We are asked to say whether the due process clause of the Fourteenth Amendment precludes New York from taxing the exercise, by a domiciled resident, of a general testamentary power of appointment of which he was the donee under the will of a resident of Massachusetts, the property appointed being intangibles held by trustees under the donor's will.
Respondents' decedent died a resident of New York, where his will was probated and letters testamentary were issued. Decedent's father had previously died a resident of Massachusetts, where his will had been probated. By his will the father bequeathed his residuary estate in trust to divide the trust fund into as many shares as he should leave children surviving. To his son, the New York decedent, he gave a life estate in one share and a general power to dispose of that share 'by will'.
The son was also one of the three testamentary trustees. For some years they managed the trust property as a single trust fund, but in 1911 his one-third share was segregated and he was permitted by the other trustees to manage it as a separate trust, although all continued as trustees and as such accounted to the Massachusetts Probate Court for the administration of his share of the fund. From 1918 to 1929 the New York decedent resided in New York; from then until 1934 he resided in Illinois, when he returned to New York where he resided until his death in 1937. Throughout he kept in the state of his residence the paper evidences of the intangibles comprising his share of the trust. At the time of his death it consisted wholly of receivables and corporate stocks and bonds. By his will decedent appointed his share of the trust fund to his widow, and the New York tax authorities in computing the tax included in the decedent's gross estate the intangibles bequeathed to her under the power.
Article 10-C of the New York Tax Law, Consol.Laws N.Y. c. 60, by § 249-n, imposes an estate tax 'upon the transfer of the net estate' of resident decedents. Under this statute the net taxable estate is arrived at by deducting from the gross estate, as defined by § 249-r, the specified deductions allowed by § 249-s. Section 249-r, so far as relevant, provides:
'The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated * *
*'7. To the extent of any property passing under a general power of appointment exercised by the decedent (a) by will * * *.'
An order of the New York Surrogate's Court, In re Thayer's Estate, 172 Misc. 426, 15 N.Y.S.2d 208, reduced the estate tax assessed against the decedent's estate by excluding from his gross estate the share of the trust fund passing to the widow by the exercise of the power, on the ground that the state was without constitutional authority to tax the exercise by a resident donee of a power of appointment created by a non-resident donor, citing Wachovia Bank & Trust Co. v. Doughton, 272 U.S. 567, 47 S.Ct. 202, 71 L.Ed. 413. The New York Court of Appeals affirmed the order without opinion, In re Thayer's Estate, 286 N.Y. 596, 35 N.E.2d 937, but certified by its remittitur that it held that the taxing statute as sought to be applied in this proceeding violates the Fourteenth Amendment. We granted certiorari, 314 U.S. 601, 62 S.Ct. 135, 86 L.Ed. --, because of the importance of the question presented.