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Knowlton v Moore

Plaintiffs were the executors of the will of Edwin F. Knowlton, of Brooklyn, New York.
Defendant was the United States Collector of Internal Revenue for the First Collection District for
the New York.
Edwin Knowlton died at Brooklyn in October, 1898, and his will was duly proved.
Pursuant to a statute, Act of Congress of June 13, 1898, defendant demanded of the executors a
return showing the amount of the personal estate of the deceased and the legatees and
distributees thereof.
The return was made by the executors under protest, asserting that the Act of June 13 was
unconstitutional.
The return showed that the personal estate amounted to over two and a half millions of dollars,
and that there were several legacies, ranging from under $10,000 each to over $1,500,000.
Defendant considered the whole of the personal estate of the deceased for the purpose of fixing
the tax rate for each, and not the amount coming to each individual legatee under the will.
Payment was made under protest.
When defendant refused to refund any of it, plaintiffs commenced suit to recover the amount so
paid.
The circuit court sustained a demurrer upon the ground that no cause of action was alleged, and
dismissed the suit.
WON plaintiffs are entitled to a refund.
YES
The statute clearly imposes the duty on the particular legacies or distributive shares, and not on
the whole personal estate.
* Death duty (estate duty/tax) is predicated on the passing of property as the result of death, as
distinct from a tax on property.
Death duties rest upon the principle that death is the generating source from which the particular
taxing power takes its being, and that it is the power to transmit from the dead to the living on
which such taxes are more immediately vested.
The tax is not upon the property, but upon the right to dispose of it, and it is not until it has
yielded its contribution to the state that it becomes the property of the legatee.
That the tax is not a tax upon the property itself, but upon its transmission by will or descent.
That the court below erred in denying all relief, and that it should have held the plaintiffs entitled
to recover so much of the tax as resulted from taxing legacies not exceeding $10,000, and from
increasing the tax rate with reference to the whole amount of the personal estate of the deceased
from which the legacies or distributive shares were derived.
DOCTRINE:
1) Death duties rest upon the principle that death is the generating source from which the
particular taxing power takes its being, and that it is the power to transmit from the dead to the
living on which such taxes are more immediately vested.
2) The tax is not upon the property, but upon the right to dispose of it.
* NOTES on Death Duty:
Probate duty is the oldest form of death duty. It was a fixed tax dependent on the sum of the personal estate
within the jurisdiction of the probate court, payable on the grant of letters of probate by means of stamp
duties, and was treated as an expense of administration to be deducted out of the residue of the estate.
In 1780, this tax was supplemented by what became known as a legacy tax.
In 1853, they were supplemented by a tax known as the succession duty. This law reached interests in real
estate passing or acquired by the death of a person and interests in personal property not covered by the
legacy act.
Estate duty is the new duty imposed by the Finance Act and supersedes probate duty.

Although it is leviable on property which was left untouched by probate duty, such as real estate, yet is in
substance of the same nature as the old probate duty.
What it taxes is not the interest to which some person succeeds on a death, but the interest which ceased by
reason of the death.

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