Individual Income Taxes

Individual Income Taxes.—A State may tax annually the entire net income of resident individuals from whatever source received,470 as jurisdiction is founded upon the rights and privileges incident to domicile. A State may also tax the portion of a non-resident's net income which is derived from property owned, and from any business, trade, or profession carried on, by him within its borders,471 based upon the State's dominion over the property or activity from which it is derived and the obligation to contribute to the support of a government which secures the collection of such income. Accordingly, a State may tax residents on income from rents of land located outside the State; from interest on bonds physically without the State and secured by mortgage upon lands similarly situated;472 and from a trust created and administered in another State, and not directly taxable to the trustee.473 Further, the fact that another State has lawfully taxed identical income in the hands of trustees operating therein does not necessarily destroy a domiciliary State's right to tax the receipt of income by a resident beneficiary.474

470 Lawrence v. State Tax Comm'n, 286 U.S. 276 (1932).

471 Shaffer v. Carter, 252 U.S. 37 (1920); Travis v. Yale & Towne Mfg. Co., 252 U.S. 60 (1920).

472 New York ex rel. Cohn v. Graves, 300 U.S. 308 (1937).

473 Maguire v. Trefy, 253 U.S. 12 (1920).

474 Guaranty Trust Co. v. Virginia, 305 U.S. 19, 23 (1938). Likewise, even though a nonresident does no business within a State, the latter may tax the profits realized by the nonresident upon his sale of a right appurtenant to membership in a stock exchange within its borders. New York ex. rel. Whitney v. Graves, 299 U.S. 366 (1937).

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