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March 29, 1934

SCHNADER, Attorney General of Pennsylvania, et al.

The opinion of the court was delivered by: KIRKPATRICK

KIRKPATRICK, District Judge.

This case involves the taxable situs of tangible personal property. The occasion for imposing the tax is the transfer of the property by death of the owner.

 In the case of intangibles the law is now well settled that the state in which the owner is domiciled and no other may impose an inheritance tax. Farmers' Loan & Trust Co. v. Minnesota, 280 U.S. 204, 50 S. Ct. 98, 100, 74 L. Ed. 371, 65 A.L.R. 1000; First National Bank v. Maine, 284 U.S. 312, 52 S. Ct. 174, 175, 76 L. Ed. 313, 77 A.L.R. 1401. The facts upon which these decisions were rendered did not involve the taxation of tangibles. In the opinion in the Minnesota Case, the court made it perfectly clear that the taxable situs of such property depends upon entirely different considerations.

 The outstanding decisions governing the taxation of tangible personalty are Gromer v. Standard Dredging Company, 224 U.S. 362, 32 S. Ct. 499, 503, 56 L. Ed. 801, Frick v. Pennsylvania, 268 U.S. 473, 45 S. Ct. 603, 69 L. Ed. 1058, 42 A.L.R. 316, and Blodgett v. Silberman, 277 U.S. 1, 48 S. Ct. 410, 72 L. Ed. 749. The first of these cases recognized and applied the general rule "that tangible personal property is subject to taxation by the state in which it is, no matter where the domicil of the owner may be." The court pointed out that there was nothing in the case to show that the property (certain machinery and boats) was only temporarily within the territorial limits of the jurisdiction which proposed to tax it. The import of the decision is that, where nothing appears in the case beyond the facts that the property is in one jurisdiction and the domicile of the owner in the other, the property is taxable where it is. It was really upon this point that the court divided; the minority holding, in substance, that the presumption is the other way, that all personal property is ordinarily taxable at the owner's domicile, and that, if it is to be taxed somewhere else, it must be shown that its location in the taxing state was not "of a temporary or fleeting character."

 In the Frick Case the expression "where it is" as defining the taxable situs of such property was exchanged for "actual situs." Actual situs means a little more than simply the place where property is. It excludes the idea of mobile personal property which happens to be in the course of transit in or through the taxing state at the moment when the occasion for taxation arises.It also excludes the idea of property which for some definite purpose of its owner has come to rest within the boundaries of the taxing state for a brief and limited time. In either of these cases its location there would be of a temporary or fleeting character.

 It does not, however, demand or necessarily involve any idea of permanency or a permanent location in the taxing state. In the Minnesota Case the court, in discussing the Frick Case, said that it had been there held that no state could "impose death duties reckoned upon the value of tangibles located permanently outside her limits." But as a matter of fact the decision in the Frick Case had gone much further than that, and, in its later opinion in First National Bank v. Maine, the court again reviewed the Frick Case and stated its doctrine as being "the power to tax is exclusively in the state where the property has an actual situs."

 In the true sense, permanency of location can never be predicated of personal property. The pictures which Mr. Frick housed in the specially built gallery or museum in New York were probably as permanently located where they were as any personal property could ordinarily be, but they might have been removed at any time without difficulty, and there was certainly nothing permanent about the location of the automobiles in his New York garage or the farming implements on his Massachusetts estate. Even less permanent was the location of the money in the safe deposit box in the Blodgett Case. To attempt to identify actual situs with permanent location as applied to personal property is only productive of confusion of thought.

 If, then, actual situs is not permanent situs, we must turn to the facts of the Frick and Blodgett Cases to ascertain what it is. From the Frick Case we learn, among other things, that, where the owner has residences in two or more states, furniture, automobiles, farming implements, etc., located at such residences, though not the domiciliary one, have an actual situs at the place where they are. From the Blodgett Case it appears that bank notes and coin in a safe deposit box (there being nothing to show us for what purpose they were there or how long they had remained) also have an actual situs in the state in which they are, though the owner is domiciled elsewhere.

 In the case at hand the following facts appear with regard to the portraits which are the subject of the tax: (1) They had been physically located in Pennsylvania two years and ten months. (2) At the time of the owner's death no definite plans had been made for their removal and no definite limit had been placed by the owner upon the duration of their stay in Pennsylvania.

 If there were no other facts in the case, it would be beyond dispute that the portraits had an actual situs in Philadelphia. To show that they had something less than that, the complainant points out (1) that the pictures were loaned, without consideration, to the Pennsylvania Museum for the purpose of exhibition, for the pleasure and education of the public; (2) that the loan was not a "permanent loan" after the manner of many loan exhibitions, but that it was understood that the pictures would be returned to the owner on his request, which might be made at any time; and (3) that the owner, after two years and two months, had stated that the arrangement would terminate on a fixed day about a month later, but that the pictures were allowed to remain thereafter until his death in the hope (apparently entertained by both the owner and the museum authorities) that a donor could be found who would buy the paintings and present them to the museum.

 As we interpret the meaning of actual situs, it is not destroyed or impaired by these facts. Certainly it must be conceded that the location in Pennsylvania was not permanent, but, as has been stated, it need not be. Perhaps it might be said that it was temporary, although it was only such in the sense that the owner reserved the title and the right to remove the property when he saw fit -- a right which he did not exercise for nearly three years and which, so far as the record shows, he had no definitely formed intention of exercising at any predictable time. The portraits were safely housed in Pennsylvania and were under the protection of the laws of that state. They had been taken out of storage to be placed where they were. They were there for an indefinitely prolonged stay, and that, we think, gives them an actual situs.

 It may be conceded that the idea of a sale, though by no means to be disregarded, was secondary and remote, and that the portraits were in Pennsylvania primarily for the purpose of being exhibited to the public. If it had appeared that the exhibition was for a specific occasion or for a brief and limited time, I do not say that this fact would not have been of importance as giving a transitory character to their location here. But when the stay is of unlimited duration or, as suggested, indefinitely prolonged, the mere fact that its main purpose is public exhibition is not enough to destroy the actual situs of the property.

 We would readily agree that, if these portraits could be endowed with personality, the facts appearing in the record would not be sufficient to show an intention upon their part to change their domicile from New York to Pennsylvania. This is practically the test which the complainant urges upon us. But it is also in substance the view that was urged by the minority and rejected in Gromer v. Standard Dredging Company, supra. The law as set forth in that case and uniformly followed with regard to tangibles is that the inquiry is not whether the property ...

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