In re Cook's Estate

Citation187 N.Y. 253,79 N.E. 991
PartiesIn re COOK'S ESTATE.
Decision Date22 January 1907
CourtNew York Court of Appeals

OPINION TEXT STARTS HERE

Appeal from Supreme Court, Appellate Division, Fourth Department.

In the matter of the appraisal of the estate of Frederick Cook, deceased, under the act in relation to the taxable transfers of property. From a judgment of the Appellate Division (99 N. Y. Supp. 1049,114 App. Div. 718), modifying and affirming a decree of the Surrogate's Court determining the amount of the transfer tax, the State Comptroller and the executors of the decedent appeal. Order of the Appellate Division reversed, and decree of the surrogate modified, and, as thus modified, affirmed.

This proceeding was instituted to ascertain and determine the amount of a succession tax under the following facts: Frederick Cook, late of the city of Rochester, died on the 17th of February, 1905, leaving a widow, but no child of his body, and no descendant of any deceased child. He left, however, Fredericka Louise MacDonell, a daughter duly adopted according to the laws of this state, and Frederick Cook MacDonell, her only child. He disposed of his large estate by a last will and testament, of which only two paragraphs are now material. By the eleventh paragraph he gave $50,000 to his executors in trust for his ‘grandson, Frederick Cook MacDonell,’ with directions to accumulate the income until he should become 15 years of age, and thereafter to pay him the annual income from the aggregate until he should become of full age, and then to pay him the amount of the accumulations, together with the annual income from the balance until he should reach 25, when one-half of the principal was to be paid over and the remainder when he should become 30. In case of his death before all of the fund was paid over, the remainder was to go to his wife and children, if he left any, and if he left none it was to be paid over to the residuary legatees named in the thirty-eighth clause. By the thirty-eighth paragraph the residue of his estate was given to various nephews and nieces.

When the will was offered for probate, the widow and adopted daughter filed objections which raised an issue as to testamentary capacity. Pending the trial a compromise was arrived at, which was carried into effect by certain instruments executed by the widow and by each of the residuary legatees, whereby, for a good and sufficient consideration, they duly and formally assigned, transferred and set over to her all their ‘right, title, and interest in and to any part of the residuary estate of said Frederick Cook and all rights accruing to’ them and each of them ‘by virtue of the provisions of said paragraph number thirty-eight of said last will.’ Thereupon the objections to probate were withdrawn and the will was proved. The compromise agreements have been duly kept and performed by all the parties thereto. If the litigation had proceeded and the contestants had prevailed, the entire estate of the testator would have gone to the widow and adopted daughter. The settlement was made in good faith for the sole purpose of avoiding a contest, and not to reduce the transfer tax.

After finding these facts, in substance, the appraiser found as conclusions of law that the bequest to Frederick Cook MacDonell should be taxed at 5 per cent., which amounted to $2,500, and that the entire residuary estate should be taxed at the same rate, which amounted to $25,223.38. Upon appeal to the surrogate this determination was affirmed, but upon appeal to the Appellate Division it was reversed by a divided vote as to the tax on the residuary estate, which was fixed at the rate of 1 per cent., amounting to $8,924.67, and affirmed as to the tax on the legacy to Frederick Cook MacDonell. The State Comptroller appealed from the modification of the surrogate's decree, and the executors and Frederick Cook MacDonell from the entire order.Merton E. Lewis and William T. Plumb, for the Comptroller.

Charles Van Voorhis for executors and Frederick Cook MacDonell.

VANN, J. (after stating the facts).

By the appeal of the Comptroller the question is presented whether the transfer tax upon the residuary estate should be at the rate of 1 per cent., as fixed by the Appellate Division, or 5 per cent., as fixed by the surrogate. The tax was reduced upon the theory that the compromise was a renunciation by the residuary legatees of their interest in the residuary estate, and this conclusion was reached in reliance upon the recent case of Matter of Wolfe, 89 App. Div. 349,85 N. Y. Supp. 949;Id., 179 N. Y. 599, 72 N. E. 1152.

In that case the testator had bequeathed to the persons nominated as executors the sum of $20,000 for their own use. After his death those legatees, called for convenience the Executors,’ by an appropriate instrument duly renounced and released said bequest, so that the amount given to them fell into the residuary trust for the benefit of the testator's children and their descendants. The executors, instead of accepting the legacy given to them, absolutely refused to accept it by a formal instrument of renunciation. It was held that the legacy was not subject to a tax calculated at the rate at which it would have been taxable if it had been actually accepted by the original legatees, but at the rate at which it would have been taxable if the will had originally provided that it should pass to the residuary legatees. This conclusion was reached upon the ground that the transfer tax act does not provide that an attempted transfer by a bequest which is refused by the beneficiary, should be taxed the same as if it were accepted; that the tax was on the succession and not upon the property; that an intended beneficiary has the right to refuse a gift, ‘and, if a testamentary bequest is refused, the voluntary relinquishment of the donation by the legatee leaves nothing to be taxed unless it be the ultimate transfer of property under the will as necessitated by the relinquishment.’ No opinion was written by this court in that case, but the learned justice who wrote for the Appellate Division very appropriately said: ‘If no transfer is effected because it turns out that there is no property to transfer, no tax can be collected, and, if the legatee renounce the gift and refuse to receive it, no tax can be collected with respect to him, because there has been no transfer to him. His right to renounce the privilege of accepting the donation is not denied or forbidden by the statute, and such right is recognized by the authorities. * * * On his effective renunciation the title to, or ownership of, the property of the gift remains in the estate to be disposed of under the terms of the will and the succession is taxable in accordance with the nature of the ultimate devolution. * * * Assuming the right of an individual to reject proffered bounty, whether tendered by deed to take effect at the grantor's death, or by will, I can see no good reason for applying the provisions of the tax law to a mere abortive attempt at a transfer as well as to the consummated act.’

We adhere to that decision, but are unable to see that it...

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