G. L. c. 65, §§ 10, 11, 12] statute allows an executor, administrator, guardian or trustee duly appointed in another state or country to file a petition in the probate court for license to receive personal property situated in this commonwealth to which he is entitled. The section now under consideration relates only to the collection of the inheritance tax, and cannot be invoked in aid of the claim of a private party. Interest and Discount SECTION 11. If taxes imposed by this chapter are not paid when due, interest shall be charged and collected from the time the same became payable. If a tax imposed by this chapter is paid prior to the date upon which it is due, it shall be discounted at the rate of four per cent a year. When interest begins to run in any case depends upon when the tax is due, as established by other provisions of the law. Ordinarily interest begins to run one year from the date of the executor's or administrator's bond; but when there is a deferment of the tax on a future estate, and there is an executor, administrator or trustee in office when the right of possession to such estate accrues, the tax is payable and interest begins to run when the right of possession accrues; but if there is no such officer in existence when the right of possession accrues the tax is not payable and interest does not begin to run until one year thereafter." Tax Chargeable to Capital SECTION 12. All taxes under this chapter shall be paid out of and, chargeable to capital and not income, unless otherwise provided in a will or codicil, or deed or other instrument creating the grant or gift; but this provision shall not affect any right of the commonwealth to collect such tax, or any lien therefor. The enactment of the foregoing provision in 1912 modified the existing rule, and established the principle that all inheri5 Morrison v. Hass, 229 Mass. 514 (1918); Morrison v. Berkshire Loan & Trust Co., 229 Mass. 519 (1918). 1 1G. L. c. 65, §7, supra, page 627. 2 Bradford v. Storey, 189 Mass. 104 (1905). Attorney General v. Stone, 209 Mass. 186, 192 (1911). [G. L. c. 65, §§ 12, 13 tance taxes should be paid out of capital and not income.1 When in a will which establishes a number of trusts there is no sequestration of any part of the general trust fund, but it is held as a unit, the inheritance taxes must be paid out of this fund as the capital of the estate.2 The state inheritance tax, unlike the federal estate tax, is normally assessed upon and payable out of each legacy and distributive share, and is not paid out of the residue of the estate unless the testator expressly so directs. Even when a devise of real estate was made in accordance with a contract between the testator and the devisee, the inheritance tax must be paid out of the devise; and a direction by a testator to pay taxes on legacies out of the residue of his estate will not include appointments made by him in his will under a power established by the will of a prior decedent.* Value for Purposes of the Inheritance Tax SECTION 13. Except as otherwise provided in this and the following section, the tax imposed by this chapter shall be assessed upon the actual value of the property at the time of the death of the decedent. In case of a devise, descent, bequest or grant to take effect in possession or enjoyment after the expiration of one or more life estates or of a term of years, the tax shall be assessed on the actual value of the property or interest therein coming to the beneficiary at the time when he becomes entitled to the same in possession or enjoyment. The value of an annuity or a life interest in any such property, or any interest therein less than an absolute interest, shall be determined by the "American Experience Tables" at four per cent compound interest; but when an annuity or a life interest is terminated by the death of the annuitant or life tenant, and the tax upon such interest is not due and has not been paid in advance, the value of said interest for the purposes of taxation under this chapter shall be the amount of the annuity or income actually paid or payable to the annuitant or life tenant during the period for which he was entitled to the annuity or was in possession of the life estate. St. 1912, c. 678, §1. As to the earlier law, see Sohier v. Eldredge, 103 Mass. 345 (1869). 2 Parkhurst v. Ginn, 228 Mass. 159 (1917). G. L. c. 65, § 13] The original statute provided merely that the value for the purpose of taxation should be the "actual value" without fixing a date as of when the valuation should be made; but it was held by the court in a case in which the property had greatly appreciated in value between the death of the testator and the distribution of the legacies that it could be gathered from other portions of the act that it was the intention of the legislature that the valuation should be made as of the date of the death of the decedent.1 Income accruing between the death of the decedent and the distribution of the property is not taxed,2 but income which has accrued before the death of the decedent is included in his estate subject to taxation although not collected until after his death, the income in such cases being apportioned as of the date of his death. This principle does not however justify the taxation of income, though paid at fixed intervals, which is not apportionable, such as rent or dividends on stock of corporations. Although the valuation, except in certain prescribed instances, is made as of the date of the death of the decedent, and the rights of all parties vest at the death, in determining the amount upon which the tax is computed all payments made by the executor or administrator to relieve the estate from a general charge upon it, to discharge'the debts or other obligations of decedent or to defray the legal expenses of administration are deducted, and the tax is only upon the balance passing to the legatee or distributee. Applying this principle, inheritance taxes paid to the United States, and inheritance taxes which the executor or administrator was obliged to pay to other states in order to reduce the property of the decedent to possession, and property taxes assessed before but payable after the death. of decedent are deductible." 3 When the decedent was a non-resident part of whose property was within the jurisdiction of Massachusetts, it was the 1 Hooper v. Bradford, 178 Mass. 95 (1901). 2 Hooper v. Bradford, 178 Mass. 95 (1901). 3 Old Colony Trust Co. v. Treasurer & Receiver General, Mass. (1921). Debts and expenses of administration may be deducted, Callahan v. Woodbridge, 171 Mass. 595 (1898); but only such payments are deductible as have been allowed by the probate court. See G. L. c. 65, §27, infra, page 651. 4 Hooper v. Shaw, 176 Mass. 190 (1900); Old Colony Trust Co. v. Treasurer & Receiver General, Mass. (1921). 5 Old Colony Trust Co. v. Treasurer & Receiver General, Mass. (1921). [G. L. c. 65, § 13 practice to tax a legacy or share including such property if the entire legacy or share was of sufficient value to fall within the statutory provisions, but to determine the amount of the tax by considering only the portion of the legacy or share that was within the jurisdiction of Massachusetts; but it was held that the statutes did not warrant the taxation of such a legacy or share unless the portion within the jurisdiction of Massachusetts exceeded the statutory minimum." If a sufficient portion of the estate of a non-resident is within the jurisdiction of Massachusetts to bring a proportionate part of any legacy or share above the statutory minimum, such legacy or share will be taxed upon the proportion that the part of the estate taxable in Massachusetts bears to the entire estate, and the executor or administrator will not be allowed to diminish the amount of the tax by devoting the property subject to the jurisdiction of this state to the payment of debts, exempt legacies and legacies to the direct heirs; but it would seem that a non-resident testator by specifically devising such of his property as is subject to the jurisdiction of Massachusetts to his direct heirs or to Massachusetts charities and the remainder of his estate to friends or collateral kindred could lawfully effect a reduction of the tax on his estate. In the case of a present 'interest determinable upon death, such as a life estates or an annuity, the present value of the interest is determined according to the expectancy of life of the person upon whose death the determination of the interest depends, as shown by the experience tables. Formerly it was held that the expectancy as of the death of the testator was to govern, even if the death of the life tenant or annuitant had occurred before the tax was assessed; 10 but since 1913 it has been provided that in such case the amount of the tax should be de Attorney General v. Barney, 211 Mass. 134 (1912). 7 Kingsbury v. Chapin, 196 Mass. 533 (1907). As to what constitutes a life estate, it was held in Dow v. Abbott, 197 Mass. 283 (1908), that when a piece of real estate was devised to a devisee "to use for the term of five years or longer" the devise should be taxed as a life estate. In Kemp v. Kemp, 223 Mass. 32 (1916), it was held that when a testator devised the income of all of his estate to his wife for life, with power if the income was insufficient to sell any of the property and spend the proceeds, her estate should be taxed as a life estate. In 1909 the "American Experience Tables" were substituted for the "Actuaries Combined Experience Tables" which had been in use since 1891. 10 Howe v. Howe, 179 Mass. 546 (1901). AMERICAN EXPERIENCE TABLES.-DISCOUNTED AT 4 PER CENT COMPOUND INTEREST. Explanation: To find the present worth of the life estate of a person, multiply the principal of the fund by the figure in column 1 opposite the age of the person at the nearest birthday. Example: A, who is 26 years, 4 months old at the death of B, is given by B's will a life estate in property valued at $20,000. Solution: Opposite age 26 in column 1 is .7143; multiply .7143 X $20,000 = $14,286. To find the present worth of an annuity of a given amount for life, multiply the annuity by the figure in column 2 opposite the age at the nearest birthday of the person receiving the annuity. Example: A, who is 25 years, 7 months old at death of B, is given by B's will an annuity of $800 for life. Solution: Opposite age 26 in column 2 is 17.857; multiply 17.857 X $800 $14,285.60. = If an annuity is payable semiannually, add .250 to the annuity value in Column 2. |