1. A decision of a state court applying a state statute over the
ambiguous objection that it is "unconstitutional" is reviewable
here insofar as that court interpreted the objection as based on
the federal Constitution, and, in its opinion, sustained the
statute under that instrument. P. 276 U. S.
2. By Massachusetts Acts of 1909, c. 527, § 8, a transfer of
property passing to anyone through the failure of any person to
exercise a power of appointment is made taxable under an Act of
1907 which, as amended, 1916, taxes property passing by gift made
or intended to take effect in possession or enjoyment after the
death of the donor. A trust, established before the dates of these
acts, when interests passing to children were not subject to
transfer tax, gave
Page 276 U. S. 261
the income, after the settlor's death, to his children (with
gifts over), but reserved to him, while living, the power, with
consent of one trustee, to alter or terminate the trust. The
settlor having died while these acts were in force, without having
exercised the power, the entire interest passing to the children
was held taxable as of the date of his decease.
(1) That the state court's construction of the taxing Acts as
imposing a succession tax, and of the trust instrument as creating
a power of appointment within the Act of 1909, would be accepted by
this Court. P. 276 U. S.
(2) Imposition of the tax under the statute of 1909 was
consistent with the due process clause of the Fourteenth Amendment,
the tax being laid not on the donor, but on the beneficiaries, the
gifts taxed having never passed to them until after the donor's
death subsequent to the enactment of the statute, and the basis of
the tax being the value of the gifts at that operative moment.
Nichols v. Coolidge, 274 U. S. 531
distinguished. P. 276 U. S.
(3) So long as the privilege of succession has not been fully
exercised, it may be reached by a tax. P. 276 U. S.
256 Mass. 519 affirmed.
Error to a judgment of the Supreme Judicial Court of
Massachusetts instructing trustees that interests of beneficiaries
under a trust were subject to succession taxes. The beneficiaries,
having prayed a contrary ruling in answer to the trustees'
petition, sued out this writ of error against their co-respondent,
James Jackson, Treasurer and Receiver General of the state, and the
trustees. The opinion below is reported sub nom. Saltonstall v.
Treasurer & Receiver General.
Page 276 U. S. 267
MR. JUSTICE STONE delivered the opinion of the Court.
Plaintiffs in error are beneficiaries of a trust created by deed
of Peter C. Brooks. After the death of the settlor, the trustees,
who, with certain Massachusetts tax officials, are defendants in
error, filed in the Supreme Judicial Court of Massachusetts a
petition for instructions which joined the beneficiaries of the
trust and the officials as respondents, and asked a determination
that the Massachusetts statutes taxing inheritances did not affect
the property passing to the beneficiaries under the trust, or, if
applicable, were "unconstitutional." The beneficiaries joined in
the prayer of the bill, and it was opposed by the state officials.
The Supreme Judicial Court held the taxing acts applicable and
valid. We may disregard the ambiguity of the trustees' contention
below that the statutes were "unconstitutional," insofar as the
state court understood that the federal Constitution was the basis
for the objection and in its opinion sustained the statutes under
that instrument. Cissna v.
Page 276 U. S. 268
289; compare Miedreich v. Lauenstein, 232 U.
. To that extent, the case is properly here on
writ of error. Judicial Code, § 237(a).
In brief and argument here, plaintiffs in error have stated
various constitutional objections to the taxing acts. But, as on
the record none of them before the Supreme Judicial Court appears
to have been based on the federal Constitution, we consider only
the single objection discussed as a federal question by that court
in its opinion -- viz.,
that the statutes as applied
deprive plaintiffs in error of their property without due process
of law because retroactive as to them.
On various dates between 1905 and 1907, Peter C. Brooks, by
indenture, transferred to the trustees, defendants in error, or
their predecessors, certain property upon trust, to pay the income
to him for life or, at his option, to allow it to accumulate, and,
upon the death of himself and his wife, to pay the income to his
children, the plaintiffs in error, without any liability for their
debts and without power of alienation or anticipation, with gifts
The trust instrument provided that its terms might be changed
and the trust terminated in whole or in part by Peter C. Brooks,
with the concurrence of one trustee. Before his death, on January
27, 1920, the trust was in fact thrice altered, the last time in
1919 by providing that, during the life of Peter C. Brooks, the
income should be accumulated and added to the principal, so that,
from that date, his interest in the trust was terminated, except
for the power with one trustee to alter or terminate it.
At the time of the several transfers, there were no
Massachusetts statutes imposing an inheritance or transfer tax upon
property passing to children, but, before the death of Peter C.
Brooks the statutes now assailed were enacted. By St. Mass.1909, c.
527, § 8, printed in the
Page 276 U. S. 269
the transfer of
property passing to any one on the exercise of a power of
appointment or the failure to exercise it is made taxable as though
a disposition or transfer of property taxable under the provisions
of the statute taxing inheritances. Mass.Acts 1907, c. 563.
Mass.Acts 1916, c. 268, § 1, amending Mass.Acts 1907, c. 563, §
1, as amended, imposes a tax on all property passing by will,
intestate succession, or gift "made or intended to take effect in
possession or enjoyment after the death of the grantor or donor."
By § 4 of this act, the tax is made applicable only to property or
interests therein "passing or accruing upon the death of persons
who die subsequently to the passage hereof."
In this and earlier cases, the Massachusetts court has held that
the tax authorized by these statutes is a tax upon "succession,"
which includes the "privilege enjoyed by the beneficiary of
succeeding to the possession and enjoyment of property." See
Attorney General v. Stone,
209 Mass. 186, 190; Minot v.
162 Mass. 113, 124; Crocker v. Shaw,
Mass. 266, 267. It has held
Page 276 U. S. 270
also that the provisions of the trust instrument for change or
termination of the trust by Peter C. Brooks with the consent of one
trustee created a power of appointment within the meaning of
Mass.Acts 1909, c. 527, § 8, and that the nonexercise of the
reserved power in Brooks' lifetime as well as the fact that the
interest of the beneficiaries took effect "in possession or
enjoyment" after his death within the meaning of Mass.Acts 1916, c.
268, § 1, required the imposition of the tax as of the date of his
death upon the entire interest in the trust passing to the
plaintiffs in error. This construction of the statutes by the state
court we accept, Stebbins v. Riley, 268 U.
; Chanler v. Kelsey, 205 U.
, 205 U. S. 477
as we do its construction of the trust deed. Nickel v.
Cole, 256 U. S. 222
256 U. S. 225
Moffitt v. Kelly, 218 U. S. 400
The plaintiffs in error contend that, as interpreted, the
statutes deprive them of property without due process because they
are taxed on an interest they had already received before the
enactment of the taxing acts. It is said that they had vested
interests or remainders subject only to being divested by the
exercise of the reserved power, which never happened; that, as
their remainders vested before the enactment of the taxing
statutes, these cannot constitutionally be applied to them under
the rule laid down by this Court in Nichols v. Coolidge,
274 U. S. 531
In Nichols v. Coolidge,
it was held that, under the
estate tax sections of the Revenue Act of 1919, which tax the
privilege of transmission, Nichols v. Coolidge, supra; New York
Trust Co. v. Eisner, 256 U. S. 345
property of which a donor had made an outright conveyance several
years before the enactment of the statute could not, on his death
after its enactment, be included as part of his taxable gross
estate at its value at the time of his death. But we are here
concerned, not with a tax on the privilege of
Page 276 U. S. 271
transmission, not with an attempt to tax a donor's estate for an
absolute gift made when no tax was thought of, and to do so at the
probably appreciated value which the gift now bears, but with a tax
on the privilege of succession, which also may constitutionally be
subjected to a tax by the state whether occasioned by death,
Stebbins v. Riley, supra,
or effected by deed, Keeney
v. New York, 222 U. S. 525
Chanler v. Kelsey, supra; Nickel v. Cole, supra.
present tax is not laid on the donor, but on the beneficiary; the
gift taxed is not one long since completed, but one which never
passed to the beneficiaries beyond recall until the death of the
donor, and the value of the gift at that operative moment, rather
than at some later date, is the basis of the tax.
So long as the privilege of succession has not been fully
exercised, it may be reached by the tax. See Cahen v.
Brewster, 203 U. S. 543
Orr v. Gilman, 183 U. S. 278
Chanler v. Kelsey, supra; Moffitt v. Kelly, supra; Nickel v.
And, in determining whether it has been so
exercised, technical distinctions between vested remainders and
other interests are of little avail, for the shifting of the
economic benefits and burdens of property, which is the subject of
a succession tax, may, even in the case of a vested remainder, be
restricted or suspended by other legal devices. A power of
appointment reserved by the donor leaves the transfer, as to him,
incomplete and subject to tax. Bullen v. Wisconsin,
240 U. S. 625
beneficiary's acquisition of the property is equally incomplete
whether the power be reserved to the donor or another. And so the
property passing to the beneficiaries here was acquired only
because of default in the exercise of the power during the donor's
life, and thus was, on his death, subject to the state's power to
tax as an inheritance.
Without considering the other statutes involved, we need not go
further than to say that the statute of 1909,
Page 276 U. S. 272
imposing the tax because of the failure to exercise the power of
appointment, does not deprive plaintiffs in error of their property
without due process of law.
"Section 8. Whenever any person shall exercise a power of
appointment derived from any disposition of property made prior to
September first, nineteen hundred and seven, such appointment when
made shall be deemed to be a disposition of property by the person
exercising such power, taxable under the provisions of chapter five
hundred and sixty-three of the acts of the year nineteen hundred
and seven, and of all acts in amendment thereof and in addition
thereto, in the same manner as though the property to which such
appointment relates belonged absolutely to the donee of such power,
and had been bequeathed or devised by the donee by will, and
whenever any person possessing such a power of appointment so
derived shall omit or fail to exercise the same within the time
provided therefor, in whole or in part, a disposition of property
taxable under the provisions of chapter five hundred and
sixty-three of the acts of the year nineteen hundred and seven and
all acts in amendment thereof and in addition thereto shall be
deemed to take place to the extent of such omission of failure. . .