127 Misc. 206 | N.Y. Sur. Ct. | 1926
This appeal is taken by the executors, trustees and certain beneficiaries under the will of decedent from the order fixing the transfer tax on the ground: (1) That the taxation of the transfer of decedent’s interest in the copartnership of E. Bosenwald & Co. was in violation of the Fourteenth Amendment of the United States Constitution and of the provisions of the Constitution of this State; (2) that shares of stock which formed no part of the assets of the copartnership were erroneously included in the appraisal; (3) that good will did not exist as an element of value ir the copartnership; (4) that the imposition of a tax thereon was in violation of the Federal and State Constitutions; (5) that
The decedent was a non-resident of this State. At the date of his death on May 1,1922, paragraph (d) of subdivision 2 of section 220 of the Tax Law (as amd. by Laws of 1922, chap. 430)
(2) The transfer tax appraiser included as copartnership assets shares of stock which are claimed as the individual property of the copartners. It appears that while these shares were carried on the books of the concern, an entry was made showing that each partner of the firm was credited with an equal share of the investments when purchased. I am of the opinion that the shares formed
(3) The finding of the transfer tax appraiser that good will existed as an asset of the copartnership is amply supported by the evidence, although as we hereinafter hold the value of the good will so far as decedent’s interest in it is concerned is materially and seriously affected by several factors in connection with the partnership agreement. However inconsiderable that value may be it cannot be denied that this interest in the good will did exist. The firm was engaged in the importation and sale of leaf tobacco. It had been in business since 1908. It is conceded by the appellants that during its existence the partnership had established a reputation which made the firm name a valuable asset in the trade. This is evidenced by the provision of the copartnership agreement as to the ownership of the firm name. The appeal on this ground is overruled.
(4) Good will is intangible property. The taxation of the transfer thereof, as I have determined (supra) with reference to the partnership interest of decedent, does not violate the provisions of the United States or State Constitutions. The appeal on this ground is overruled.
(5) The copartnership was to continue until the 31st day of December, 1924, unless sooner terminated by the death of two of the copartners. The decedent was the first of the copartners to die after the making of the agreement. His interest in the good will passed by his will as a part of his estate, in the absence of a provision in the agreement as to the disposition thereof in the case of the death of one of the copartners prior to the dissolution of the copartnership. The appraiser has valued the good will on the assumption that the copartnership Was to continue indefinitely. This was erroneous. Its value should have been appraised with consideration of the fact that the copartnership was not to continue after the 31st day of December, 1924, and might be terminated before that time by the death of another of the copartners. The appraiser took the average annual profits for the years 1917 to 1921, inclusive, as a basis for his calculation of the good will. It is objected that the profits for the years 1917, 1918 and 1919 Were abnormal. I think this contention is fully sustained and that the figures for these years should be excluded. (Matter of Lincoln, 114 Misc. 45.) The appellants con
It appears that the decedent was an active member of the copartnership and a reasonable allowance for loss of his services should have been made in computing the good will. (Matter of Borden, 95 Misc. 443.)
The partnership agreement provided that in the event of the death of this decedent, his personal representatives should be entitled to a definite share of the profits earned by the firm for a period subsequent to his death. These sums together with other payments provided for under the agreement should be added to the value of the decedent’s interest after making due allowance and discount from the date of decedent’s death to the time of payment.
No evidence was offered as to the actual amount received by the decedent’s personal representatives for his interest in the copartnership. While such proof is not conclusive the consideration would afford evidence of value. (Matter of Herrmann, 110 Misc. 475.) The report of the transfer tax appraiser is returned to him for revision and correction in accordance with this opinion.
Now Tax Law, § 248, subd. 1, K (e), as added by Laws of 1925, chap. 143.— [Rep,