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Argument for Pennsylvania.

268 U.S.

poration laws of foreign States are neither incorporated by reference nor given extraterritorial effect.

Whether a decedent's property be transferred by will or intestate succession, the real estate passes in accordance with the law of the situs-what the domiciliary law may provide is immaterial. But if the property be personalty, then, whether it be tangible or intangible, pictures or stocks, the persons entitled must be determined by reference to the provisions of the domiciliary law. As a matter of history and practice the line is drawn between real estate and personal property. State Tax on Foreign Held Bonds, 15 Wall. 300; Bullen v. Wisconsin,

supra.

Inheritance taxes paid to Pennsylvania, to other States, and to the United States, are not deductible. Kirkpatrick's Estate, 275 Pa. 271. The stocks were transferred to somebody at the moment of the testator's death; if that were not so, they would have been for a considerable period without an owner. Pennsylvania was not required to adopt as the measure of its tax the value of the stocks to the executors, or their value for administration purposes in Pennsylvania, but very properly adopted market value at the date of the testator's death-when his interest ceased. As was pointed out by this Court in several cases above cited, the transfer of title to stocks of foreign corporations owned by this estate could not be effected without invoking the provisions of Pennsylvania law. Blackstone v. Miller, 188 U. S. 189, 207. The fallacy of the argument that the value of foreign property is reduced by the amount of inheritance taxes paid to foreign States lies in failing to observe the fundamental principle of inheritance taxation, namely, that the tax is not upon or out of the property, but upon the privilege of transfer. As well might it be argued that an inheritance tax computed upon the value of an estate including United States bonds is a taking or extinguishing of part of the value of the bonds. Plummer v. Coler, supra.

473

Argument for Pennsylvania.

The argument that the federal estate tax must be deducted is based principally upon two propositions: First, Pennsylvania's refusal to deduct is an interference with the "paramount" taxing power of the United States; second, it is in violation of the due process clause of the Fourteenth Amendment. See New York Trust Co. v. Eisner, 256 U. S. 345. If either the state or the federal government be "paramount" in this field, it is the state and not the federal government. The privilege of transfer is granted, affirmatively and exclusively, by state legislation. Take that legislation away, and the privilege now taxed by Congress does not exist. If the State does not take the privilege away entirely, but limits it, as, for example, by conditioning it upon payment of a tax to the State, the privilege taxed by Congress is the privilege as so limited and so conditioned. The condition inheres in the privilege, and if the condition is not performed, there is no privilege for Congress to tax. Thus the State comes first. Hyde v. Woods, 94 U. S. 523. If plaintiffs in error are correct in their argument that Pennsylvania has interfered with the "paramount" taxing power of the United States, it is not enough that she deduct the amount of the federal tax. The State should withdraw entirely from the field of inheritance taxation; for if the federal taxing power in that field is "paramount," it is difficult to see why it is not also exclusive so long as Congress sees fit to tax the transfer of estatesas in the case of bankruptcy. That result would be anomalous, to say the least, since the subject of the tax is created by the State exclusively. So long ago as 1824, in Gibbons v. Ogden, 9 Wheat, 1, 198, Mr. Chief Justice Marshall pointed out that neither federal nor state taxing power is "paramount" in respect to the other. The argument that Pennsylvania's refusal to deduct the federal tax violates the due process clause of the Fourteenth Amendment reduces itself to the proposition that, before

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the state tax accrues, the estate has already been reduced by the amount of the federal tax. This Court answered that argument very fully in New York Trust Co. v. Eisner, supra.

This question of deducting the taxes of other jurisdictions is not a new one. It has been raised in many state courts, and always has been dealt with as a problem of construing the particular statute. Matter of Gihon, 169 N. Y. 443; Succession of Gheens, 148 La. 1017; Week's Estate, 169 Wis. 316; Bierstadt Estate, 178 App. Div. (N. Y.) 836; Penfold's Estate, 216 N. Y. 171; Matter of Sherman, 179 App. Div. 497 (affirmed 222 N. Y. 540); Sanford's Estate, 188 Iowa 833; Hazard v. Bliss, 43 R. I. 431; Kirkpatrick's Estate, 275 Pa. 271; Hooper v. Shaw, 176 Mass. 190; State v. Probate Court, 97 Minn. 532; People v. Pasfield, 284 Ill. 450; People v. Northern Trust Co., 289 Ill. 475; Knight's Estate, 261 Pa. 537; Otto's Estate, 257 Pa. 155; Roebling's Estate, 89 N. J. Eq. 163; State v. First Calumet Trust & Savings Bank, 71 Ind. App. 467; People v. Bemis, 68 Col. 48; Corbin v. Townshend, 92 Conn. 501; Old Colony Trust Co. v. Burrell, 238 Mass. 544.

New York Tr. Co. v. Eisner, 256 U. S. 345, held that state legacy taxes were not deductible before computation of the federal tax, and Revenue Act 1921, § 403 (a) so provides.

Messrs. Carl Sherman, Attorney General of New York, and Seth T. Cole filed a brief as amici curiae, for the State of New York, by special leave of Court.

MR. JUSTICE VAN DEVANTER delivered the opinion of the Court.

These four cases involve the constitutional validity of particular features of a statute of Pennsylvania imposing a tax on the transfer of property by will or intestate laws. Act No. 258, Pa. Laws 1919, 521.

473

Opinion of the Court.

Henry C. Frick, domiciled in Pennsylvania, died testate December 2, 1919, leaving a large estate. By his will he disposed of the entire estate—giving about 53 per cent. for charitable and public purposes and passing the rest to or for the use of individual beneficiaries. Besides real and personal property in Pennsylvania, the estate included tangible personalty having an actual situs in New York, tangible personalty having a like situs in Massachusetts, and various stocks in corporations of States other than Pennsylvania. The greater part of the tangible personalty in New York,1 having a value of $13,132,391.00, was given to a corporation of that State for the purposes of a public art gallery, and the other part, having a value of $77,818.75, to decedent's widow. The tangible personalty in Massachusetts, having a value of $325,534.25, was also given to the widow. The will was probated in Pennsylvania, and letters testamentary were granted there. It was also proved in New York and Massachusetts, and ancillary letters were granted in those States. Under the laws of the United States the executors were required to pay to it, and did pay, an estate tax of $6,338,898.68; and under the laws of Kansas, West Virginia and other States they were required to pay to such States, and did pay, large sums in taxes imposed as a prerequisite to an effective transfer from a non-resident deceased of stocks in corporations of those States.

3

The Pennsylvania statute provides that where a person domiciled in that State dies seized or possessed of

1 This consisted of rare paintings, rugs, furniture, bronzes, porcelains and other art treasures known as "The Frick Collection" and housed in a building in New York City specially constructed for the purpose.

2 This consisted of furniture, household furnishings, automobiles, tools, etc., in Mr. Frick's New York house and garage.

3 This consisted of paintings, other objects of art, furniture, household furnishings, farming implements, etc., on Mr. Frick's estate at Prides Crossing.

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property, real or personal, a tax shall be laid on the transfer of the property from him by will or intestate laws, whether the property be in that State or elsewhere; that the tax shall be 2 per cent. of the clear value of so much of the property as is transferred to or for the use of designated relatives of the decedent and 5 per cent. of the clear value of so much of it as is transferred to or for the use of others; and that the clear value shall be ascertained by taking the gross value of the estate and deducting therefrom the decedent's debts and the expenses of administration, but without making any deduction for taxes paid to the United States or to any other State.

In applying this statute to the Frick estate the taxing officers included the value of the tangible personalty in New York and Massachusetts in the clear value on which they computed the tax; and in fixing that value refused to make any deduction on account of the estate tax paid to the United States or the stock-transfer taxes paid to other States. In proceedings which reached the Supreme Court of the State the action of the taxing officers and the resulting tax were upheld by that court, 277 Pa. 242. The matter was then brought here on writs of error under § 237 of the Judicial Code.

The plaintiffs in error are the executors and an interested legatee. They contended in the state court, and contend here, that in so far as the Pennsylvania statute attempts to tax the transfer of tangible personal property having an actual situs in States other than Pennsylvania it transcends the power of that State, and thereby contravenes the due process of law clause of the Fourteenth Amendment to the Constitution of the United States.

This precise question has not been presented to this Court before, but there are many decisions dealing with cognate questions which point the way to its solution. These decisions show, first, that the exaction by a State of a tax which it is without power to impose is a taking

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