177 A.D. 871 | N.Y. App. Div. | 1917
Lead Opinion
This is an appeal by the State Comptroller from an order of one of the surrogates of New York county finally assessing the tax payable under the Transfer Tax Law upon the estate of the above named decedent.
The question raised by the appeal has to do with the valuation to be placed upon five hundred shares of stock in the corporation of Chas. Cory & Son, Inc., which were owned by the testator at his death, and which were transferred by his executor to the appellant John M. Cory at an arbitrary valuation agreed upon by said decedent and said John M. Cory during the lifetime of the former.
The aforesaid decedent and John M. Cory were brothers and until May, 1913, were equal partners in a business conducted under the firm name of Chas. Cory & Son, which had come to them from their father. In May, 1913, they organized a corporation under the same name with 1,000 shares of stock of which 500 shares were issued to each.
On the same day the brothers executed identical wills. Charles Cory died on November 25, 1914, leaving the will executed by him as aforesaid, and still owning the 500 shares of stock in the above mentioned corporation. He left two sisters and the above-mentioned brother John M. Cory. By paragraph 2 of his will he gave all of his property, after payment of debts and funeral expenses to his said sisters and brother “to be divided among them equally share and share alike.” As to his stock in the corporation of Chas. Cory & Son, Inc., he provided as follows: “ Third. I hereby reaffirm the agreement made between my brother John M. Cory and myself, to the sale to him by my executors of any and all shares of stock in the corporation of Charles Cory & Son, Incorporated, which I may own at the time of my decease and direct and instruct my executors hereinafter named to carry out the terms of said agreement. And I further direct my said executors to allow my said brother, credit on his share in my residuary estate for any and all moneys, which, under the terms of said agreement, shall be payable by him to my executors, to the extent of the amount of his share or interest in my said estate, and I authorize my said executors to accept and receive in lieu of such payment, a receipt or acquittance to them, as such executors, for so much of the said moneys as may be payable by him to them under said agreement, to the extent of the
The shares were thereupon • transferred to John M. Cory at the price fixed by the aforesaid agreement of sixty dollars per share.
The appraiser reported that the fair market value of said shares was $103,400, which valuation is not questioned on this appeal. The surrogate, however, on appeal, reduced the value to $30,000, the sum fixed by the aforesaid agreement. The shares appear to have been of substantially the same value when the aforesaid agreement was made and when the decedent died.
The result of the surrogate’s decision is that property owned by the decedent at the time of his death and then worth over $100,000, and which after his death was transferred to his brother, has been taxed at a valuation of only $30,000. This is claimed by the respondent to be the necessary result of the ante-mortem contract made bebween the two brothers.
Subdivision 4 of section 220 of the Transfer Tax Act imposes a tax upon the' “ transfer * * * by deed, grant, bargain, sale or gift * * * intended to take effect in possession or enjoyment at or after * * * death. ” (Tax Law [Consol. Laws, chap. 60; Laws of 1909, chap. 62], §220, subd. 4, as amd. by Laws of 1911, chap. 732.)
In my opinion the will executed by Charles Cory is significant, and yet unless carefully considered is likely to be misleading. By the 2d paragraph of his will Charles Cory purported to divide his estate equally between his two sisters and his brother, but by the 3d paragraph he, in effect, created an inequality by providing that there should be transferred to the brother, at the arbitrary valuation of $30,000, stock of the true value of $103,400. The effect of this 3d paragraph was as if he had in terms directed that the stock which he held in Chas. Cory & Son, Inc., should, for the purpose of dis
The order, in so far as appealed from, is, therefore, reversed, with ten dollars costs and disbursements to appellant payable out of the estate, and the matter remitted to the Surrogate’s Court for further proceedings in accordance with this opinion.
Clarke, P. J., Laughlin and Smith, JJ., concurred; Page, J., dissented.
Since amd. by Laws of 1915, chap. 664, and Laws of 1916, chap. 323.— [Rep.
Dissenting Opinion
The sale and transfer of the stock in the Charles Cory & Son, Inc., by the executors of Charles Cory to John M. Cory, pursuant to the contract made by Charles Cory in his lifetime, does not, in my opinion, come within either the letter or spirit of the Transfer Tax Law.
After giving the history of the development of the law imposing taxes on the transmission of or succession to the property of a decedent, under the Roman and ancient law and the modern law of France, Germany and other continental
The New York Transfer Tax Law has been upheld and its constitutionality affirmed upon the theory that the right to dispose of property by will or by deed to take effect upon death of the grantor is not an inherent or natural right, but exists solely by legislative enactment, and hence is subject to regulation, limitation and tax. (United States v. Perkins, 168 U. S. 625, 628; Keeney v. New York, 222 id. 525, 533.) The right of the owner to sell his property is an inherent and natural right. He has the right also to contract to sell upon a valuable consideration and to bind his executors to perform the contract and the performance of such a contract by the executors would not render the purchaser liable to pay a transfer tax, nor has it ever been contended that a sale of property by executors,- pursuant to a power and direction to sell contained in a will, rendered the purchaser liable to a transfer tax.
In the case at bar the mutual promise of each to purchase from the executors of the other the shares of stock in Charles Cory & Son., Inc., which the one first dying owned at the time of his decease, was a valuable consideration for the contract of September 12, 1913. Each thereby relinquished his right to bequeath the stock, and each secured the benefit of obtaining, at a price therein fixed, the share of the business represented by the stock certificates of the other. So that instead of owning one-half, he could become the owner of the entire business. The right to purchase the stock became vested at the time of the signing of this agreement. It cannot be doubted that the executors of Charles Cory could have enforced the contract and compelled John M. Cory to purchase and pay for the stock at
In principle this case cannot be distinguished from the other cases of contracts made during lifetime upon a valuable consideration to be performed after death (Johnston v. Spicer, 107 N. Y. 185; Carnwright v. Gray, 127 id. 92; Hegeman v. Moon, 131 id. 462), which have been held not to come within the Transfer Tax Law. (Matter of Miller, 77 App. Div. 473, 481; Matter of Baker, 83 id. 530; affd. on opinion below, 178 N. Y. 575.)
The words “transfer * * * by deed, grant, bargain, sale or gift,” used in subdivision 4 of section 220 of the Tax Law (Consol. Laws, chap. 60 [Laws of 1909, chap. 62], as amd. by Laws of 1911, chap. 732),
I am not unmindful of the fact that persons seeking to transfer their property to take effect after their death, naturally desire to have it transmitted undiminished by tax, and that ingenious schemes are adopted by fertile minds to evade the law. Where such attempt appears the courts have been swift to brush aside the form adopted and to consider the intent. The possibility of abuse is not a controlling element in construction.
If a transfer is attempted to be made without present valuable consideration to take effect after death, the courts will impose the tax no matter in what language the instrument is framed.
The order, in my opinion, should be affirmed.
Order reversed, with ten dollars costs and disbursements to appellant payable out of the estate, and proceeding remitted to surrogate.
Since amd. by Laws of 1915, chap. 664, and Laws of 1916, chap. 323.— [Rep.