In re Hall's Estate

• Citation: 125 A. 246
• Parties: In re HALL'S ESTATE.
• Decision Date: 18 December 1923
• Court: New Jersey Supreme Court

125 A. 246

In re HALL'S ESTATE.

Supreme Court of New Jersey.

Dec. 18, 1923.

(Syllabus by the Court.)

In the matter of the inheritance taxes on the estate of Francis A. Hall, deceased. Certiorari to review decree of the Prerogative Court affirming tax. 119 Atl. 669. Modified, and affirmed.

McCarter & English, of Newark, and Otto C. Wierum, of New York City, for prosecutors.

Thomas F. McCran, Atty. Gen., and William Newcorn, Asst. Atty. Gen., for the State.

GUMMERE, C. J. The writ in this case was allowed for the purpose of reviewing a decree of the Prerogative Court (In re Hall's Estate, 119 Atl. 669), affirming an inheritance tax, assessed by the comptroller of the treasury, upon the transfer of his business, including the good will thereof, by Francis A. Hall, to his sons; the assessment being based upon a finding that this transfer was made by him in contemplation of death. On the appeal to the Prerogative Court it was contended that this finding was not justified by the fact, and that, for this reason, the tax should be set aside. It was further contended that, even if the transfer was so made, the tax was invalid, so far as it was based upon the theory that the transfer of the business included the good will thereof and that this good will added to the value of the property transferred. It was also contended that, even if the good will was an integral part of the property transferred, and so taxable, the valuation placed upon it was excessive. Vice Ordinary Buchanan, before whom the appeal was heard, reached the conclusion that each one of these several contentions was without merit, and, as a result of that conclusion, advised a decree affirming the tax in toto.

On the argument before me the same grounds are relied upon in support of the contention that the decree of the Prerogative Court should be reversed. As to the first point: I concur in the view of the Vice Ordinary that the proofs justify a finding that the transfer of the business, which took place on May 23, 1919, was made by Mr. Hall in contemplation of his death, which occurred on June 18, 1919, and so is taxable under the third subdivision of section 1 of the act of April 9, 1914, amending our act for the taxation of the transfer of property of resident and nonresident decedents (P. L. 1914, p. 267).

I further concur in the conclusion reached by the Vice Ordinary that the good will of a business is an integral part thereof, and is to be taken into consideration in determining the value of that business. I consider, however, that the basis upon which the valuation of the transfer of the good will in the present case was rested by the comptroller is unsound. In making that valuation the comptroller assumed that the ownership thereof was exclusively in Mr. Hall, which was, as it seems to me, contrary to the fact, as will appear from the following recitals. Prior to 1910 Mr. Hall was engaged in the manufacture of beds and bedding in New York, Philadelphia, and other places. In that year he entered into a partnership agreement with two of his sons, and transferred the business to the partnership, with the exception of certain items, which were excluded in and by the partnership agreement. The transfer of this business to the partnership carried with it the good will thereof, as well as the personal property used in the business, and the partners became the owners of that good will. In 1918 this partnership was dissolved for the purpose of taking into the firm a third son, and at the same time a new partnership agreement was entered into...