226 A.D. 108 | N.Y. App. Div. | 1929
This is certiorari to review a determination of the State Tax Commission confirming an assessment of an additonal income tax against the relators for the year 1924 under article 16 of the Tax Law. The relators are executors and trustees under the will of George R. Sheldon, deceased, who died in New York county on January 14, 1919. Prior to his death and for many years Mr. Sheldon had been a member of the stock brokerage firm of William C. Sheldon & Co., of New York city. The decedent had, prior to his death, deposited with the firm, for its use, certain securities acquired by him by purchase at various times between 1902 and 1919 and costing not less than $273,451.88. These securities on January 1, 1919, had a market value of $255,282.59. They were firm assets, however, on January 14, 1919, the date of decedent’s death, and chargeable with the firm debts. In the transfer tax appraisal on decedent’s estate, the interest of decedent in this partnership was designated as having no market value at the time of his death. This was based upon a report of accountants, dated December 31, 1918, who audited the partnership accounts. It was apparently calculated at the time of the transfer tax appraisal that the firm assets, which included decedent’s securities, did not exceed its liabilities as of the time of decedent’s death. Shortly after decedent’s death, the surviving partners commenced liquidation, and in the course of such liquidation they sold the securities contributed by decedent, resulting in a subsequent balancing of the partnership accounts as between the surviving partners and decedent’s representatives and leaving in the decedent’s account a credit balance of $252,326. Decedent’s credit balance was settled and agreed upon at that figure. The securities contributed to the firm for its use by decedent were sold by the surviving partners on various dates between March 4, 1919, and March 28, 1919, the proceeds being the aggregate sum of $251,140.50. His account was also credited with certain minor items which brought decedent’s
We think it has no application. By its terms, article 90 of the regulations applies to “ property acquired by bequest, devise, or descent ” or to property of an estate “ disposed of by the executor.” This is not the case of an income tax against a beneficiary for profit taken on “ property acquired by bequest, devise, or descent.” The $80,000 is part at least of the value of property “ included in the original estate ” but which has not been “ disposed of ” by the executors. Section 353 of the Tax Law relating to income tax, which provides the basis “ for the purpose of ascertaining the gain derived or loss sustained from the sale or other disposition of property,” must be read in connection with sections 354 and 355;
Wendell, 196 App. Div. 613, 615.) It is only a gain in the hands of the executors after acquisition by them, by “ sale or other disposition of property ” by them, which can properly be deemed income to the estate. In the case before us there was no “ sale or other disposition of property ” within the meaning of section 353 of the Tax Law. It was a mere receipt on account of property which, though uncertain in value, was a part of the original estate. We find no apparent legislative intention to regard “ its value as appraised for the purpose of the New York State transfer tax ” as having any bearing upon the taxation of this receipt for income tax purposes. The value of a chose in action, such as the unliquidated claim of the estate of a deceased partner to the partnership interest belonging to the estate, may be so uncertain and contingent at the time of death as to seem to have no market value and yet have a value which can only be determined at some date subsequent to the death of the decedent when a liquidation of the partnership has been had. The transfer tax is arbitrarily imposed upon a value computed as of the date of death unaffected by any contingency which may later affect the actual value transferred. This is to prevent confusion, uncertainty, unnecessary burden or impracticability in the collection of that tax. (Matter of Penfold, 216 N. Y. 163, 170.) If the State is aggrieved because no transfer tax has been assessed upon the partnership interest of this Sheldon estate, it may be due to the fact that it did not have the transfer tax appraisal postponed for a reasonable time to permit the liquidation of the partnership. (Matter of Hubbard, 234 N. Y. 175.) The order entered on the original appraisal may be a final adjudication. (Matter of Rice, 56 App. Div. 253; Matter of Lansing, 31 Misc. 148; Matter of Morss, 85 id. 676.) But if the estate is now foreclosed of such a right to appraise this partnership interest at any value that it may have actually had at the death of decedent, it is the fault of the State in not having had the appraisal of it postponed until after liquidation. Its failure to assess a proper transfer tax is no justification for assessing an income tax on a basis not clearly found in the law governing the collection of the latter tax.
The real question is whether the $80,000 came to the estate essentially as capital or income. Until Sheldon’s interest in the partnership had been ascertained by liquidation, his executors had a mere equitable interest in the distribution of any surplus
The determination should be annulled, with fifty dollars costs and disbursements.
Van Kirk, P. J., Davis, Whitmter and Hasbrouck, JJ., concur.
Determination annulled, with fifty dollars costs and disbursements.