In re Harvey's Estate

• Decision Date: 26 March 1924
• Parties: In re HARVEY'S ESTATE.
• Court: New Jersey Supreme Court

129 A. 393

In re HARVEY'S ESTATE.

Prerogative Court of New Jersey.

March 26, 1924.

In the matter of the estate of Charles E. W. Harvey, deceased. From an assessment of transfer tax by the Comptroller, the executor appeals. On final hearing. Appeal dismissed.

Andrew Foulds, Jr., of Passaic, for appellant.

Edward L. Katzenbach, Atty. Gen., for respondent.

BUCHANAN, Vice Ordinary. The executor of the estate of Charles E. W. Harvey appeals from the assessment of transfer tax by the comptroller.

Testator died July 9, 1922, a resident of this state. In April, 1907, he had made an agreement with the Moravian Seminary, of Bethlehem, Pa., whereby he was, within 60 days, to pay to the seminary $25,000, and convey to it also a certain residence property in Essex county. The seminary was to pay him 5 per cent. interest on the $25,000 during his life and lease the property to him, for his lifetime, rent free, for his own occupancy, or to sublet for his own benefit, he to pay the taxes and upkeep.

This agreement was performed on both sides. The comptroller has assessed a tax in respect of the said $25,000, and in respect of the residence property, appraised at $19,000, as a gift or transfer to take effect at (loath. Appellant contends this was error; that the transfers took effect immediately in 1907.

Of course, as a matter of legal technicality, the actual transfers of title did take effect in 1907. The question to be determined, however, is, What was the substance and effect of the entire transaction? As to the house, it amounted to a conveyance of the remainder, subject to a life estate in testator; it was a transfer intended to take effect in beneficial possession and enjoyment at testator's death. Until testator's death he himself retained the beneficial enjoyment of the property. So also with the $25,000. He retained the beneficial enjoyment of that during his lifetime, for by the terms of the agreement the donee was to pay him "interest" on that very sum of $25,000 during his life, at five per cent. (which is the generally accepted ordinary rate for safe investment income).

Appellant further contends that in any event the transfers in, question are not taxable, because the statute in force in 1907 did not provide for the assessment of a tax thereon; the provisions in that behalf being enacted in 1922, shortly before testator's death. In view of Carter v. Bugbee, 91 N. J. Law, 438, 103 A. 818; Id., 92 N. J. Law, 390, 106 A. 412, and American Board,...