to receive it was contingent upon the failure of settlor to revoke the trust during his lifetime *268 and upon the failure of the trustees to expend the principal of the trust in stipulated payments to settlor's wife after his death and for her care, comfort and support; (6) that so long as the trust property remained undistributed to the beneficiaries it was the province of the legislature to remove the existing exemptions and apply the tax to the transfers without violating the constitutional guaranties upon which trustees rely.
The law upon which the succession or transfer tax here involved is based is found in the following statutory provisions: "The word `transfer' as used in this chapter shall be taken to include the passing of property * * * in possession or enjoyment, present or future * * * by * * * succession * * * grant, deed * * * gift in the manner herein described." Section 3, chapter 85, '35 C.S.A. "A tax is hereby imposed * * * upon transfers, in trust or otherwise, of the following property * * * : (a) When the transfer is from a resident of this state — * * * 3. All intangible personal property, wheresoever the notes, bonds, stock certificates, or other evidence, if any, thereof, any be physically located, or the banks or other debtors may be located or domiciled. * * * ." Section 6, ibid. "The transfers enumerated in the preceding section shall be taxable if made: * * * (d) By gift or grant intended to take effect in possession or enjoyment at or after the death of the transferor. * * * ." Section 7 ibid. "There shall be exempt from the tax imposed by this chapter all transfers to * * * any state * * * or any political subdivision thereof, * * *." any public institution, society, association, or trust formed for charitable, educational, or religious purposes * * * ; provided, however, that the exemptions allowed under this paragraph shall apply only to property limited for use within this state. This chapter shall take effect from its passage and shall apply to all suits and proceedings pending for the collection of any taxes due the state and to all undistributed estates of decedents in the hands of administrators, executors *269 or trustees, whether or not said estates are pending in court, and it is hereby declared to be the intent and purpose of this chapter to withdraw the exemption of such tax from all transfers of property not limited for use within this state unless before the passage of this chapter such property has been delivered to the heirs and distributees and received by them, whether the decedent died before or after the passage of this chapter." Section 15, ibid.
[1] With regard to the first contention of counsel for the state, there cannot now be any dispute in this jurisdiction concerning the nature of this tax; it is a succession tax imposed upon the privilege of receiving property, based upon a transfer and is laid upon the beneficiary. Millikin v. People,
[2] The primary problem before us is the time element of taxability. Objectors here contend that this occurred at the time of the death of settlor, it being asserted that at that moment the beneficiaries became vested with the remainder of the property involved. Counsel for the state contend that the property becomes taxable at any time before the beneficiaries, by transfer, obtain possession or enjoyment of the property. We think the latter contention is correct and is sustained by practically all of the authorities. In the opinion in the Saltonstall case, on page 271, is the following statement: "So long as the privilege of succession has not been fully exercised it may be reached by the tax. See Cahenv. Brewster,
It is clear from the trust indentures that settlor intended to retain during his life, and during the life of his wife, all of the economic benefits of the trust property, and at no time during the life of settlor or the survivor could there be any shifting of such economic benefits of the property to either of the beneficiaries. It inevitably follows that taxability occurs at any time prior to succession by possession or enjoyment by the beneficiaries, which could not here have happened before the death of the widow and the enactment of the 1935 act. Thus, there could be no consummation of the gifts to the beneficiaries until they had come into possession or enjoyment or until they were entitled thereto. There can here be no question that the tax imposed was prior to the time the beneficiaries were entitled to actual possession of the trust property. *271
[3, 4] Undoubtedly, the legislative power may select the event of possession or enjoyment of property as a proper occasion for the imposition of a succession tax.Vanderbilt v. Eidman,
[5, 6] To sustain the inapplicability of the succession tax to the gifts here involved on constitutional grounds counsel for objectors primarily rely upon the case ofCoolidge v. Long,
[7] Because of the situs of the intangible personal property here involved, which always, since the creation of the trust, has been in New York City, objectors contended in the lower court that it was without the jurisdiction of the state; that it was beyond its taxing power, and that the assessment was made without constitutional authority, which contentions the trial court overruled. Since this ruling the United States Supreme Court has definitely settled the question of the taxable situs of intangible personal property in the cases ofCurry v. McCanless,
We are aware of authorities which have held otherwise on the question of taxability at situs. These were all prior to the decision in Curry v. McCanless, supra, and must now be considered as not applicable to the problem before us. Whether the residence of one of the trustees, which at all times was in Colorado, is a substantial factor on which taxable jurisdiction may be based in this state, in view of our conclusions, it is not necessary to determine. The trial court committed error *276 in modifying the original assessment of August 26, 1937, in exempting therefrom the transfers to the University of Vermont and Town of Waitsfield.
[8] Whether interest may be waived or reduced on the transfers above mentioned, as provided by section 35, chapter 85, '35 C.S.A., is a matter for determination by the county court. In our opinion the record discloses sufficient facts to show reasonable cause to permit either waiver or reduction of the interest.
The judgment and order modifying the original assessment of August 26, 1937, by exempting the transfers to the University of Vermont and the Town of Waitsfield, is reversed and the cause remanded with directions to fix the tax on such transfers as found in said original assessment order. The lower court also is directed to exercise its statutory authority in procuring a waiver or reduction of interest thereon.
MR. CHIEF JUSTICE FRANCIS E. BOUCK dissents on the ground that the judgment of the county court was right and should be affirmed.
MR. JUSTICE YOUNG and MR. JUSTICE HILLIARD not participating. *277