PROOF OF FACTS: Taxation of Intangibles is at the domicile of the owner by default

By ftsig-admin | June 16, 2025

EDITORIAL:

While mobilia sequuntur personam remains a guiding principle, the Court has also recognized that intangibles may acquire a commercial situs in another jurisdiction, allowing taxation beyond the owner’s domicile

The power of the State of a man’s domicil to impose a tax upon the succession to, or the transfer of, his intangible property, even when the evidences of such property are outside of the State at the time of his death, has been constantly asserted by the legislatures of the various 9*9 States. The Supreme Court of Errors in its opinion in this case says that at the present time the inheritance tax laws of over four-fifths of the States impose a tax similar to that imposed by Connecticut. Frothingham v. Shaw, 175 Mass. 59; In re Estate of Zook, 317 Mo. 986; In re Sherwood’s Estate, 122 Wash. 648; Mann. v. Carter, 74 N.H. 345; People v. The Union Trust Company, 255 Ill. 168; In re Lines’ Estate, 155 Pa. 378; In re Estate of Hodges, 170 Cal. 492; Commonwealth v. Williams’ Executor, 102 Va. 778. The same principle was recognized by this Court in Carpenter v. Pennsylvania, 17 How. 456, before the adoption of the Fourteenth Amendment, and the principle was reaffirmed thereafter in Orr v. Gilman, 183 U.S. 278; Keeney v. New York, 222 U.S. 525; and Bullen v. Wisconsin, 240 U.S. 625. In the latter case the question arose as to the power of Wisconsin to impose a tax upon the succession to certain intangible property of one of its citizens, the evidences of which were held by a trust company in Illinois upon a revocable trust at the time of his death, and the power was sustained. Reference to the record in the case shows that the property included shares of stock in Missouri, New Jersey and Illinois corporations; stock in a national bank organized under the National Banking Act; mortgage bonds and debentures issued by New Jersey, Illinois, Missouri, Utah and Kansas corporations; promissory notes of residents of Illinois and Minnesota; insurance policies issued by New York, Canadian and Wisconsin insurance companies; and money on deposit in two Illinois banks. The same principle was affirmed in the Frick case.

At common law the maxim “mobilia sequuntur personam” applied. There has been discussion and criticism of the application and enforcement of that maxim, but it is so fixed in the common law of this country and of England, in so far as it relates to intangible property, including choses in action, without regard to whether they are 10*10 evidenced in writing or otherwise and whether the papers evidencing the same are found in the State of the domicil or elsewhere, and is so fully sustained by cases in this and other courts, that it must be treated as settled in this jurisdiction whether it approve itself to legal philosophic test or not.

Further, this principle is not to be shaken by the inquiry into the question whether the transfer of such intangibles, like specialties, bonds or promissory notes, is subject to taxation in another jurisdiction. As to that we need not inquire. It is not the issue in this case. For present purposes it suffices that intangible personalty has such a situs at the domicil of its owner that its transfer on his death may be taxed there.

[Blodgett v. Silberman, 277 U.S. 1, 8-10 (1928);
SOURCE: https://scholar.google.com/scholar_case?case=13735666256610932832]

The power to tax “is an incident of sovereignty, and is co-extensive with that to which it is an incident. All subjects over which the sovereign power of a state extends, are objects of taxation; but those over which it does not extend, are, upon the soundest principles, exempt from taxation.” McCulloch v. Maryland, 4 Wheat. 316, 429. But this does not mean that the sovereign power of the state does not extend over intangibles of a domiciled resident because they have no physical location within its territory, or that its power to tax is lost because we may choose to say they are located elsewhere. A jurisdiction which does not depend on physical presence within the state is not lost by declaring that it is absent. From the beginning of our constitutional system control over the person at the place of his domicile and his duty there, common to all citizens, to contribute to the support of government have been deemed to afford an adequate constitutional basis for imposing on him a tax on the use and enjoyment of rights in intangibles measured by their value. Until this moment that jurisdiction has not been thought to depend on any factor other than the domicile 367*367 of the owner within the taxing state, or to compel the attribution to intangibles of a physical presence within its territory, as though they were chattels, in order to support the tax. Carpenter v. Pennsylvania, 17 How. 456; Kirtland v. Hotchkiss, 100 U.S. 491; Hawley v. Malden, 232 U.S. 1; Bullen v. Wisconsin, 240 U.S. 625; Cream of Wheat Co. v. Grand Forks, 253 U.S. 325; Blodgett v. Silberman, 277 U.S. 1; Farmers Loan & Trust Co. v. Minnesota, supra; Baldwin v. Missouri, supra; Beidler v. South Carolina, 282 U.S. 1; First National Bank v. Maine, supra; Virginia v. Imperial Coal Sales Co., 293 U.S. 15; Schuylkill Trust Co. v. Pennsylvania, 302 U.S. 506.

In cases where the owner of intangibles confines his activity to the place of his domicile it has been found convenient to substitute a rule for a reason, cf. New York ex rel. Cohn v. Graves, 300 U.S. 308, 313; First Bank Stock Corp. v. Minnesota, 301 U.S. 234, 241, by saying that his intangibles are taxed at their situs and not elsewhere, or, perhaps less artificially, by invoking the maxim mobilia sequuntur personam, Blodgett v. Silberman, supra; Baldwin v. Missouri, supra, which means only that it is the identity or association of intangibles with the person of their owner at his domicile which gives jurisdiction to tax. But when the taxpayer extends his activities with respect to his intangibles, so as to avail himself of the protection and benefit of the laws of another state, in such a way as to bring his person or property within the reach of the tax gatherer there, the reason for a single place of taxation no longer obtains, and the rule is not even a workable substitute for the reasons which may exist in any particular case to support the constitutional power of each state concerned to tax. Whether we regard the right of a state to tax as founded on power over the object taxed, as declared by Chief Justice Marshall in McCulloch v. Maryland, supra, 368*368 through dominion over tangibles or over persons whose relationships are the source of intangible rights; or on the benefit and protection conferred by the taxing sovereignty, or both, it is undeniable that the state of domicile is not deprived, by the taxpayer’s activities elsewhere, of its constitutional jurisdiction to tax, and consequently that there are many circumstances in which more than one state may have jurisdiction to impose a tax and measure it by some or all of the taxpayer’s intangibles. Shares of corporate stock may be taxed at the domicile of the shareholder and also at that of the corporation which the taxing state has created and controls; and income may be taxed both by the state where it is earned and by the state of the recipient’s domicile.[4] Protection, benefit, and power over the subject matter are not confined to either state. The taxpayer who is domiciled in one state but carries on business in another is subject to a tax there measured by the value of the intangibles used in his business. New Orleans v. Stempel, 175 U.S. 309; Bristol v. Washington County, 177 U.S. 133; State Board of Assessors v. Comptoir National, 191 U.S. 388; Metropolitan Life Ins. Co. v. New Orleans, 205 U.S. 395; Liverpool & L. & G. Ins. Co. v. Board, 221 U.S. 346; Wheeling Steel Corp. v. Fox, 298 U.S. 193; cf. Blodgett v. Silberman, supra; Baldwin v. Missouri, supra. But taxation of a corporation by a state where it does business, measured by the value of the intangibles used in its business there, does not preclude the state of incorporation from imposing a tax measured by all its intangibles. Cream of Wheat Co. v. Grand Forks, supra, 329;[5] see Fidelity & Columbia Trust Co. v. Louisville, 245 U.S. 54.

[Curry v. Mcanless, 307 U.S. 357 (1909) -Permits multiple state taxation of intangibles.
https://scholar.google.com/scholar_case?case=8851827307667754941]

The essential elements of the question presented here are the same as those considered in Curry v. McCanless, ante, p. 357. As is there pointed out, the power of disposition of property is the equivalent of ownership. It is a potential source of wealth and its exercise in the case of intangibles is the appropriate subject of taxation at the place of the domicile of the owner of the power. The relinquishment at death, in consequence of the non-exercise in life, of a power to revoke a trust created by a decedent is likewise an appropriate subject of taxation. Saltonstall v. Saltonstall, 276 U.S. 260; Reinecke v. Northern Trust Co., 278 U.S. 339; Helvering v. City Bank Farmers Trust Co., 296 U.S. 85; cf. Keeney v. New York, 222 U.S. 525; Bullen v. Wisconsin, 240 U.S. 625; Chase National Bank v. United States, 278 U.S. 327; Tyler v. United States, 281 U.S. 497; Guaranty Trust Co. v. Blodgett, 287 U.S. 509; Porter v. Commissioner, 288 U.S. 436.

For reasons stated in our opinion in Curry v. McCanless, supra, we cannot say that the legal interest of decedent in the intangibles held in trust in Colorado was so 387*387 dissociated from her person as to be beyond the taxing jurisdiction of the state of her domicile more than her other rights in intangibles. Her right to revoke the trust and to demand the transmission to her of the intangibles by the trustee and the delivery to her of their physical evidences was a potential source of wealth, having the attributes of property. As in the case of any other intangibles which she possessed, control over her person and estate at the place of her domicile and her duty to contribute to the support of government there afford adequate constitutional basis for imposition of a tax measured by the value of the intangibles transmitted or relinquished by her at death. Curry v. McCanless, supra, and cases cited.

[Graves v. Elliott, 307 U.S. 383 (1939);
SOURCE: https://scholar.google.com/scholar_case?case=15721509679577221684
This case reinforced the idea that taxation of intangibles depends on control and benefit, rather than strict physical location]

MICROSOFT COPILOT QUESTION:

What If the decedent has not domicile and does not WANT a domicile and gives no evidence of such at any time. Can the intangibles still be taxed at the place they reside but do not maintain a domicile on the date of death?

ANSWER:

If a decedent has no domicile and has never established one, taxation of their intangible assets becomes a complex issue. Generally, under the mobilia sequuntur personam doctrine, intangibles are taxed at the owner’s domicile. But if no domicile exists, courts and tax authorities may look to alternative principles:

1. Situs-Based Taxation

  • If the decedent has no domicile, taxation may default to the situs of the intangible assets—meaning the jurisdiction where the assets are legally maintained.
  • Some states and countries impose estate taxes on intangibles located within their borders, even if the owner had no domicile.

2. U.S. Estate Tax Rules for Non-Domiciled Individuals

  • The IRS estate tax applies to nonresident non-citizens based on U.S.-situated property, including intangibles like stocks and bonds issued by U.S. entities.
  • If the decedent had no domicile, the IRS may still tax U.S.-situated intangibles under estate tax rules for nonresidents.

3. Legal Precedents & Challenges

  • Courts have ruled that domicile is a key factor in estate taxation, but when domicile is absent, taxation may rely on business situs or legal registration of assets.
  • Some jurisdictions may argue that intangible assets held within their financial institutions are taxable, even if the owner had no domicile.

Conclusion

If a decedent never established domicile, taxation of their intangibles may depend on where the assets are legally maintained or registered. The IRS and state tax authorities may still impose estate taxes based on situs-based taxation rather than domicile.

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