287 Mass. 464 | Mass. | 1934
This is an appeal by a taxpayer from a decision by the Board of Tax Appeals denying an abatement of an income tax for the calendar year 1928. G. L. (Ter. Ed.) cc. 58A, 62.
The taxpayer received the amount so reported as a beneficiary under the fourth paragraph of the will of his sister, a resident of the State of Washington, which is as follows: “To my sister Anne Louise Burroughs and to my brother, Charles Quincy Tirrell, [the taxpayer] I give each the sum of Two Hundred Fifty and no/100 Dollars ($250.00) per month, to be paid from the income from my estate during their natural lives, to be paid by my executor monthly and prior to the payment of the money bequests hereinafter stated, that is, all money bequests hereinafter stated shall not interfere with the payment of the Two Hundred Fifty Dollars ($250.00) per month each to my said sister and brother; and I hereby direct my executor and trustee to set aside a fund sufficient to insure said payments. And after said money bequests hereinafter stated are paid, then all the balance of the net income of my said estate shall be divided equally between my said sister and my said brother during their natural lives, and upon the death of my said sister prior or subsequent to my death, the said income herein devised to her shall be divided equally between my two nephews, namely: Edward Tirrell Burroughs and William McKinstry Burroughs, and upon the death of my said brother prior or subsequent to my death the said income herein devised to him shall be equally divided between my nephew and nieces, namely: Bernard Gould Tirrell, Jane Tirrell and Caroline McKinstry Tirrell; provided, further, that at the end of twenty-one (21) years from and after my decease, all of the residue of my estate shall be divided among my nephews and nieces as follows:
The taxpayer contends (a) that the income received by him was taxable as an annuity under G. L. c. 62, § 5 (a), at the rate of one and one half per cent per annum, and the additional tax should be abated, but (b) that, if the income was not so taxable, there is no evidence that it was taxable
G. L. c. 62, § 1, imposed a tax at the rate of six per cent per annum upon certain classes of interest and dividends received by an inhabitant of the Commonwealth. Section 5 (a) provides as follows: “Income from an annuity shall be taxed at the rate of one and one half per cent per annum. The income of property held in trust shall not be exempted from taxation under section one nor shall payments to beneficiaries be taxed under this section, because of the fact that the whole or any part of the payments to the beneficiaries is in the form of an annuity.” Section 11, which was applicable to this taxpayer, was as follows: “Any inhabitant of the commonwealth who receives income from one or more trustees or other fiduciaries who are not subject to taxation under this chapter, shall be subject to the taxes imposed by this chapter upon such income according to the nature of the income received by such trustees or other fiduciaries, and shall include such income in a return as required by section twenty-two.”
1. The income received by the petitioner was not taxable as an annuity under G. L. c. 62, § 5 (a), at the rate of one and one half per cent per annum.
The “income of property held in trust” is not taxable as an annuity even though “the whole or any part of the payments to the beneficiaries is in the form of an annuity.” In the case of a trust under the will of an inhabitant of this Commonwealth, all income thereof of a taxable nature, after the statutory deductions are made, is taxed, to the extent that such income is payable to inhabitants of this Commonwealth, irrespective of the manner of the distribution thereof, and the tax thereon was payable by the trustee. G. L. c. 62, §§ 10, 23. The same principle is applicable under § 11 to “income [received by an inhabitant of the Commonwealth] from one or more trustees . . . not subject to taxation” in this Commonwealth, though the tax is payable by the beneficiary. In neither case is the fact that payments are “in the form of an annuity” material if they are in substance payments from “income of property
The amounts received by the taxpayer under the will of his sister were “income of property held in trust,” though doubtless, being fixed periodical payments, they could also be described properly as “income from an annuity.” By
The will created a trust of the fund required thereby to be set aside. See Woods v. Gilson, 178 Mass. 511, 517-518; Casey v. Genter, 276 Mass. 165, 1731 It is a trust to provide for the periodical payments or annuities. Sears v. Hardy, 120 Mass. 524, 543. Dexter v. Episcopal City Mission, 134 Mass. 394, 397; Parkhurst v. Ginn, 228 Mass. 159, 171-172. This trust differs from the trust of the residue of the estate in that the payments to insure which this fund is to be set aside have priority over the money bequests. But it is not the less a trust because of this priority. And it is not the less a trust because the duty of making the payments rested upon the trust company in its capacity as executor until it had qualified to perform this duty as trustee, since it is not unusual for duties ordinarily performed by a trustee to be “superadded to the ordinary duties of the office of executor.” Treadwell v. Cordis, 5 Gray, 341, 358-359. See also Smith v. Fellows, 131 Mass. 20, 21; Cummings v. Cummings, 146 Mass. 501; Bean v. Commonwealth, 186 Mass. 348, 351. Furthermore, where there is no provision in the will with respect to the source from which an annuity is to be paid, and the will provides for the distribution of the rest of the estate, it is the duty of the executor or trustee “before distributing the capital, either to appropriate a sufficient amount of the capital to purchase an annuity, or to reserve enough of it to yield an income amply sufficient to meet the annuity, leaving such portion of the capital to be the subject
A distinction has been taken between a gift by will of an annuity and a gift by will of the income of a trust fund. Brimblecom v. Haven, 12 Cush. 511. See also Swett v. Boston, 18 Pick. 123. A significant difference between such gifts is that the former is a gift of fixed periodical amounts, while the amount of the latter fluctuates with the income of the trust fund. And another characteristic of an annuity is that, when unrestricted as to source, it is chargeable upon and payable out of capital if income is insufficient. See Smith v. Fellows, 131 Mass. 20; Welch v. Hill, 218 Mass. 327, 331. The conceptions, however, are not mutually exclusive. The source of an annuity may be limited to income (Bates v. Barry, 125 Mass. 83, Bridge v. Bridge, 146 Mass. 373, Forbush v. Home for Aged Women, 241 Mass. 433, Brooks v. Attorney General, 266 Mass. 161), or a maximum limit may be placed upon a gift of income of a trust fund. Parkhurst v. Ginn, 228 Mass. 159. But the “very nature of an annuity suggests, when those charged with the payment of it have in their hands a fund producing income sufficient to pay it, that the payment should be made from the income, and not from the principal.” Cummings v. Cummings, 146 Mass. 501, 508. And here, by express provision of the will, the payments to the taxpayer and to his sister are to be made
2. The taxpayer is not entitled to an abatement of the additional tax or to a refund of the original tax on the ground that there is no evidence of the nature of the income of the trust fund out of which payments were made to the taxpayer.
For the reasons already stated, the amounts received by the taxpayer under the will of his sister were taxable as income received “from one or more trustees or other fiduciaries who were not subject to taxation [under G. L. c. 62] . . . according to the nature of the income received by such trustees or other fiduciaries.” G. L. c. 62, § 11. The taxpayer introduced no evidence tending to show that the income of the trust fund was not of such a nature that it was taxable at the rate of six per cent per annum, and the board ruled rightly that the burden rested upon the taxpayer of showing that the income was not of such a nature. The taxpayer’s contention, however, goes farther.
The taxpayer’s requests for rulings are disposed of by what has been said.
Petition dismissed.