In re Burgess' Estate

• Decision Date: 23 January 1912
• Citation: 97 N.E. 591,204 N.Y. 265
• Parties: In re BURGESS' ESTATE.
• Court: New York Court of Appeals Court of Appeals

204 N.Y. 265

97 N.E. 591

In re BURGESS' ESTATE.

Court of Appeals of New York.

Jan. 23, 1912.

Appeal from Supreme Court, Appellate Division, Second Department.

In the matter of the appraisal under the Transfer Tax Act of the estate of William H. Burgess, deceased. From an order of the Appellate Division (146 App. Div. 348,130 N. Y. Supp. 686) affirming a decree of the surrogate fixing the amount of a transfer tax, the executors of the will of deceased appeal. Modified and affirmed.

Albert Stickney, for appellant.

Henry P. Keith, for respondent.

CULLEN, C. J.

The will of the deceased, so far as material to the controversy before us, after directing his executors to set aside a fund of $50,000 for the benefit of each of his daughters, the income thereof to be paid to said daughter during her life, gave all the residuary estate to his executors in trust to pay the net income to the testator's wife during her life or widowhood, and upon her death or remarriage he directed his said executors to divide said trust fund (with the exception of the sum of $10,000) ‘into as many shares as I may have daughters living at the time of such division, and then living issue, collectively, of any then deceased daughter, and to set aside one share for the issue collectively of any then deceased daughter, and pay over the said share to such issue in equal shares, so that each set of issue will receive one share, per stirpes; and to set aside one share for the benefit of each of my said daughters then living and to have and to hold the same in trust, nevertheless, to and for the following uses and purposes, namely:-to invest and keep the same invested, to receive the rents, issues and profits, and to pay the net rents, issues and profits so received to the daughter for whose benefit the said share shall be so set aside, during the term of her natural life, and on her death, to pay over the principal so held in trust, together with the sum of fifty thousand dollars also set apart for her benefit as provided by the third clause of this will to such person and in such manner as she may in and by her last will and testament, properly executed by her, duly appoint, or in default of such appointment, either as to the whole or any part thereof, then to the extent to which no appointment shall be made, to her issue her surviving per stirpes, or in default of both such appointment, either as to the whole or any part thereof, and of issue, then to the extent to which no such appointment shall be made, to such persons as would be entitled to receive the same if she had died intestate possessed of the principal of said trust estate (and for the purposes of ascertaining the persons who would be so entitled to receive the same, the entire principal of the trust estate shall in that event be deemed to be personal property).’

The testator left his widow and three daughters him surviving. The surrogate held the remainders in the trust funds of $50,000 each to be subject to taxation only at the respective deaths of the equitable life tenants. He held that the remainder in the residuary estate after the death of the wife to be presently taxable, and imposed the tax at the rate of 5 per cent. The executors appealed from so much of the decree as imposed a tax of 5 per cent. upon the remainder of the residuary estate. No appeal was taken by the comptroller.

The question presented in this appeal is not free from doubt. Its determination depends on what section of the tax law is deemed to be applicable to the case. Under the statutes that first imposed taxes on succession, either under testamentary dispositions or intestacy laws, it was held that contingent remainders, or remainders technically vested, but subject to be divested, and therefore, in the broad sense, contingent, could not be taxed until they indefeasibly vested. Matter of Curtis, 142 N. Y. 219, 36 N. E. 887. Subsequently it was held that the exercise of a power of appointment did not subject the property passing thereunder to a succession tax, where the source of the power was a will prior to the enactment of the transfer tax law (Laws 1896, c. 908). But in 1897 (Laws 1897, c. 284), the statute was changed, so that section 220, subd. 6, now provides, ‘Whenever any person or corporation shall exercise a power of appointment derived from any disposition of property made either before or after the passage of this chapter, such appointment when made shall be deemed a transfer taxable under the provisions of this chapter in the same manner as though the property to which such appointment relates belonged absolutely to the donee of such power and had been bequeathed or devised by such donee by will;’ and where the property passes by failure to exercise the power of appointment, the persons succeeding thereto by such failure shall be considered as having taken the property under the donee of the power. Still later section 230 was amended, so as...