State ex rel. Hickox v. Widule

Siebeoker, J.

(concurring). I concur in the result of the decision of this ease upon the ground that the tax commission properly assessed an income tax on the $6,500 in*120come in tbe bands of tbe testamentary trustee under tbe will of Samuel A. Eield, deceased. In arriving at this conclusion, I conclude that within tbe decision of this court in State ex rel. Field v. Widule and in Field v. Milwaukee, both reported in 161 Wis. 393, 154 N. W. 696, 698, an income tax is assessable against tbe trustee under tbe reservation in tbe court’s opinion in State ex rel. Kempsmith v. Widule, 161 Wis. 389, 154 N. W. 695, decided at tbe same time tbe Field Gases were decided, and which case, as pointed out by tbe court, ruled tbe Field Cases.

I am, however, constrained upon re-examination of tbe question determined in tbe Field and Kempsmith Cases to call attention to what I am now persuaded is an erroneous construction of tbe inheritance and income tax laws as applied in those cases. It was held, as is accurately and fully expressed in tbe syllabus of tbe Kempsmith Case, that

“Tbe yearly payments to an annuitant by trustees out of tbe income of property given to them by will for that purpose are not taxable as income of the annuitant, where the inheritance tax ivas duly paid upon the interest of the annuitant in the estate of the testator. Such an annuity is subject to the Inheritance Tax Law, and tbe value in prcesenti of tbe right to receive it may properly be appraised under sub. 4, 5, see. 1087 — 15, Stats.”

I am of tbe opinion that tbe legislative intent expressed in the statutes governing those decisions is that “tbe yearly payments to an annuitant, by trustees out of tbe income of tbe property given to them by will for tbe purpose” are taxable as income in tbe bands of tbe trustee or annuitant, and that an inheritance tax paid by such an annuitant, based on the value of the ñght to receive it at tbe time of tbe testator’s death, does not operate to exempt tbe trustees or annuitant from income taxation under sub. (i), sec. 1087m — 4, Stats. Tbe court in tbe opinion in the Kempsmith Case, following the Nunnemacher Case, 129 Wis. 190, 108 N. W. 627, and *121Estate of Bullen, 143 Wis. 512, 128 N. W. 109, declared that the inheritance tax is not a tax upon property bnt upon the right to receive property. In the case of State v. Pabst, 139 Wis. 561, 121 N. W. 351, it was recognized that the provisions of onr Inheritance Tax Law were substantially those of the New York transfer tax law, and the construction given the law by the court of New York is to be resorted to for aid in administering the law by the courts of this state, and the case of Matter of Westurn, 152 N. Y. 93, 46 N. E. 317, was followed in this:

“The devolution of the property and the right of the state have their origin at the same moment of time. The ascertainment of the value of the taxable interest and the fixing of the tax necessarily takes place subsequent to the death. But the guide is the value at the time of the death, when the interests were acquired.”

It is also held in the Pabst Case that the statute requires “that the tax at the prescribed rates shall be upon the clear market value of the property transferred, exclusive of the exemption. The context of the law expresses as its purpose and object that the tax shall be imposed on the transfer at the time of the death of the decedent and rest as a lien on the property so transferred until paid.” Sub. 1, sec. 1087 — 5, provides, “. . . every such tax shall be and remain a lien upon the property transferred until paid, and the person to whom the property is transferred and the administrators, executors and trustees of every estate so transferred shall be personally liable for such tax until its payment.” The clear implication of this provision and the whole scheme of the administrative provisions of the statutes are that the tax is levied and rests on existing property which may be seized and taken to satisfy the tax if not paid. The procedure of taxing officers in this and other cases before the courts shows that in administering the law they have interpreted it to mean that the tax on devolution of property by will or the *122intestate laws of tbe state must be levied upon tbe body of tbe estate wben tbe persons and corporations become beneficially entitled in possession or expectancy to tbe property or tbe income thereof, and wben sucb property is transferred by way of testamentary trusts (except those exempted) tbe transfer is subject to tbe tax as though tbe property went direct to those having a beneficial interest thereto. It is manifest from tbe terms of these provisions of tbe law that tbe tax is in fact one on tbe transfer of tbe corpus of such estate. In pursuance of this rule and practice tbe tax commissioners levied a transfer tax on tbe body *of tbe estate of Samuel A. Field, deceased, which included tbe interest Mrs. Field bad therein under tbe will granting her an annual fixed amount out of the income produced by such estate. Tbe rule adopted by tbe taxing officers is to malee the total of tbe various interests and estates which is divided equal to tbe present market value of tbe entire existing corpus of tbe estate and then levy tbe tax against tbe various interests in tbe proportion of tbe present values of each of sucb interests in tbe estate. Tbe result in tbe instant case was that Mrs. Field was required to pay her distributive share of tbe inheritance tax assessed upon tbe corpus of tbe testator’s estate as one of tbe beneficial owners thereof, which tbe county court found to be $520.20, based on tbe market value of her interest in tbe estate, namely, $32,821. I am persuaded that tbe taxing officers have executed tbe statute as tbe legislature intended, and that this court erred in its decision in tbe Kemp-smith and Field Gases in which it was held that tbe beneficial interest in tbe form of an annual income devised to the widows of tbe testators bad been subjected to an inheritance tax. I am convinced now that tbe inheritance tax paid by or on behalf of the testator’s widow as a beneficiary of tbe estate was not a tax on the value of tbe widow’s future income as part of the corpus of tbe estate, but a tax on tbe corpus of tbe testator’s estate to ascertain tbe distributive share of tbe in*123heritance tax, imposed by law on tbe devolution of tbe estate. Under tbis administration of tbe Inheritance Tax Law tbe income produced by sucb estate bas paid no inheritance tax and hence was subject to an income tax prescribed by secs. 1087 — 1 to 1087 — 3, Stats. Although tbe decisions in tbe Kempsmith and Field Oases, heretofore decided in tbis court, cannot be altered, I am of tbe view that tbis court then erred in tbe construction of tbe Inheritance Tax Law there involved and'that tbis is an opportune and appropriate occasion to correct sucb error.