Individual Income Taxes.

A state may tax annually the en-tire net income of resident individuals from whatever source received,476 as jurisdiction is founded upon the rights and privileges incident to domicile. A state may also tax the portion of a nonresident’s net income that derives from property owned by him within its borders, and from any business, trade, or profession carried on by him within its borders.477 This state power is based upon the state’s dominion over the property he owns, or over activity from which the income derives, and from the obligation to contribute to the support of a government that 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 outside the state and secured by mortgage upon lands physically outside the state;478 and from a trust created and administered in another state and not directly taxable to the trustee.479 Further, the fact that another state has lawfully taxed identical income in the hands of trustees operating in that state does not necessarily destroy a domiciliary state’s right to tax the receipt of income by a resident beneficiary.480

Footnotes

476
Lawrence v. State Tax Comm’n, 286 U.S. 276 (1932). [Back to text]
477
Shaffer v. Carter, 252 U.S. 37 (1920); Travis v. Yale & Towne Mfg. Co., 252 U.S. 60 (1920). [Back to text]
478
New York ex rel. Cohn v. Graves, 300 U.S. 308 (1937). [Back to text]
479
Maguire v. Trefy, 253 U.S. 12 (1920). [Back to text]
480
Guaranty Trust Co. v. Virginia, 305 U.S. 19, 23 (1938). Likewise, even though a nonresident does no business in a state, the state 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). [Back to text]