[G. L. c. 65, § 1 The exemption applies only to charitable institutions exempted from taxation by the laws of this state," although there is no requirement that a charitable institution incorporated in this state limit its field of usefulness to this state under penalty of taxation. When a testator leaves property to trustees for a charitable purpose to be carried out outside the commonwealth so that the bequest is taxable, the trustees cannot escape the tax by forming a Massachusetts corporation and turning over the property to it; but when the property is directly devised to such charitable purposes as the trustees may designate, and the trustees cause a corporation to be formed and the property turned over to it, the bequest is exempt, because the passage from the testator's estate to the corporation is direct. With respect to a bequest to an existing corporation, the exemption depends upon the purposes and work of the corporation at the time of the testator's death."

In 1895 it was provided that bequests to towns for any public purpose should not be subject to the tax,10 and there is no doubt that the legislature intended to confine this exemption to towns within this commonwealth." In 1905 this exemption was extended to bequests to or for the use of a city or town for public purposes12 and in 1906 bequests to a trustee or trustees for public charitable purposes within the commonwealth were made exempt.13 In the statute of 1907 which originated the direct inheritance tax and codified and re-enacted the existing statutes

A bequest to a municipal or charitable or educational corporation located outside the state is taxable. Minot v. Winthrop, 162 Mass. 113 (1894); Rice v. Bradford, 180 Mass. 545 (1902); Pierce v. Stevens, 205 Mass. 219 (1910); Davis v. Treasurer & Receiver General, 208 Mass. 343 (1911); Batt v. Treasurer & Receiver General 209 Mass. 319 (1911). It was held in Board of Education v. Illinois, 203 U. S. 553 (1906), that there was nothing in violation of the constitution of the United States in a state statute limiting the exemption from the legacy tax to charitable institutions incorporated within the state. A bequest to the World Peace Foundation, a corporation organized to promote peace among nations, is for charitable rather than for political purposes, and is exempt. Parkhurst v. Treasurer & Receiver General, 228 Mass. 196 (1917). As to what constitute charitable, educational and religious societies within the meaning of the tax laws see G. L. c. 59, §5, cl. 3, 11, supra, pages 197, 205.

Balch v. Shaw, 174 Mass. 144 (1899).

'Pierce v. Stevens, 205 Mass. 219 (1910).

Balch v. Shaw, 174 Mass. 144 (1899).

Parkhurst v. Treasurer & Receiver General, 228 Mass. 196 (1917).

10 St. 1895, c. 307.

" Davis v. Treasurer & Receiver General, 209 Mass. 319 (1911).

G. L. c. 65, §§ 1, 2] relating to the subject of inheritance taxes, the last exemption was put very briefly as "for or upon trust for any charitable purposes, " and the same phraseology was employed in the codification of 1909.15 In the same year however the whole subject of the geographical limitation of exemptions from the inheritance tax was given explicit attention by the legislature and the exemption of charitable institutions in terms confined to such institutions "the property of which is by the laws of this commonwealth exempt from taxation," the exemption of cities and towns confined to cities and towns "within this commonwealth" and the exemption of charitable trusts confined to "charities to be carried out within this commonwealth."18 The statute however which contained these provisions was held to be merely declaratory of the existing law and a bequest taking effect outside the state made by a person who died in 1908 was held to be subject to the tax.17

The provision as to exemption has remained unchanged since 1909, except that in 1916 legacies to the commonwealth itself were added to the tax exempt class.18

Powers of Appointment

SECTION 2. 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 a disposition of property by the person exercising such power, taxable under section one, 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 section one shall be deemed to take place to the extent of such omission or failure in the same manner as though the persons thereby becoming entitled to the possession or enjoyment of the property to which such power related had succeeded

14 St. 1907, c. §1.

15 St. 1909, c. 490, Part IV, §1.

1 St. 1909, c. 527, §1.

17 Davis v. Treasurer & Receiver General, 208 Mass. 343 (1911).

18 St. 1916, c. 268, §1.

[G. L. c. 65, § 2 thereto by a will of the donee of the power failing to exercise such power, taking effect at the time of such omission or failure.

Under the original statute it was held that the donor of a power of appointment and not the donee was the decedent whose estate was liable to taxation, and consequently that the exercise after the enactment of the inheritance tax statute of a power of appointment created prior to its enactment was not subject to the tax. Thus remained the law until 1909 when a statute which is in substance the provision quoted above was enacted, in effect subjecting to the provisions of the direct inheritance law of 1907 the subsequent exercise of all testamentary powers of appointment created prior to the taking effect of that law, and also the subsequent passing of property by the failure to exercise such powers, and exonerating from the provisions of the collateral inheritance law of 1891 the subsequent exercise of powers created after its enactment and prior to the taking effect of the direct inheritance law of 1907, upon which the taxes had not already been settled. The constitutionality of the statute of 1909 was assailed in a case in which a tax was imposed upon the passing of property by failure to exercise a power created by deed long before the enactment of any inheritance tax law in the commonwealth; but it was held that as the succession in possession and enjoyment was not determined until the donee of the power acted or refused or omitted to act, it was not vested in anybody, and that when it vested in possession through a disposition dependent upon the will and conduct of the donee of the power a succession tax might be constitutionally imposed, and the same result was reached in the case of a succession tax upon the equal distribution of property among the children of the beneficiary for life by reason of the failure of the beneficiary to exercise a special power of appointment to fix the proportions in which the property should be distributed among his children and grandchildren.3

The test to be applied to determine whether property pass

'Emmons v. Shaw, 171 Mass. 410 (1898).

2 Minot v. Treasurer & Receiver General, 207 Mass. 588 (1911). See also Moffitt v. Kelly, 218 U. S. 400 (1910).

3 Burnham v. Treasurer & Receiver General, 212 Mass. 165 (1912). When, however, upon the failure of a donee of a power to exercise it, another person is given the power, no tax is due upon the failure of the first donee to exercise the power, because no one thereby became entitled to the possession or enjoyment of the property. Attorney-General v. Thorp, 230 Mass. 25 (1918).

G. L. c. 65, §§ 2, 3]

ing by the exercise of a power of appointment under the present statute is this: Would the property in question have been subject to an inheritance tax if it had been the property of the donee of the power and had passed by way of devise or legacy under his will?*

When the donee of the power dies domiciled in another state, so much of the property is subject to the inheritance tax as is within the jurisdiction of the commonwealth and would have been taxable if the donee of the power had owned it outright." This principle cannot however be extended to justify the taxation of the transfer of property by the exercise of a power of appointment by a resident decedent, when the power was created by the will of a non-resident and the property is not physically within the jurisdiction of the commonwealth, because in such case the succession can be determined and enforced without resorting to our courts, and does not depend upon any privilege conferred by our laws."

When a decedent having a general power of appointment dies insolvent, having exercised the power, and a portion of the sum appointed is applied by order of the court to the payment of his debts, only the remainder is subject to the inheritance tax.' When a testator directs that all his legacies be paid in full, and that taxes be charged to the residue of his estate, such a direction does not apply to the exercise by him of a special power of appointment, and the inheritance tax must be paid out of the sum appointed rather than out of the residue of the estate,

Gifts in Contemplation of Death

SECTION 3. Any deed, grant or gift completed inter vivos, except in cases of bona fide purchase for full consideration in money or money's worth, made not more than six months prior to the death of the grantor or donor, shall, prima facie, be deemed to have been made in contemplation of the death of the grantor or donor. Notwithstanding any provision of section one, no tax shall be payable there

'Minot v. Treasurer & Receiver General, 207 Mass. 588, 590 (1911); Clark v. Treasurer & Receiver General, 218 Mass. 292 (1914); Gardiner v. Treasurer & Receiver General, 225 Mass. 355, 362 (1916).

'Clark v. Treasurer & Receiver General, 218 Mass. 292 (1914); Gardiner v. Treasurer & Receiver General, 225 Mass. 355 (1916).

"Walker v. Treasurer & Receiver General, 221 Mass. 600 (1915).

'Hill v. Treasurer & Receiver General, 229 Mass. 474 (1918).

[G. L. c. 65, § 3 under on account of any deed, grant or gift in contemplation of death made more than two years prior to the death of the grantor or donor, unless made or intended to take effect in possession or enjoyment after such death.

In 1920 provision was made for the first time for subjecting to the inheritance tax completed gifts of a decedent, which took effect at once in possession and enjoyment, provided they were made by him in contemplation of death.1 The ultimate test of liability to taxation in such cases is whether the gift was made in contemplation of death, although the statute set forth above regulates the determination of the question by providing that a completed gift made within six months of the death of the donor shall be deemed prima facie to have been made in contemplation of death, and that in no event shall a tax be payable on such a gift if made more than two years prior to the death of the donor. The statute applies only to gifts made on or after May 27, 1920;2 and the tax is payable at the expiration of one year after the death of the donor.3

The statute taxing gifts in contemplation of death has not yet been brought before the supreme judicial court of Massachusetts; but similar statutes, some of them more drastic, have been in force in other states for several years, and have been held constitutional when their validity has been assailed. The constitutionality of the Massachusetts act has however been questioned as creating an arbitrary discrimination between different classes of completed gifts, and as attempting to levy an excise upon the exercise of a natural right, which is not a "commodity" within the meaning of the constitution of Massachusetts.*

A gift is made in contemplation of death when there is an apprehension of death soon to occur, arising from some existing bodily condition, as when the donor is suffering from a disease which he knows to be fatal, or from some impending peril, and the statute does not apply to the general expectation of eventual decease commonly entertained by all persons, even if the donor is advanced in years. Ante-nuptial settlements, or advancements made to the children of a decedent, are not made in contemplation of death merely because they take the place of a 1 St. 1920, c. 548. See G. L. c. 65, §1, supra, page 608.

'G. L. c. 65, §36, infra, page 660.

3 G. L. c. 65, §7, infra, page 627.

4

See Part I, §55.