Washington State

Office of the Attorney General

Attorney General

Bob Ferguson

AGO 1951 No. 450 -
Attorney General Smith Troy


The character of a vendee's interest in an executory contract of sale for real estate in a foreign jurisdiction is governed by the law of the situs.

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                                                                February 14, 1951

Mr. Ernest C. Huntley, Supervisor
Inheritance Tax Division
Tax Commission
Olympia, Washington                                                                                                 Cite as:  AGO 49-51 No. 450

Attention:  !ttMr. Daniel S. Bigelow, Asst. Supervisor

Dear Sir:

            This is in response to your recent request for an opinion of this office on the following question:

            "* * * whether or not the interest of a vendee in an executory contract of sale for real estate constitutes intangible personal property so as to be subject to inheritance tax to the State of Washington where the decedent is domiciled in Washington, although the property subject to the contract is situated in another state."

            Our conclusion is as follows:

            Whether it is to be treated as tangible or intangible should be determined by looking to the character ascribed to it by the law of the jurisdiction wherein the realty is situated.


             [[Orig. Op. Page 2]]                                                                             

            In determining the character of property, it must be recognized that the law deals in reality with rights, and that the law of the sovereign wherein a given tangible thing is in fact located is supreme in determining whether the rights over the thing, e.g., land or obligations connected with it, or the documents which impose such rights or obligations, should be treated as an interest in movables or immovables.  This principle of law seems agreed upon.  For example, the Restatement of the Conflict of Laws states:                                                  

            "Whether an interest in a tangible thing is classified as real or personal property is determined by the law of the state where the thing is."  Sec. 208.

            We know of no dispute among the authorities as to the propriety of this principle, e.g., Dicey, Conflict of Laws, Rule 126; (6th ed., Morris 1950) Goodrich, Conflict of Laws, Sec. 144 et seq. (2nd ed., 1938); Beale, Conflict of Laws, 208.1;McGoon v. Scales, 76 U.S. 23 (1869).  The principle has also been subscribed to by our Washington Supreme Court inGasaway v. Thomas, 56 Wash. 77, 105 Pac. 168 (1909).

            When confronted with the identical problem you pose, the Supreme Court of Maine resolved the matter in this manner.  Bates v. Decree of Probate Judge, 131 Maine 176 [[131 Me. 176]], 160 Atl. 32, and the case has been commented upon favorably by text writers and contributors to legal publications, Kidder, State Inheritance Tax and Taxability of Trusts (1934), p. 221-238; 46 Yale L. J. 687.  Note that by regarding the law of the situs of the realty as determining the character of ownership of the different parties' interest therein, the undesirable result of double taxation or no taxation at all on the succession to a particular piece of property is avoided.

            We are not unmindful of the confusion that surrounds the several problems arising out of the lack of uniformity as to whether the doctrine of equitable conversion should be considered or ignored in tax questions.  As a result of this lack of uniformity, there have often been cases of double taxation or a complete escape from taxation, and either is, of course, undesirable.  Many states seem to disregard the doctrine completely when considering tax problems, recognizing that it is merely a fiction applied by courts of equity, and that a fiction cannot change the location of land and jurisdiction as to rights in the land.  Connell v. Crosby, 210 Ill., 380, 71 N.E. 350 (1904); State v. Fusting, 134 Md. 349; 106 Atl. 690 (1919);McCurdy v. McCurdy, 197 Mass. 248, 83 N.E. 881 (1908).  Other jurisdictions apply the doctrine to either subject property to taxation which would otherwise be free from tax, or to  [[Orig. Op. Page 3]] relieve from taxation.  In re Estate of Sanford, 188 Iowa 833, 175 N.W. 506 (1919); In re Rambo's Estate, 266 Pa. 520, 109 Atl. 671 (1920);Land Title & Trust Co. v. South Carolina Tax Commission, 131 S.C. 192, 126 S.E. 189, 42 A.L.R. 417 (1925); Re Boshart, 119 Misc. 697, 177 N.Y. Supp. 567 (1919).  The Washington court, as you are aware, did the latter in In re Eilermann's estate, 179 Wash. 15, 35 P. (2d) 763 (1934), noted in 9 Wash. L. Rev. 230.  It seems that prior to the United States Supreme Court's caustic remarks about basing jurisdiction for taxation upon fictions of law inFrick v. Pennsylvania, 268 U.S. 473 42 A.L.R. 316, 426 (1926), the doctrine was quite often regarded as controlling, although primarily in cases relieving from taxation; however, since that date, several jurisdictions have categorically stated that the fiction should be entirely disregarded for inheritance tax purposes, and that a fiction developed by the courts of equity has no place in the purely legal process of taxation, e.g.,In re Paul's Estate, 303, Pa. 330, 154 Atl. 503, 78 A.L.R. 779 (1931); opinions of the Attorney General of Oregon of January 13, 1933, and January 16, 1942; opinion of the Attorney General of South Dakota of August 20, 1937; opinion of the Attorney General of New Hampshire of August 23, 1940; opinion of the Attorney General of Maryland of May 7, 1940.  As to which of these positions is correct, we need not now decide in view of the conclusion we have reached.  While it is quite likely sound to say that fictions shall not be observed for taxation purposes, this in itself does not solve the problem you present, for as one leading author has stated,

            "While equitable conversion is a fiction of law, the question whether land shall be dealt with as if it were personalty is not.  That question is governed by the law of the state of situs of the land."  Beale, Conflict of Laws, Sec. 209.1.

            Accordingly, it is the opinion of this office that your question can only properly be answered by looking to the law of the jurisdiction wherein the realty is situated.  If the law of the situs recognizes that the doctrine of equitable conversion is based upon fiction and should be ignored for tax purposes, the vendee's interest should be considered as an intangible and taxable by the state of the domicile.  In those jurisdictions wherein the courts have not yet answered the problem as to whether the fiction should be ignored for tax purposes, it appears that you can most safely assume the law therein to be that the fiction will not alter the tax consequences, for this seems to  [[Orig. Op. Page 4]] represent the trend of authority and to be the proper result.  However, in any jurisdiction wherein the fiction is applied to alter tax consequences, the vendee's interest may be regarded as real and tangible, thus taxable only in the state of the situs.

Very truly yours,

Attorney General

Assistant Attorney General