199 A.D. 492 | N.Y. App. Div. | 1922
The testator died March 15, 1911, leaving a will which was duly admitted to probate by the surrogate of New York county. By the terms of this will the testator transferred his residuary estate in trust to pay over the income to his wife during her life, and upon her death to pay over the income to his daughter for life, and upon her death he gave the principal of his estate to his daughter’s issue. Failing issue, the property went to such persons as his daughter might appoint by will, and failing such appointment, to the testator’s heirs at law. Similar provision was made to cover the contingency of the daughter dying without issue before her mother. The rights, interest and estate of the transferee were dependent upon conditions whereby they might be defeated or abridged, and consequently in the transfer tax proceeding the appraiser reported and the order fixing the tax provided for the payment of the tax at the highest rate possible under the Transfer Tax Law. The tax so assessed amounted to $12,886.98, while the tax, if the property went to the direct descendants of the testator, would amount to $2,577.39, a total difference of $10,309.59.
Prior to 1899 remainders affected by contingencies and conditions were not taxed until they vested in possession and enjoyment.
The difficulty and uncertainty of the collection of the tax led the Legislature to enact chapter 76 of the Laws of 1899, amending section 230 of the Tax Law (Gen. Laws, chap. 24; Laws of 1896, chap. 908)
“ When property is transferred in trust or otherwise, and the rights, interest or estates of the transferees are dependent upon contingencies or conditions whereby they may be wholly or in part created, defeated, extended or abridged, a tax shall be imposed upon said transfer at the highest rate which, on
The Court of Appeals held this law constitutional. (Matter of Vanderbilt, 172 N. Y. 69.) It pointed out, however, in a later case, how unfairly the statute bore upon the life tenant. The deduction of the tax reduced the corpus of the trust fund and. diminished the income payable to the life tenant, and although the statute provided for a refund of the excess fund with interest, if the remainder vested in persons, the transfer to whom was taxed at a rate less than that exacted, such refund was generally made after the death of the life tenant, and it was suggested in fairness, although the statute did not so provide, that the interest on the amount paid to the State should be paid to the life tenant. The court pointed out that in the majority of cases the remainders are first appointed to the issue of the life tenant and descendants of the testator, and are given to collaterals or strangers only in default of issue. Thus the lowest rate of tax usually proves the final rate. Therefore, if the Legislature desired to make taxes on remainders payable immediately, it would be fairer to the life tenant to have the tax assessed at the lowest rate of any succession provided for by the will, and in case the remainder eventually vesting should prove taxable at a higher rate, then such increased tax should be payable at the time of its enjoyment. (Matter of Brez, 172 N. Y. 609, 61L) It was to remove the injustice of the law, while at the same time securing the State against any danger of failing to receive the proper tax, as we pointed out in Matter of Spingarn (175 App. Div. 806, 809), that led to the enactment of chapter 800
Although the testator died before this amendment became effective, proceedings for determining the amount of the transfer tax on this estate were commenced after it became a law. This act dealt with procedure under the Transfer Tax
The attorney for the estate demanded of the State Comptroller the right to deposit securities for the difference between the highest and lowest tax assessable upon the transfers. The matter remained in abeyance until March, 1921, when the representative of the Comptroller finally informed the attorney for the estate that the Comptroller would not consent to the deposit of securities and insisted upon the payment of the entire tax in cash. On April 15, 1921, an order was entered without opposition, remitting the penalties. On April 23, 1921, the executrix caused to be sent to the Comptroller a check for the tax due with a letter stating: “ The executrix makes this payment to avoid further interest and penalties, and without prejudice to her right to claim the benefit of the provisions of the Tax Law in regard to the deposit of securities, and of other provisions of section 241 of the Tax Law.”
We are of opinion that the surrogate should have granted the order resettling the order in the manner requested.
The attorney for the State Tax Commission suggests difficulties in now accepting the deposit of securities, in that the full amount of the tax had been paid over to the State Treasurer and that there was no fund deposited by the Comptroller to the credit of the estate for which the securities could be substituted. There is no proof before us that this
The order should be reversed, with ten dollars costs and disbursements, and motion granted.
Clarke, P. J., Laughlin, Dowling and Smith, JJ., concur.
Order reversed, with ten dollars costs and disbursements, and motion granted. Settle order on notice.
Now Tax Law (Consol. Laws, chap. 60; Laws of 1909, chap. 62), § 230, as amd.— [Rep.