                       THE.&ITORNEY                 GENERAL

                                      OFTEXAS

                                  AUSTIN    11. TEXAS

    WI&       WILSON
A-l-l-0RNEY     GENERAL                  August 22, 1960

        Honorable Robert S. Calvert              Opinion No. WW-911
        Comptroller of Public Accounts
        Capitol Station                          Re:    Taxability for inheritance
        Austin, Texas                                   tax purposes of decedents'
                                                        interests in partnerships
                                                        located In Mlssisslppi,
        Dear Mr. Calvert:                               Louisiana and New Mexico.
                   We quote the following excerpt from your letter re-
         questing our opinion on the above captioned matter.
                           "On August 5, 1937, former Assistant
                       Attorney General John J. McKay wrote an
                       opinion in which he held that an interest
                       of a partner in partnership assets constl-
                       tutes a chose in action and is intangible
                       personal property subject to transfer
                       inheritance tax in the state of domicile.
                           'We now have three large cases in which
                       the decedents own an interest in a partner-
                       ship located in Mississippi, Louisiana
                       and New Mexico, and the attorneys for each
                       of these estates have reported the part-
                       nership assets to these three States and
                       paid a tax thereon.
                           "You will observe from this opinion
                       that these three partnerships should be
                       taxed in the State of Texas. Therefore,
                       we need your advice with respect to the
                       current law In effect with respect to the
                       taxing of a partnership interest."
                   The opinion which you refer to was concerned with the
         taxability of a partnership interest In Texas realty owned by a
         non-resident decedent. The opinion held that the partnership
         Interest, even though comprised of real property, was not
         taxable In Texas, since under Texas law the partner*s Interest
         was an Intangible one subject to taxation only in the state of
         the decedent's domicile. This ruling was based on certain
         United States Supreme Court decisions which limited the right
         to tax Intangibles (reserving a decision of the question in the
Honorable Robert   S.   Calvert,   Page 2   Opinion No. WW-911


event such intangibles had acquired a business situs) to the
decedent's domiciliary state. The opinion specifically relied
on Blodgett v. Sllberman, 277 U.S. l-(1928).- Other cases so
holding are Farmers Loan and Trust Co. v. Minnesota, 280 U.S.
204 (1930); Baldwin v. Missouri, 281 U.S. 58b (1930); Beldler
v. South Carolina Tax Commission, 282 U.S. 1 (1930); Fr
.NationalBank of Boston v. Maine, 284 U.S. 312 (1930). HOW-
ever, on May 29. 1939. the United States Supreme Court aban-
doned its single death tax theory and held that intangible
property comprising a trust was subject to tax both In the
state of the decedent owner's domicile and in the state in
which the property was held by the trustee. Curry v.
McCanless, 307 U.S. 357 (1939); Craves v. Elliott, 307 U.S.
 83 (1939).
          Since the time of these last two decisions, the rule
has been that state death taxes are ordinarily applied to all
property and any Interest therein which is within the power
of the state to reach whether such property is real or personal,
tangible or intangible, corporeal or Incorporeal. 28 Am.Jur.
78, 'Inheritance,Estate and Gift Taxes, Sec. 91. As a result
of the right of more than one state to subject the same transfer
of intangibles to death taxes, numerous states have passed
laws exempting such property of non-resident decedents on a
reciprocal basis. Texas has provided for such reciprocity,
as have Louisiana, New Mexico and ~ississippi;l however, the
Mississippi provision exempting intangible personal property
in non-resident estates when such property had not acquired a
business situs did not become effective until April 30, 1960.
           Since more than one state has the right to constltu-
 tionally tax intangibles of a decedent, either resident or
non-resident, Texas's right to the taxes in question is not
 affected by the fact that the states of Mississlppl, Louisiana
 and New Mexico may have asserted the right, either rightly or
 wrongly, to Impose a tax upon the partnership assets located
 within their borders. However, since the partnership interests
 involved are located in these three states, the law of these
 states as to the nature of a partnership Interest must be
 examined in order to determine whether such interest constitutes
 tangible or intangible prop e&y.
                                If k!MT_ax,                    -in,
 91 P.2d 73 (Okla.Sup. 1939 .
 a tangible interest, the State of Texas has no jurisdiction to



' Art. 14.01, Title 122A, Ch. 14, Revised Civil Statutes of
Texas, 1925; La. R.S. 47:  2404; New Mexico Statutes of 1953,
Ch. 31, Art. 16, Sec. 31-16-4; Miss. H.B. 202, L. 1960.
+




    Honorable Robert S. Calvert, Page 3       Opinion No. WW-911


    impose such a tax even though such interest was the property
    of a Texas decedent; but if the controlling state law proceeds
    upon the "entity" or "aggregate" theory of partnership owner-
    ship, the interest of a deceased partner is a chose in action,
    I.e., the right to receive payment of a sum of money shown
    to be due upon a liquidation and accounting, which sum is
    part of the deceased partner's wealth and properly subject
    to the Texas inheritance tax. See 28 Am.Jur. 171, Inheritance,
    Estate and Gift Taxes, Sec. 226.
              The attorneys for the three estates in question
    have the burden of proving that under the applicable state
    law the partnership interests in question were tangible
    rather than intangible Interests. In the absence of such
    proof, such interests will be deemed to be intangible and sub-
    ject to Texas inheritance taxes.

                            SUMMARY

                    The nature of partnership assets belonging
                to a resident decedent but located in another
                state must be determined according to the law
                of the state where the partnership is located.
                If the decedent's interest in the partnership
                is, under applicable law, an intangible interest,
                the State of Texas may assess an inheritance
                tax upon the privilege of receiving said interest.
                                   Yours very truly,
                                   WILL WILSON
                                   Attorney General of Texas



    MMcGP:jip
    APPROVED:
    OPINION COMMITTEE
    W. V. Geppert, Chairman
    Dean Davis
    Riley Fletcher
    Phocion Park                REVIEWED FORTHE ATTORNEY GENERAL
    Iola Wilcox                 By: Houghton Brownlee, Jr.
