This case presents the question whether a state may constitutionally tax a resident upon income received from rents of land located without the state and from interest on bonds physically without the state and secured by mortgages upon lands similarly situated.
Section 351 of article 16 of the New York Tax Law, Consol.Laws c. 60 (as added by N.Y.Laws 1919, c. 627), imposes a tax upon the 'entire net income' of residents of the state. By section 359 gross income is defined as including interest and rent. The same section, as amended by N.Y. Laws 1935, c. 933, enumerates among the items of taxable income 'rent (including rent derived from real property situated outside the state) * * * it being intended to include all of the foregoing items, without regard to the source thereof, location of the property involved, or any other factor, except only a case where the inclusion thereof would be violative of constitutional restrictions.'
Appellant, a resident of New York, brought the present certiorari proceeding in the courts of New York to review a determination of the State Tax Commission, appellees, denying her application for a refund of state income taxes assessed and paid for the years 1931 and 1932, so far as the taxes were attributable to rents received by appellant from New Jersey land, and interest paid on bonds secured by mortgaged real estate in New Jersey, where the bonds and mortgages were physically located. A ground for recovery of the tax assigned by appellant's petition was that the tax was in substance and effect a tax on real estate and tangible property located without the state, in violation of the Fourteenth Amendment of the Constitution of the United States. Judgment for appellant (see 246 App.Div. 335, 286 N.Y.S. 485), was reversed by the New York Court of Appeals, 271 N.Y. 353, 3 N.E.(2d) 508. The case comes here on appeal under section 327(a) of the Judicial Code, as amended (28 U.S.C.A. § 344(a).
The stipulation of facts on which the case was tried in the state court does not indicate that appellant's income has been taxed by New Jersey, and it does not define the precise nature of her interest in the properties producing the income. It sets out that appellant's husband died testate, his will duly probated in New Jersey 'devising and bequeathing to said taxpayer the entire net income from his estate for and during her widowhood,' and that the taxed income included 'rents from testator's real estate' and 'interest from testator's real estate mortgages,' all located in New Jersey. The terms of the will and the status of the estate during the tax years do not otherwise appear. There is nothing to show that the incomeproducing properties were in those years held upon an active trust, or that appellant did not receive the income as life tenant of the legal interest. See Paletz v. Camden Safe Deposit & Trust Co., 109 N.J.Eq. 344, 157 A. 456; cf. Passman v. Guarantee Trust & Safe-Deposit Co., 57 N.J.Eq. 273, 41 A. 953; Westfield Trust Co. v. Beekman, 97 N.J.Eq. 140, 128 A. 791. Any uncertainty arising from the ambiguity of the stipulation, if it has any present significance, is put at rest by the concession of appellant in brief, and in open court on the argument, that she is the owner of a life estate or interest in the properties, and that she received, as a part of her income in the tax years, the rents and interest which have been collected by the executors acting, not in their capacity as executors, but as her agents for an annual compensation.
In any case we may assume, for present purposes, that New York may not levy a property tax upon appellant's interest, whether it be legal or equitable, see Senior v. Braden, 295 U.S. 422, 55 S.Ct. 800, 79 L.Ed. 1520, 100 A.L.R. 794; Safe Deposit & Trust Co. v. Virginia, 280 U.S. 83, 50 S.Ct. 59, 74 L.Ed. 180, 67 A.L.R. 386. We accordingly limit our review to the question considered and decided by the state court, whether there is anything in the Fourteenth Amendment which precludes the State of New York from taxing the income merely because it is derived from sources, which, to the extent indicated, are located outside the state.