Robinson v. McColgan

CURTIS, J.

This is an appeal by the defendant, as Franchise Tax Commissioner of the State of California, from a judgment directing a refund of the income tax for the year 1936 paid by plaintiff under protest.

There is but a single question of law presented for decision, to wit: Was plaintiff, a nonresident of the United States, taxable under the California Personal Income Tax Act of 1935 [Deering’s Gen. Laws, 1937, Act 8494] on in

[424]

come from dividends declared on shares of stock of a California corporation, the stock certificates being in the custody of plaintiff’s agent, a California national bank?

The facts upon which this appeal is based were stipulated and are substantially as follows: During the year 1936 plaintiff, a citizen of the United States, was a resident of the International Settlement in Shanghai, China, and thus was a nonresident both of California and of the United States. During said year she received as income dividends in the amount of $78,780.50 on common stock of W. P. Fuller & Company, a California corporation. The stock certificates were not used in connection with any business operations carried on here by plaintiff, but were simply held by the Bank of America in a living trust in San Francisco for the sole purpose of receiving the dividends thereon and forwarding the same to plaintiff. This trust had no fixed situs in California, but could be removed from the state at any time by the plaintiff, the trustor, without any previous consent of the trustee bank. The latter had no duties under this trust other than as custodian of these certificates of stock to send the income from the trust to the plaintiff, the trustor. The only asset of this trust was the aforementioned stock, and the trustee bank had no power to sell, invest or reinvest the trust

corpus

or property, nor had it any active duties of trust management.

Plaintiff reported these dividends on her income tax return for the year 1936 and paid as tax on this income the amount of $5,140.86. In due course plaintiff filed a refund claim, which was rejected by the defendant as Franchise Tax Commissioner, whereupon plaintiff brought this action to recover said sum. The cause was submitted on the foregoing stipulated facts, and the trial court rendered judgment decreeing that plaintiff recover from defendant as Franchise Tax Commissioner the aforesaid amount as income taxes erroneously paid for the year'1936. Defendant Tax Commissioner has appealed from this judgment.