[240 U.S. 625, 626] Messrs. John R. Montgomery, Louis E. Hart, Jasperson Smith, and Lloyd R. Steere for plaintiffs in error.
[240 U.S. 625, 629] Mr. Walter Drew and Mr. Walter C. Owen, Attorney General of Wisconsin, for defendant in error.
Mr. Justice Holmes delivered the opinion of the court:
This is a proceeding to fix the inheritance tax upon the estate of George Bullen, deceased, a resident of Wisconsin. The supreme court of the state affirmed a judgment for a tax upon a fund of nearly a million dollars which the heirs and next of kin say cannot be taxed in Wisconsin without violating the 14th Amendment and the contract clause of the Constitution of the United States. 143 Wis. 512, 139 Am. St. Rep. 1114, 128 N. W. 109.
The facts are simple. Bullen formery had lived in Chicago, and continued to do some business there after moving to Wisconsin, which he did in 1892. He kept in Chicago the bonds, stocks, and notes constituting the fund, and in 1902 conveyed them to the Northern Trust Company of that city upon certain trusts. In 1904, by virtue of powers reserved, he repossessed himself of the fund, but in 1907 he conveyed it to the company upon the former trusts again. The limitations, so far as material, were of relatively small sums to a sister and niece residing in Massachusetts, and, subject to those gifts of one third of the income to his widow for life and the rest of the income and the principal to his four sons. But the instrument contained the following clause: 'Fifth. I. the donor, expressly reserve the right to direct and control the disposition of the said trust property and estate, to revoke and vacate this trust at any time during my life, to enter into and upon and take possession of the same, or any part thereof, to require a reconveyance to me of the said trust property, or any part thereof, and to dispose of it as I may see fit. During my lifetime the principal and income shall be used for such beneficiaries [240 U.S. 625, 630] and in such manner as I may from time to time appoint, and in default of any appointment during my lifetime, and, at all events, after my death, the said income and the said principal shall be applied, paid over or held as herein provided.' It also declared that no portion of principal or income should be paid under some of the leading clauses before Bullen's death, unless by his direction. In fact, be received the whole income during his life. The supreme court held that an inheritance tax was due in respect of the whole fund as upon a transfer intended to take effect in enjoyment after the donor's death.
The deeds of trust were not a merely simulated transaction. Bullen made a will shortly after the first transfer, which was of similar tenor, but which, it is found, 'has not been probated.' perhaps because the parties relied upon the deeds. The deeds transferred title and they had a purpose. Bullen at the time was suffering from locomotor ataxia, his wife also was in precarious health, and the chief instrument contemplated the possible disability of both. The ultimate limitations would operate unless revoked, which they were not. But Bullen, as has been seen, reserved an absolute power of control over all of his gifts, and exercised it during his life by a revocation (followed, to be sure, by a reconveyance upon the same terms), and by taking all the income of the fund. The words of Lord St. Leonards apply with full force to the present attempt to escape the Wisconsin inheritance tax: 'To take a distinction between a general power and a limitation in fee is to grasp at a shadow while the substance escapes.' Sugden, Powers, 8th ed. 396. See Gray, Perpetuities, 526b, 1st ed. pp. 334, 335. We do not speak of evasion, because, when the law draws a line, a case is on one side of it or the other, and if on the safe side is none the worse legally that a party has availed himself to the full of what the law permits. When an act is condemned as an evasion, what is meant is that it [240 U.S. 625, 631] is on the wrong side of the line indicated by the policy if not by the mere letter of the law. What we do say is that the supreme court of Wisconsin was fully justified in treating Bullen's general power of disposition as equivalent to a fee for the purposes of the taxing statute, that there is no constitutional objection to its doing so, and that although Illinois also has taxed the fund, as it might, we are not aware that it has attempted to qualify the effect that Wisconsin has given to the power, and do not intimate that it could have done so, if it had tried. See Hawley v. Malden, 232 U.S. 1, 13 , 58 S. L. ed. 477, 483, 34 Sup. Ct. Rep. 201.
The power to tax is not limited in the same way as the power to affect the transfer of property. If this fund had passed by intestate succession, it would be recognized that by the traditions of our law the property is regarded as a universitas the succession to which is incident to the succession to the persona of the deceased. As the states where the property is situated, if governed by the common law, generally recognize the law of the domicil as determining the succession, it may be said that, in a practical sense at least, the law of the domicil is needed to establish the inheritance. Therefore the inheritance may be taxed at the place of domicil, whatever the limitations of power over the specific chattels may be, as is especially plain in the case of contracts and stock. Blackstone v. Miller, 188 U.S. 189, 204 , 47 S. L. ed. 439, 444, 23 Sup. Ct. Rep. 277; Eidman v. Martinez, 184 U.S. 578, 586 , 589 S., 590, 592, 46 L. ed. 697, 702-705, 22 Sup. Ct. Rep. 515; Thomson v. Advocate General, 12 Clark & F. 1, 18, 21, 13 Sim. 153, 9 Jur. 217; Frothingham v. Shaw, 175 Mass. 59, 78 Am. St. Rep. 475, 55 N. E. 623; Re Swift, 137 N. Y. 77, 88, 18 L.R.A. 709, 32 N. E. 1096; Mann v. Carter, 74 N. H. 345, 15 L.R.A.(N.S.) 150, 68 Atl. 130; Hopkins's Appeal, 77 Conn. 644, 60 Atl. 657; Hartman's Case, 70 N. J. Eq. 664, 62 Atl. 560. The same would be true of a universal succession established by will, and the notion of privity or identity of person that is recognized in these cases has been carried over to more limited bequests and in some degree to deeds. Norcross v. James, 140 Mass. 188, 2 N. E. 946. The principle that allows the tax is to be [240 U.S. 625, 632] applied, if ever, to a disposition that operates upon the great mass of the donor's estate, and that takes effect only upon his death; at least, so far as concerns the persons before this court, the donor's widow and sons. Lines's Estate, 155 Pa. 378, 26 Atl. 728.
It is suggested that there was a subordinate error in not deducting the amount of the Illinois inheritance tax. But this appears not to have been assigned in the appeal to the Supreme Court of the state, and therefore we need not inquire whether there was any constitutional obstacle to the state of Wisconsin adopting the gross fund disposed of rather than the net amount received as the measure of the tax.