1932 BTA LEXIS 1516">*1516 The facts herein show that decedent was a resident of the United States within the meaning of section 301(a) of the Revenue Act of 1924, as amended by section 322 of the Revenue Act of 1926.
25 B.T.A. 507">*507 This proceeding is for the redetermination of a deficiency of $52,349.93 in estate taxes. The errors alleged are:
(1) The respondent has determined that the decedent was a resident of the State of New York, and thus a resident of the United States, at the time of his death, within the meaning of section 301(a) of the Revenue Act of 1924;
(2) The respondent has failed to allow as a deduction from decedent's gross estate the amount of succession duty taxes paid to the Kingdom of Great Britain and Ireland and the Dominion of South Africa of account of property situated therein and included as a part of decedent's estate.
The proceeding was submitted upon the pleadings, an agreed statement of facts, documentary evidence, and briefs.
FINDINGS OF FACT.
The decedent, Albert G. Jeffress, died on the high seas December 20, 1925, while a passenger on the1932 BTA LEXIS 1516">*1517 S. S. President Pierce.
At the time of his death on December 20, 1925, the decedent was a vice chairman of the board of directors of the British-American Tobacco Company, Ltd., a British corporation, and had his office with that company at Westminster House, 7 Millbank, London. He had a home at Kenton Grange, near Harrow, Middlesex, England, and an apartment in London. He lived in these respective places with his wife and two sons for more than twenty years. However, he always traveled on an American passport, filed his Federal income-tax returns at Baltimore, and had declared to his brother and to associates that when he retired from business he intended to return to the United States to live and that he would probably settle in or near New York, his last American residence. Prior to going to England in 1902 or 1903, he had lived in New York City, where he was associated with the American Tobacco Company.
The Guaranty Trust Company of New York was duly appointed executor of the decedent's estate by the Surrogate's Court of New York County, New York, and qualified as such executor, in which 25 B.T.A. 507">*508 capacity it is still acting. The decedent's last will and testament, 1932 BTA LEXIS 1516">*1518 dated January 8, 1919, describes the decedent as being "of the City and State of New York," while a codicil thereto, dated March 6, 1925, states, "I do hereby declare that I am a citizen of the United States of America, permanently residing at Kenton Grange, near Harrow, Middlesex, England, United Kingdom of Great Britain and Ireland." The said will was admitted to probate on the ground that the decedent was domiciled in New York. Prior to the probate of the will and codicil the said Guaranty Trust Company, executor, had several conferences with the decedent's brother and other relatives and associates in New York and exhaustively investigated the question whether the decedent was domiciled in England or the United States, especially in view of the codicil referred to above. They reached the conclusion that, although his residence and business were located in England and he had lived there for more than twenty years, he had retained his American domicile because he intended to return to the United States upon his retirement from business. Therefore, the will was probated, not only on the ground that the decedent had personal property situated in New York, but that he was domiciled1932 BTA LEXIS 1516">*1519 there at the time of his death.
The said executor in due course filed a return for Federal estate tax as required by the laws of the United States. The said return, together with the will and a codicil thereto, were introduced as joint exhibits herein, but owing to their length we have incorporated them as a part of these findings by reference.
Ancillary administrators with the will annexed were duly appointed and qualified in England. Said ancillary administrators filed a tax return with the Succession Duty Office and, after a hearing, the Succession Duty Office assessed a tax only on property situated in England on the basis that decedent was an American citizen domiciled in the United States. Said ancillary administrators successfully protested against the claim of the Succession Duty Office that the decedent was domiciled in England at the time of his death.
The return filed by the Guaranty Trust Company, Executor, for the purpose of New York transfer tax law was filed upon the ground that the deceased was domiciled in New York and had personal property located in that State. The New York transfer tax was therefore assessed and paid on the basis that the decedent was1932 BTA LEXIS 1516">*1520 domiciled in New York upon the date of his death.
At the time of his death the decedent owned personal property and securities of English corporations situated in England, on which the ancillary administrators paid succession duty taxes to the Kingdom of Great Britain and Ireland and to the Dominion of South Africa in the sum of $435,334.52.
25 B.T.A. 507">*509 A copy of the affidavit for inland revenue filed in Great Britain and a copy of the New York transfer-tax return were introduced as joint exhibits and are incorporated as a part of these findings by reference.
The estate-tax return was filed on the basis of the decedent having died a resident of the United States, and the tax was computed and paid in the amount of $216,381.59, on the basis of the entire estate of decedent, wherever situated. Briefly, the return shows:
| Gross estate in England | $2,227,301.54 | |
| Less: | ||
| English death taxes | $430,456.00 | |
| South Africa taxes | 4,878.52 | |
| 435,334.52 | ||
| Net estate situated in England and taxable in United States | 1,791,967.02 | |
| Estate situated in United States | 1,861,043.14 | |
| Plus: | ||
| Interest or dividends | $17,325.57 | |
| Mortgage, cash, and insurance | 23,450.39 | |
| Miscellaneous | 3,051.02 | |
| 43,826.98 | ||
| Grand total gross estate | 3,696,837.14 | |
| Deductions: | ||
| Funeral expenses | $7,538.29 | |
| Executors' com | 85,000.00 | |
| Attorney fees | 50,000.00 | |
| Miscellaneous | 3,164.30 | |
| Debts of decedent | 593,928.88 | |
| Exemption | 50,000.00 | |
| 789,631.47 | ||
| Net taxable estate | 2,907,205.67 |
1932 BTA LEXIS 1516">*1521 The respondent disallowed the deduction of $435,334.52, for English and South African death duties and determined a deficiency in the amount of $69,799.91, less the New York transfer tax not in excess of 25 per cent of the tax imposed (section 301(b) of the 1924 Act) and proposed to assess as a deficiency the amount of $52,349.93.
OPINION.
TRAMMELL: The first issue is whether the respondent erred in determining that the decedent was a resident of the State of New York and thus a resident of the United States within the meaning of section 301(a) of the Revenue Act of 1924, as amended by section 322 of the Revenue Act of 1926, effective as of June 2, 1924. That section provides as follows:
In lieu of the tax imposed by Title IV of the Revenue Act of 1921, a tax equal to the sum of the following percentages of the value of the net estate (determined 25 B.T.A. 507">*510 as provided in section 303) is hereby imposed upon the transfer of the net estate of every decedent dying after the enactment of this Act, whether a resident or nonresident of the United States: * * * [Italics supplied.]
Section 302 of the said act provides for computing the value of the decedent's gross1932 BTA LEXIS 1516">*1522 estate by including "the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated * * *."
Section 303 of said act provides that:
For the purpose of the tax the value of the net estate shall be determined -
(a) In the case of a resident, by deducting from the value of the gross estate -
(1) Such amounts for funeral expenses, administration expenses, claims against the estate, unpaid mortgages upon, or any indebtedness in respect to, property (except, in the case of a resident decedent, where such property is not situated in the United States), to the extent that such claims, mortgages, or indebtedness were incurred or contracted bona fide and for a fair consideration in money or moeny's worth, losses incurred during the settlement of the estate arising from fires, storms, shipwreck, or other casualty, or from theft, when such losses are not compensated for by insurance or otherwise, and such amounts reasonably required and actually expended for the support during the settlement of the estate of those dependent upon the decedent, as are allowed by the laws of the jurisdiction, whether within or without the United States, 1932 BTA LEXIS 1516">*1523 under which the estate is being administered, but not including any income taxes upon income received after the death of the decedent, or any estate, succession, legacy, or inheritance taxes;
* * *
(b) In the case of a nonresident, by deducting from the value of that part of his gross estate which at the time of his death is situated in the United States -
(1) That proportion of the deductions specified in paragraph (1) of subdivision (a) of this section which the value of such part bears to the value of his entire gross estate, wherever situated, but in no case shall the amount so deducted exceed 10 per centum of the value of that part of his gross estate which at the time of his death is situated in the United States;
* * *
(c) No deduction shall be allowed in the case of a nonresident unless the executor includes in the return required to be filed under section 304 the value at the time of his death of that part of the gross estate of the nonresident not situated in the United States. [Italics supplied.]
There is no dispute in this proceeding with respect to the facts. Both parties agree that the domicile of the decedent was in the United States.
The petitioner1932 BTA LEXIS 1516">*1524 contends that the decedent, although domiciled in New York at the time of his death, was nevertheless a "nonresident" of the United States within the meaning of the Federal taxing statute. The respondent's contention, briefly stated, is that the word "residence" as used in inheritance or estate-tax statutes is synonymous with "domicile," and that although the Federal statute uses the 25 B.T.A. 507">*511 word "resident," the residence is determined by applying the principles relating to "domicile." The respondent urges that decedent was an American citizen who traveled on an American passport; that he was domiciled in the United States; that he was a resident of England only for business purposes and that he never intended to establish his domicile or legal residence in England; and, further, that the only purpose of claiming residence in England is the evasion of taxes upon that portion of the estate situated without the United States. In the determination of the meaning of the word "resident" as used by Congress in said section 301(a), we are not concerned with the possibility that the estate, or a portion thereof, of an American citizen may escape taxation. The only real question is whether1932 BTA LEXIS 1516">*1525 the statute levies a tax only upon the estate of a decedent who actually and physically resided in the United States at the date of death, or upon the estate of any decedent who had his domicile, that is, his legal residence, in the United States at the date of death.
The respondent's regulations have consistently provided that, "A resident (as that term is used in the estate tax provisions and various Revenue Acts) is one who, at the time of his death, had his domicile in the United States" and, with certain exceptions not applicable in this proceeding, that, "all persons not residents of the United States as above defined, * * * are non-residents."
In connection with the term "resident" as used in the Federal estate-tax acts, the Circuit Court of Appeals for the Second Circuit, in the case of Bowring v. Bowers, 24 Fed.(2d) 918, said:
But all the limitations applicable to acquiring a new domicile, particularly when a domicile of national origin is to be abandoned, do not necessarily attach to taking out a new residence, either in this country to England. The United States Income Tax Acts, from the Act of 1913 (38 Stat. 114) on, have been uniform in levying1932 BTA LEXIS 1516">*1526 a tax on the entire income of aliens, if resident here, and residence has been construed by the Commissioner in all his rulings as something which may be less than a domicile, which fixes the law of the devolution of property and determines the incidence of estate and succession taxes. It is true that "residence" is ordinarily used as the equivalent of domicile in statutes relating to probate, administration, and succession taxes. So, as might be expected, in the Revenue Acts, the word "resident," when employed in the portions of these acts dealing with the Estate Tax Law, means "domiciled," and has been so construed by the practice and regulations of the department.
It is contended that the same words, when used in the titles of the same acts dealing with the income tax, must have the same meaning. But the estate tax provisions were first introduced in the Revenue Act of 1916 (39 Stat. 756), after the construction of the word "resident" in that act had already become fixed by the ruling of the department at least as early as Treasury Decision 2242 of September 17, 1915, infra. Moreover, the incidence of estate and succession taxes has historically been determined by domicile1932 BTA LEXIS 1516">*1527 and situs, and not by the fact of actual residence. Frick v. Pennsylvania,25 B.T.A. 507">*512 268 U.S. 473">268 U.S. 473, 45 S. Ct. 603, 69 L. Ed. 1058, 42 A.L.R. 316">42 A.L.R. 316. As Justice Holmes said in Bullen v.Wisconsin, 240 U.S. at page 631, 36 S. Ct. 474 (60 L. Ed. 830):
"* * * As the states where the property is situated, if governed by the common law, generally recognize the law of the domicile as determining the succession, it may be said that, in a practical sense at least, the law of the domicile is needed to establish the inheritance. Therefore the inheritance may be taxed at the place of domicile, whatever the limitations of power over the specific chattels may be. * * *"
As was said, also, in the Matter of Martin, 173 App. Div. at page 3, 158 N.Y.S. 916:
"* * * in many instances there is a difference between the legal intendment of the terms 'residence' and 'domicile' * * * but in the matter of succession and transfer taxes the theory of the action of the taxing power renders the term synonymous. In the case of succession the intestate's personalty is distributed according to the Statute of Distribution of the State of the domicile. Therefore, 1932 BTA LEXIS 1516">*1528 that State which permits the inheritance is entitled to impose a duty on that privilege. * * *"
But in personal and income taxes domicile has played no necessary part, and residence at a fixed date has determined the liability for the tax.
In view of the long established Treasury Department's regulations construing the said term "resident," which have not been changed in all the subsequent legislation, we think that, in so far as the estate-tax provisions of the Revenue Acts are concerned, it was the intention of Congress to use the term "resident" as meaning a person domiciled in, that is, a legal resident of, the United States. Evidently Congress was satisfied that the consistent administrative construction of the term "resident" as used in the various revenue acts was correct, or it would have made an appropriate change in the language used in subsequent acts.
The parties to this proceeding are in agreement that the decedent had his domicile in the United States. England was his place of business and he remained there for business purposes, but maintained his legal residence or domicile in the United States, which he had the legal right to do.
Accordingly, in our opinion, 1932 BTA LEXIS 1516">*1529 the decedent at the date of his death was a resident of the United States within the meaning of section 301(a) of the Revenue Act of 1924, as amended by section 322 of the Revenue Act of 1926, and his estate is subject to the tax imposed by the estate-tax provisions applicable to the estates of "resident" decedents. As to this issue the action of the respondent is sustained.
The second issue in this proceeding involves the question of whether the respondent erred in not diminishing the value of the foreignsituated property by the foreign death or succession duties paid thereon, for the purpose of including the value of such foreignsituated property in the gross estate. In the case of Lucius N. Littauer et al., Executors,25 B.T.A. 21">25 B.T.A. 21, the Board had under consideration 25 B.T.A. 507">*513 this same question, which was decided adversely to the petitioner. Also compare John Aspinwall Hadden, Jr.,10 B.T.A. 741">10 B.T.A. 741. The action of the respondent is sustained.
Reviewed by the Board.
Judgment will be entered under Rule 50.
GOODRICH, MATTHEWS, and MURDOCK concur in the result.