Wait and see. In connection with this Resolution, I dare say we will hear a great deal about the poor, bleeding taxpayer. This Resolution affects, in the main, persons liable to surtax. The position with regard to the estates of deceased persons in process of administration has, broadly, been this: that income received by the executors of an estate, in so far as it has not been taxed by deduction, has been assessed to income-tax by direct assessment on the executors. In so far as the income has been actually paid by the executors to a life tenant, it has been treated as the income of the latter for surtax purposes, and the recipient has been assessed to surtax accordingly. On the other hand, income received by executors during the period of administration, which ultimately reached a residuary legatee, has been regarded as the income of the executors, and, as such, has not been liable to surtax, and has, therefore, escaped surtax altogether.
Recently the practice in regard to life tenants was challenged in the British courts. It was held there that income paid over to the life tenant was not his income, and he could not be charged surtax accordingly. The issue has not been raised here, but we wish, in case it may be, to confirm the existing practice; that is, as regards the life tenant. With regard to the case of the residuary legatee, I cannot hold that there is any sound reason why the income, which ultimately reaches him through the executor, should not be treated for surtax purposes as his income. Apart from that, there is in the existing state of the law some considerable temptation to the residuary legatee of a wealthy estate to get the completion of the administration deferred as long as possible so as to escape the payment of tax.
The effect of this Resolution, therefore, will be that income received by the executors of an estate while it is in process of administration, in so far as it, in fact, ultimately reaches either the life tenant or the residuary legatee, will become liable to surtax in the hands of the ultimate recipient, subject to the usual provision that the first £1,500 for any one year is not chargeable.
