State ex rel. Hickox v. Widule

¶1The following opinions were filed June 12, 1917:

¶2The questions presented by the appellant, as stated in the brief of counsel, are in substance as follows: (1) When a testator wills property in trust to be invested and a specific amount per year paid out of the net income to a designated beneficiary for’life, and such beneficiary’s interest in the estate is appraised and the statutory inheritance *115tax paid, is the yearly income received by the trustee for the beneficiary subject to taxation under the Income Tax Law of this state? (2) Are general taxes paid on nonproductive property a proper deduction under the Income Tax Law ?

¶3Counsel for appellant assign the following error: The court erred in holding that the assessment of $6,500, received by the executor in 1914 as income from the trust estate in question, was void for the reasons: (1) that the executor was not entitled to a deduction of $1,953.51 on account of taxes paid on nonproductive property; (2) that the executor was not entitled to a deduction of $5,000 on account of the payment of this sum to testator’s widow in accordance with the provisions of the will; (3) that the income received by the testator, as such, during the year 1914 was $8,860.92, from which he was entitled to no deduction except $2,360 for interest paid on existing indebtedness of the estate and necessary expenses in producing the income, leaving a net taxable income of $6,500.

¶4We are of opinion that the error is well assigned.

¶51. It is perfectly clear under the statute that the deduction claimed on account of taxes paid on nonproductive property was not allowable. Sub. (h), sec. 1087m — 4, Stats. This statute allows deductions for “Taxes paid by such persons during the year other than inheritance taxes upon the property or business from which the income hereby taxed is derived.” It is without dispute that the taxes sought to be deducted in the instant case were not paid upon property or business from which the income was derived.

¶62. A majority of the court is of the opinion that the yearly income received by the trastee, less the deduction made of $2,360, was subject to taxation under the Income Tax Law; but no four justices agree upon the reasons for their conclusions, hence none can be given.

¶7Bp the Qourt. — The judgment of the court below is reversed, with costs, and the cause remanded with instructions *116to affirm the levy of the tax made by the assessor.and affirmed by the tax commission.

¶8The following opinion was filed June 25, 1917:

¶9(dissenting). The difficulty which the court has experienced with this case is quite apparent from *125the number of opinions filed. It is only just to say that every effort was made to harmonize the differences of opinion, but without success. 1 desire to state in the form of propositions my views without attempting to argue them out.

¶101. The interest of the annuitant in the present case was appraised and assessed pursuant to the provisions of the Inheritance Tax Law and the tax paid. State ex rel. Field v. Widule, 161 Wis. 393, 154 N. W. 696; Field v. Milwaukee, 161 Wis. 393, 154 N. W. 698. These cases, in my judgment, were correctly decided.

¶112. The inheritance tax having been paid by the annuitant, the yearly annuity payments are not subject to income taxation in her hands. This is not only the definite provision of the law, but it is res adjudicata with regard to the income in question. See cases cited upon the preceding proposition.

¶123. Income received by an executor or trustee for the benefit of a ward or other beneficiary is liable to income taxation subject to the deductions and exemptions provided in the Income Tax Law, provided they have not been claimed by the ward or beneficiary in another capacity.

¶134. This proviso is, in my judgment, singularly misunderstood by some of my brethren. To my mind it means simply that the beneficiary is to have the benefit of the statutory deductions and exemptions but once. If, for instance, the beneficiary has other income, e. g. a business income or. a salary, and has claimed the benefit of his exemptions and deductions out of that income, the executor or trustee is not allowed to claim them out of the annuity income, because they have been claimed by the beneficiary in another capacity, i. e. not as the beneficiary of a trust, but in his capacity as an individual carrying on business.

¶14This, of course, applies to such deductions and exemptions as can be claimed in another capacity, as, for instance, the exemptions for husband and wife, minor children, and dependents, enumerated in sec. 1087m — 5, Stats., or the deductions for interest paid during the year on existing indebted*126ness or the like, enumerated in sec. 1087m — 4. These may he claimed in the individual capacity by the beneficiary as an individual simply and allowed out of other income than the annuity, and if so allowed are not to be again allowed out of the annuity.

¶15The exemption of inheritance devises and bequests in trust cannot be claimed by the beneficiary in any capacity except in the capacity of beneficiary, hence the proviso cuts no figure in the ease.

¶16I think the judgment should be affirmed.

¶17A motion for a rehearing was denied without costs, except clerk’s fees, on October 23, 1917.