Baron Inchyra v Jennings (Inspector of Taxes)
| Jurisdiction | England & Wales |
| Judgment Date | 08 April 1965 |
| Date | 08 April 1965 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
Income Tax, Schedule D - Income from foreign possessions - Payments under foreign will trusts - Capital or income - Whether question governed by English law or law of will trusts - Whether separate rights under one will constitute separate sources of income.
Under the trusts of her mother's will, which were governed by the law of the District of Columbia, the Appellant's wife was entitled: (a) from her mother's death on 16th November, 1950, to one-quarter of the income of the estate of the testatrix; (b) from her father's death on 16th January, 1955, to the remainder of that income; (c) on 16th November, 1951, and subsequent anniversaries of the testatrix's death up to and including 16th November, 1970, or until her own death if earlier, to an amount equal to 1 per cent. of the capital value of the estate exclusive of real property. The payments under head (c) were regarded by the law of the District of Columbia, for the purposes of taxation and of the trust accounts, as an interest in capital payable at intervals.
The Appellant was assessed to Income Tax under Case V of Schedule D for the years 1951-52 to 1956-57 on the footing that the payments under heads (a), (b) and (c) constituted separate sources of income, from which income first arose on the aforesaid dates respectively. On appeal, he contended, inter alia, (i) that the nature of payments under head (c) must be determined in accordance with the law of the District of Columbia, and they were therefore capital payments; (ii) that the will trusts constituted a single source of income and not separate sources. The Special Commissioners rejected both contentions.
Held, (1) that the periodical payments out of capital constituted income; but
(2) that the trust estate together with the right to have it applied in accordance with the will constituted a single source of income of the Appellant's wife.
Stated under the Income Tax Act, 1952, Section 64, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the High Court of Justice.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 21st June, 1960, and thence adjourned to 22nd June, 1960, and 5th February, 1962, Lord Inchyra (hereinafter called "the Appellant") appealed against the undermentioned assessments made on him under the provisions of Schedule D, Income Tax Act, 1952, in respect of the American income of his wife (hereinafter referred to as "Lady Inchyra"):
Year of assessment |
Amount of assessment |
|
£ |
||
1951-52 |
8000 |
(additional) |
1952-53 |
8000 |
" |
1953-54 |
8000 |
" |
1954-55 |
14,500 |
|
1955-56 |
15,000 |
|
1956-57 |
15,000 |
The grounds of the appeal were:
(a) that certain sums of money paid to Lady Inchyra by the trustees of the will of the late Elizabeth L. Van Swinderen (hereinafter referred to as "Mrs. Van Swinderen"), the mother of Lady Inchyra, a citizen of the United States of America, under the terms of item XII of her will and the second codicil thereto, as hereinafter appeareth, were capital payments and not income within the meaning of Case V, Schedule D, Income Tax Act, 1952, and in computing for Income Tax purposes the profits or gains of the Appellant for the periods relative to the assessments under appeal the said payments fell to be excluded;
(b) that income received by Lady Inchyra from the trustees of the will and codicils thereto of Mrs. Van Swinderen arose from a single source within the meaning of Section 134, Income Tax Act, 1952, namely the property subject to the trusts of the said will and codicils, notwithstanding that Lady Inchyra was entitled to more than one interest under the terms of the said will and codicils, as hereinafter appeareth, and that in computing for Income Tax purposes the profits or gains of the Appellant for the periods relative to the assessments under appeal the provisions of Sections 133 and 134, Income Tax Act, 1952, fell to be applied accordingly.
2. Evidence was given at the hearing of the appeal by John Holt Myers (hereinafter referred to as "Mr. Myers"), a partner in the firm of Williams, Myers & Quiggle, attorneys and counsellors at law, in the District of Columbia, U.S.A., a graduate of Princeton University, a Bachelor of Laws of the University of Michigan and State of Michigan, a Master of Laws of Georgetown University in the District of Columbia, and a member of the American and Columbian Bar Associations, and the following documents were produced and admitted or proved:
(i) a copy of the will and codicils of the late Mrs. Van Swinderen (exhibit "A");
(ii) an affidavit dated 13th June, 1960, of Ralph W. Howard, Jnr, trust officer of the Riggs National Bank of Washington, D.C. (exhibit "B").
The above documents are attached to and form part of this Case (exhibits "A" and "B"(1) ).
3. We found the following facts admitted or proved on the evidence adduced at the hearing of the appeal:
(2) Mrs. Van Swinderen, who was the mother of Lady Inchyra, the Appellant's wife, died on 16th November, 1950, in Washington, D.C., being survived by her husband, Rene Van Swinderen (hereinafter referred to as "Mr. Van Swinderen") and by her only child, Lady Inchyra. At all times relevant to this appeal Mrs. Van Swinderen was domiciled and resident in the District of Columbia in the U.S.A.
(3) Under the terms of the will of Mrs. Van Swinderen and the codicils thereto, which were admitted to probate in the United States District Court for the District of Columbia on 22nd November, 1950, it was provided, inter alia, as follows:
Item I: I direct my executors to pay all of my just debts and the expenses of my last illness and funeral, in such amounts as they may deem proper, as soon after my death as may be practicable. In respect of my funeral and interment expenses, they shall not be limited by any statutory restriction as to the maximum amount which might be expended therefor.
Item XII: All the rest, residue, and remainder of my property and estate, of whatsoever kind and character and wheresoever situate, of which I may die seized or possessed, or to which I may be in any manner justly entitled at the time of my death, specifically including any property and estate over which I may have power of testamentary appointment, and regardless of where such property and estate may be located -that is to say, whether within or outside the continental limits of the United States -I give, devise, and bequeath unto The Riggs National Bank of Washington, D.C., and my brother, Charles Carroll Glover, Jr., the former a national banking association organized and existing under the laws of the United States, with its principal office and place of business in the City of Washington, District of Columbia, in and upon the following trusts, that is to say:
(a) A three-fourth (3/4) part of the net income of the trust estate shall be paid to my husband, Rene de Marees Van Swinderen, so long as he shall live, and another one-fourth (1/4)part to my daughter, Elizabeth Hoyer-Millar, so long as she shall live, as to each in not less than quarter-yearly instalments from the date of my death. Upon the death of my said husband before the death of my said daughter, the entire net income of the trust estate shall be paid to said daughter so long as she shall live. Should my said daughter predecease my husband only three-fourths (3/4) of the net income of the trust estate shall continue to be paid to my said husband and the other one-fourth (1/4) part shall be paid and distributed to my said daughter's issue from time to time surviving, per stirpes, until the division of the trust estate into shares as hereinafter provided.
(b) My Trustees may in their discretion advance principal in any emergent circumstance affecting either my husband or my daughter.
(c) Upon the death of the survivor of said husband and daughter, the principal of the trust estate shall be divided among and for the benefit of my said daughter's issue then surviving, so that each then living child of hers and the collective issue of a deceased child shall be allotted respectively one equal share, and in turn each share of such collective issue shall be redivided equally share and share alike, per stripes, among the persons constituting such issue and they shall thereupon be allotted their respective subshares.
Each beneficiary of a share and subshare shall be entitled to receive one-half of the principal thereof upon attaining, or if he or she has already attained, the age of thirty-five (35) years, but the remaining portion of each such share and subshare (subject to the Trustees' discretion as hereinafter provided) shall remain in trust until the death of the beneficiary, except as hereinafter provided, the net income of a share, or subshare as at any time constituted, to be distributed to or applied for the use of the beneficiary, with authority in the Trustees to use as much of principal of a share or subshare for the beneficiary thereof as said Trustees in their discretion may deem necessary or desirable in any emergent circumstance affecting such beneficiary.
Item XIII: Every legacy, bequest, devise and interest given under this will or any codicil which may be made to it, shall be delivered free from inheritance taxes imposed by the District of Columbia or by any State, territory, or District of the United States and by the United States or by any foreign country, such taxes to be paid out of the residue of my estate; nor shall the United States federal estate taxes imposed upon my estate as a whole be prorated among the several legacies, bequests, devises, and interests given under this Will or any codicil which may be made to it, but the same shall be paid out of the residue of my estate.
No interest shall be paid on any legacy given under this Will or any codicil to it.
(4) First Codicil dated 19th January, 1949, second Item:
...
To continue reading
Request your trial
-
First Nationwide v HM Revenue and Customs
...Hill v Permanent Trustee Co of New South Wales Ltd ELR[1930] AC 720 Hoare & Co Ltd, Re ELR[1904] 2 Ch 208 Inchyra (Baron) v Jennings ELR[1966] Ch 37 IR Commrs v Reid's Trustees ELRTAX[1949] AC 361; 30 TC 431 Jenks v Dickinson TAX[1997] BTC 286 McMillan Properties Pty Ltd v Penfold UNK[2001]......
-
Oppenheimer v Cattermole (HM Inspector of Taxes)
...28 T.C. 159; [1947] A.C. 390;Higgs v. Olivier 33 T.C. 136; [1952] Ch. 311;Lilley v. Harrison (1952) 33 T.C. 344; Lord Inchyra v. Jennings 42 T.C. 388; [1966] Ch. 37. 10. We, the Commissioners who heard the appeal, gave our decision as (i) The payments in question arose under Article 31(d) o......
-
HMRC v First Nationwide
...receipt under Cayman law is determinative. 93. We find some support for that in the decision of Pennycuick J in Inchyra (Baron) v Jennings [1966] Ch 37; the judge considered a number of authorities including Rae v Lazard which he clearly did not see as requiring him to adopt the relevant fo......
-
Philippi v Commissioners of Inland Revenue
...TAXWLR41 T.C. 1; [1963] 1 W.L.R. 455Commissioners of Inland Revenue v. Frere TAXELR42 T.C. 125; [1965] A.C. 402Inchyra v. Jennings TAXELR42 T.C. 388; [1966] Ch. 37;Mapp v. Oram TAXELR45 T.C. 651; [1969] 1 Ch. 293Lupton v. F.A. and A.B. Ltd.(1) [1968] 1 W.L.R. 1401; T.C. Leaflet 2273Herdman ......