1. A resident of Illinois died in that state owning a majority
of the shares of a South Carolina corporation and also debts owed
him by the corporation on unsecured open account partly for
advances made by him to the corporation and partly for dividends
previously declared on his shares. South Carolina, besides taxing
the transfer of the shares, undertook to tax the transfer of the
indebtedness, claiming this jurisdiction because of the local
domicile of the debtor corporation and upon the ground that the
indebtedness had acquired a "business situs" in South Carolina.
that the South Carolina tax on the transfer of the
indebtedness was void under the due process clause of the
Fourteenth Amendment. Pp. 282 U. S. 7 et
2. It is now established that the mere fact that the debtor is
domiciled within the state gives it no jurisdiction to impose an
inheritance or succession tax upon the transfer of the debt from a
decedent who is domiciled in another state. P. 282 U. S. 7
3. Open accounts fall within this principle. P. 282 U. S. 8
4. A conclusion that debts have acquired a situs for taxation
other than at the domicile of their owner must have evidence to
Page 282 U. S. 2
it, and it is the province of the Court to inquire whether there
is such evidence when the inquiry is essential to the enforcement
of a right suitably asserted under the federal Constitution. P.
282 U. S. 8
5. The evidence in this case afford no adequate basis for a
finding that the indebtedness had a business situs in South
Carolina. It proves the existence of the debts and the facts that
the decedent creditor was largely interested in the affairs of the
corporation, but it shows nothing which derogates from the
existence of the corporation as such, transacting its business a
such, with corresponding rights and liabilities. P. 282 U. S. 9
6. The interests of a corporation in its property and of a
shareholder of the corporation in his share are distinct property
Error to a judgment of the Supreme Court of South Carolina which
sustained on appeal a transfer tax levied by the South Carolina Tax
Commission on the transfer of credits belonging to a decedent's
estate. The plaintiffs in error were the executors of the will.
Page 282 U. S. 6
MR. CHIEF JUSTICE HUGHES delivered the opinion of the Court.
On March 4, 1924, Francis Beidler, a resident of Chicago,
Illinois, died in that state, leaving a will by which he bequeathed
a portion of his personal property to his wife and children
directly, and gave the residue in trust for their benefit and for
charitable uses. The will was probated in Illinois, and Francis
Beidler, II, and George Engelking, the appellants, qualified as
At the time of the death of the testator, he owned 8,000 shares
of the capital stock of Santee River Cypress Lumber Company, a
corporation organized under the laws of South Carolina and doing
business in that state. The remainder, 7,000 shares, were owned by
the testator's wife and children. In addition, the Santee River
Cypress Lumber Company was indebted to the testator in the sum of
$556,864.22, for advances made by him to the company, and in the
sum of $64,672 for dividends previously declared on his shares. The
indebtedness was an open unsecured
Page 282 U. S. 7
account which was entered upon the books of the company kept in
South Carolina. The testator also kept a complete set of personal
books in Chicago upon which appear entries of the amounts due him
by the company except the item of dividends.
The total amount of the indebtedness for advances and dividends,
$621,536.22, was included by the Attorney General of Illinois in
the computation of the value of the decedent's estate for the
purpose of fixing the inheritance tax payable to that state.
The executors filed with the South Carolina Tax Commission, as
required by the Inheritance Tax Law of South Carolina, an affidavit
setting forth all the above-mentioned assets. The payment of the
succession tax to the State of South Carolina with respect to the
shares of stock owned by the testator in the Santee River Cypress
Lumber Company was not contested by the executors, and, by
agreement, the value of these shares was fixed at $204 per share,
or $1,632,000. The South Carolina Tax Commission also levied a tax
upon the transfer of the indebtedness, overruling the claim of the
executors that the State of South Carolina had no jurisdiction to
impose such a tax, and that the levy of it would constitute a
deprivation of property without due process of law in violation of
the Fourteenth Amendment of the federal Constitution. This
contention was renewed upon the appeal of the executors to the
Supreme Court of the State of South Carolina. That court sustained
the action of the Tax Commission with respect to the taxability of
the transfer of the indebtedness, and the executors bring this
appeal to review that part of the judgment.
In reaching its conclusion as to the validity of the tax, the
state court relied chiefly upon the decision of this Court in
Blackstone v. Miller, 188 U. S. 189
That decision has been overruled, and it is now established that
the mere fact that the debtor is domiciled within the state
Page 282 U. S. 8
does not give it jurisdiction to impose an inheritance or
succession tax upon the transfer of the debt by a decedent who is
domiciled in another state. Farmers Loan & Trust Co. v.
Minnesota, 280 U. S. 204
Baldwin v. Missouri, 281 U. S. 586
transfer is taxable by the state of the domicile of the deceased
owner. Blodgett v. Silberman, 277 U. S.
. Open accounts, including credits for cash deposited
in bank, fall within this principle, and its application is not
defeated by the mere presence of bonds or notes, or other evidences
of debt, within a state other than that of the domicile of the
owner. Baldwin v. Missouri, supra.
It is sought to sustain the tax by South Carolina upon the
ground that the indebtedness had what is called a "business situs"
in that state, and the state court adverted to this basis for the
tax. In Farmers Loan & Trust Co. v. Minnesota, supra,
this Court reserved the question of business situs, saying:
"New Orleans v. Stemple, 175 U. S.
; Bristol v. Washington County, 177 U. S.
; Liverpool & L. & G. Ins. Co. v. Orleans
Assessors, 221 U. S. 346
, recognize the
principle that choses in action may acquire a situs for taxation
other than at the domicile of their owner if they have become
integral parts of some local business. The present record gives no
occasion for us to inquire whether such securities can be taxed a
second time at the owner's domicile."
But a conclusion that debts have thus acquired a business situs
must have evidence to support it, and it is our province to inquire
whether there is such evidence when the inquiry is essential to the
enforcement of a right suitably asserted under the federal
Constitution. [Footnote 1
Page 282 U. S. 9
In the present case, beyond the mere fact of stock ownership and
the existence of the indebtedness, there is no evidence whatever
having any bearing upon the question save a copy of the decedent's
account with the corporation, taken from his books which were kept
by him in his office at Chicago. The various items of debit and
credit in this account, in the absence of any further evidence, add
nothing of substance to the fact of the indebtedness as set forth
in the agreed statement, and afford no adequate basis for a finding
that the indebtedness had a business situs in South Carolina.
That the decedent was largely interested in the affairs of the
corporation is apparent; he owned a majority of its stock, but
nothing is shown which derogates from its existence as a
corporation, transacting its business as such, with corresponding
corporate rights and liabilities. The interest of the decedent as a
stockholder was a distinct interest, [Footnote 2
] and the estate of the decedent has been taxed
by South Carolina upon the transfer of his stock according to its
agreed value. With respect to the items of indebtedness of the
corporation to the decedent, the latter appears upon the record
simply as a creditor, with his domicile in Illinois.
For these reasons, the judgment of the state court, so far as it
relates to the taxation of the transfer of the debts in question,
must be reversed, and the cause remanded for further proceedings
not inconsistent with this opinion.
Page 282 U. S. 10
Kansas City Southern Railway Co. v. Albers Commission
Co., 223 U. S. 573
223 U. S.
-593; Creswill v. Knights of Pythias,
225 U. S. 246
225 U. S. 261
Northern Pacific Railway Co. v. North Dakota, 236 U.
, 236 U. S. 593
Ward v. Love County, 253 U. S. 17
253 U. S. 22
Davis v. Wechsler, 263 U. S. 22
263 U. S. 24
Railroad Commission v. Eastern Texas R. Co., 264 U. S.
, 264 U. S. 86
New York Central R. Co. v. New York & Pennsylvania
Co., 271 U. S. 124
271 U. S. 126
Ancient Egyptian Order v. Michaux, 279 U.
, 279 U. S.
Van Allen v.
3 Wall. 573, 70 U. S. 584
Hawley v. Malden, 232 U. S. 1
232 U. S. 12
Eisner v. Macomber, 252 U. S. 189
252 U. S. 214
Rhode Island Trust Co. v. Doughton, 270 U. S.
, 270 U. S.
MR. JUSTICE HOLMES.
The decisions of last term cited by the CHIEF JUSTICE seem to
sustain the conclusion reached by him. Therefore, MR. JUSTICE
BRANDEIS and I acquiesce, without repeating reasoning that did not
prevail with the Court.