Stanley Forman Reed

“ Wealth has long been accepted as a fair measure of a tax assessment. As a practical mode of collecting reenue, the states unrestricted by the federal Constitution have been accustomed to assess property taxes upon intangibles 'wherever held or deposited,' belonging to their citizens and regardless of the location of the debtor. [14] So long as a state chooses to tax the value of intangibles as a part of a taxpayer's wealth, the location of the evidences of ownership is immaterial. ”

“ The tax is challenged, as wanting in 'due process,' because the Rhode Island resident is merely trustee of these intangibles and the pieces of paper that evidence them are kept outside the State.
Rhode Island's system of taxing its residents-subjecting them to the same measure for ascertaining their ability to pay whether they hold property for themselves or for others-long antedated the Fourteenth Amendment. Rhode Island has imposed this tax, 'it may be presumed, for the general advantages of living within the jurisdiction.' Fidelity & Columbia Trust Co. ”

“ One reason that state taxation of a resident on his intangibles is justified is that when the taxpayer's wealth is represented by intangibles, the tax gatherer has difficulty in locating them and there is uncertainty as to which taxing district affords benefits or protection to the actual property that the intangibles represent. There may be no 'papers.' If the assessment is not made at the residence of the owner, intangibles may be overlooked easily by other assessors of taxes. A state is dependent upon its citizens for revenue. ”

“ Whether a Rhode Island trustee can go against his trust estate for the amount of the tax which Rhode Island exacts from him is of no concern to Rhode Island. Rhode Island's power to tax its residents is not contingent upon it. A trusteeship is a free undertaking. ”

“ When an agent contracts in the name of his principal, the principal contracts, and is bound, but the agent is not. When a trustee contracts as such, unless he is bound, no one is bound, for he has no principal. The trust estate cannot promise; the contract is therefore the personal undertaking of the trustee. As a trustee holds the estate, although only with the power and for the purpose of managing it, he is personally bound by the contracts he makes as trustee, even when designating himself as such.'↑ Roger Williams Nat. ”

“ The legal interest of the trustee in the res is a distinct right. It enables a settlor to protect his beneficiaries from the burdens of ownership, while the beneficiary retained the right, through equity, to compel the legal owner to act in accordance with his trust obligations. ”

“ The precedents, holding it unconstitutional for a state to tax tangibles of a resident that are permanently beyond its boundaries, have not been applied to intangibles where the documents of owner interest are beyond the confines of the taxing jurisdiction or where the choses in action are mere promises of a nonresident without documents. ”

“ As a matter of fact, there is more reason for the domiciliary state of the owner of the intangibles than for any other taxing jurisdiction to collect a property tax on the intangibles. Since the intangibles themselves have no real situs, the domicile of the owner is the nearest approximation, although other taxing jurisdictions may also have power to tax the same intangibles. ”

“ It can hardly be deemed irrational to say, as Rhode Island apparently has said for a hundred years, that those advantages may be roughly measured, for fiscal purposes, by the wealth which a person controls, whatever his ultimate beneficial interest in the property. ”

“ The citizenship of the trustee and not the seat of the trust or the residence of the beneficiary is the controlling factor. [24] The trustee is suable like any other obligor. There is no provision of the federal Constituton which f orbids suits in state courts against a resident trustee of a trust created under the laws of a sister state. Consequently, we must conclude that Rhode Island does offer benefit and protection through its law to the resident trustee as the onwer of intangibles. ”

“ The domiciliary state of the owner of tangibles permanently located in another state, however, may require its resident to contribute to the government under which he lives by an income tax in which the income from the out-of-state property is an item of the taxpayer's gross income. ”

“ Utilization by the states of modern reciprocal statutory tax provisions may more fairly distribute tax benefits and burdens, although the danger of competitive inducements for obtaining a settlor's favor are obvious. ”

“ State courts construe their statutes according to their understanding of state policy and apply them to such situations as their interpretation of the statutory language requires. In so adjudging, they are the final judicial authority upon the meaning of their state law. ”

“ Of course, in this instance it is proposed to tax only one-half of the estate as only one of the two trustees is resident in Rhode Island. But this seems to be an act of grace if there is a right to tax at all. The trustee has no power over, or title to, any fraction of the trust property that he does not have over all of it. If mere residence of a trustee is such a conductor of state authority that through him it reaches the estate, I see no reason why it should stop at a part, nor indeed why a trustee subject to the taxing power of several states, Cf. ”