TAXATION - JURISDICTION - CLASSIFICATION OF PROPERTY AS TANGIBLE OR INTANGIBLE

Respondent\u27s decedent died testate in 1936 and was at the time of his death a resident of and domiciled in Oregon. In earlier years when he resided in Wisconsin he placed various stocks, bonds and other intangibles in the possession of an Illinois trust company, which acted as his agent in collecting and investing the principal and income on these securities. These securities were always physically present in Illinois, never in Oregon. About six months before his death respondent\u27s decedent directed the trust company to sell some of his bonds and purchase $450,000 worth of federal irrevocable trust for the benefit of certain designated relatives, whereby he transferred to the trust company, as trustee, the federal reserve notes. Thereafter the trust company used the federal reserve notes, pursuant to the terms of the trust agreement, to purchase bonds and other personal property for the account of the trust. None of the property thus acquired by the trustee was ever owned by decedent. Admittedly the transfer of the notes under the trust agreement was made in contemplation of death. The state of Oregon sought to tax the transfer under a statute providing for a tax on property transferred in contemplation of death. The Oregon Supreme Court held that the federal reserve notes were tangibles and that a tax on their transfer by the state of Oregon would be unconstitutional as they had acquired a situs outside the state of Oregon. Held, the sale of intangibles and the purchase of federal reserve notes were to be treated as constituting but one integrated and indivisible transaction -- a transfer by decedent of intangibles in contemplation of death and so viewed properly subject to an inheritance tax by Oregon, the state of decedent\u27s domicile. Pearson v. McGraw, 308 U.S. 313, 60 S. Ct. 211 (1939), reversing In re Hayer Estate, 161 Ore. 1, 86 P. (2d) 424 (1939)