102 Misc. 378 | N.Y. Sur. Ct. | 1918
This is an appeal in the ordinary course from the appraisal made by the appraiser and from the order fixing and assessing the tax. The legal'question involved is, whether property belonging to the estate of Thompson Dean, deceased, is taxable as passing under his will, or whether the property is to be taxed as passing under the will of his daughter, Alice D. W. Chauncey, above named, by reason of her execution of a power of appointment vested in her by the will of Thompson Dean, her father. The will of Thompson Dean was probated May 7,1896, before the date when property passing under a power of appointment was made taxable by act of the legislature. Mr. Dean’s will divided his residuary estate into four parts. It is with one of these portions only that we are now con
A preliminary objection taken is that it is unconstitutional to assess property passing under a power of appointment when the will of the donor was probated prior to the statute enacting the tax, namely, chapter 284, Laws of 1897, and amendments. Whatever the merits of this contention may be, the question is foreclosed in this particular court. Chauncey v. Kelsey, 205 U. S. 466.
The real question presented by the appellants is one, however, which requires our attention. An examination of the authorities and the extraction therefrom of the true rule would seem to necessitate the taxation of Zada T. Dean’s share and the exemption of that of Thompson Dean. The rule invoked is frequently stated to be that where the same property may pass both under a will and under a power of appointment granted by that will, the beneficiary may elect to take the property either under the will of the donor of the property or under the execution of the power. If the beneficiary of the will, and also of the power in trust to appoint, elect to take under the power the property is now taxable as passing by a power of appointment. But otherwise in some instances as to wifis operative before 1892. I think that the rule thus invoked must, however, be more precisely formulated if it is to be correctly applied in such cases as this. I shall not stop to recount the origin of this rule, or its limitations, as it is not necessary for this case.
It is important to note in limine that by the term “ election,” used in the so-called rule mentioned, an affirmative, intentional election is not intended but only a disclaimer. Where there is an express renunciation or rejection of all benefits of a power of appointment,
The failure to differentiate the processes to be employed in the application of principle in the two classes of cases denoted sometimes works error. Obviously where there is an unambiguous renunciation no further consideration need be given to the power of appointment or to its effect. This was most clearly pointed out in Matter of Hoffman, 161 App. Div. 836; affd. on opinion of Mr. Justice Laughlin, 212 N. Y. 604. The appointment under the power in that class of instances is entirely inoperative.
The situation is different where the election, or to speak more accurately, the renunciation, is conditional or provisional. But if, in determining whether the
The true rule to be applied in such matters as this can be reached only by an entire disregard of any intention to renounce, or of what has been termed an ‘ ‘ election.” An examination of the authorities will demonstrate this. In Matter of Lansing, 182 N. Y. 238, the donee of the power appointed the same person who would have taken under the donor’s will in the event of the default in the exercise of the power. The beneficiary took nothing from the power. The execution of the power gave back to the beneficiary precisely what it took away. In Matter of Cooksey, 182 N. Y. 92, decided at the same time, the reverse was true and the estate was held taxable. There the exercise of the power did not restore what it was required to take for its operation. As there was no express renunciation the beneficiary’s estate was deemed to come through the power and not through the original will. The opinion of the Appellate Division for the second department in Matter of Ripley, 122 App. Div. 419, presented
The language of the Appellate Division in Matter of Ripley does refer in its second ground of decision to “ election,” but the court used that term in the sense of disclaimer and not in the sense of renunciation. The same is true of the reference to that case in Matter of Slosson, supra. Matter of Hoffman has already been cited. Matter of Chapman, 133 App. Div. 337, cited in the Hoffman case, excellently presents the real principle. It is concerned with the effect of the power upon the beneficiary’s interest, and this is the determining consideration. Where the power does not transfer to the beneficiary more than the will of the donor of the power, the property is deemed for the purposes of the taxing acts to pass under the latter’s will by
In Matter of Slosson, 216 N. Y. 79, the exercise of the power took away more than it restored to those who would have taken in case of default in the exercise of the power. It was- held that the part which was left was not taxable property passing under the power of appointment. In Matter of King, 217 N. Y. 358, the transferees derived their title, or at least a more perfect title, through the exercise of the power than they would have received through the donor’s will. In Matter of Delano, 176 N. Y. 486, relied upon by the learned counsel for the state comptroller, affirmed in Chawncey v. Kelsey, supra, as well as in Matter of Dows, 167 N. Y. 227; affd., 183 U. S. 278, the question now under consideration was not directly involved. The cases, however, are in accord with the true rule. The constitutionality of the statutes, taxing powers, in their retroactive aspect, was the real point considered. Those cases emphasize the distinctions which we have pointed out — that it is the effect of the exercise of the power, irrespective of an intentional election, which is the determining test. In those and similar cases, where the constitutionality of the statute, imposing the tax upon the exercise of the power of appointment, was involved, the only question for the court to determine was whether the original will had
Applying the principles indicated to this case now before me, it must be held that the transfer to Zada T. Dean is taxable in the five per cent class. She took more under the power of appointment than under her grandfather’s will. The exercise of the power restored more than it removed. If she takes under the power the tax follows. This is not so with the share of Thompson Dean. Without the exercise of the power he was entitled to one-seventh of the estate, and he takes no more under the power. He takes under the will of his grandfather. His share is consequently taxable in the one per cent class in proceedings upon the estate of his grandfather. The so-called “ election ” need not be relied upon. It is clearly, conditional and provisional, and not a renunciation in fact or in law. My conclusion differs from the contentions of both parties.
The order of the appraiser must be modified in accordance with my opinion.
Order modified.