In re Terry's Estate

• Decision Date: 09 May 1916
• Citation: 112 N.E. 931,218 N.Y. 218
• Parties: In re TERRY'S ESTATE.
• Court: New York Court of Appeals Court of Appeals

218 N.Y. 218

112 N.E. 931

In re TERRY'S ESTATE.

Court of Appeals of New York.

May 9, 1916.

Appeal from Supreme Court, Appellate Division, Second Department.

Proceeding to assess a transfer tax upon the estate of Tootie McGregor Terry, deceased. From an order of the Appellate Division (157 N. Y. Supp. 1147), affirming an order of the surrogate fixing a transfer tax, the executor appeals. Reversed and remitted.

Chase, J., dissenting.Ernest P. Hoes, of New York City, for appellants.

Francis A. Winslow, of New York City, for respondent.

POUND, J.

The legacies about which the present controversy arises are to the A. M. McGregor Home, an Ohio corporation, located at the village of East Cleveland, in the county of Cuyahoga and state of Ohio, and are by the terms of the will--

‘to be retained by it so long and so long only as the said corporation shall continue to exist under its present name and maintain under that name a home for destitute aged men and women in the said village of East Cleveland; the income derived therefrom to be used for the purposes of the said home during such period.’

The will further provides:

‘If and when the said corporation shall cease to exist under the said name, or shall cease to maintain a home as aforesaid under said name, I give and bequeath the principal of the said fund absolutely unto such persons as would, according to the statutes of the state of New York now in force, be my heirs at law, and in the same interests and proportion in which, according to said statutes, they would take any real estate situate in the said state of New York of which I had died seised.’

The A. M. McGregor Home is a charitable corporation, which was organized about eight years before the death of testatrix, and it is undisputed that legacies to it are exempted from and not subject to the provisions of our law imposing taxes upon transfers of property by will or intestate succession. Tax Law (Cons. Laws, c. 60) § 221. The legacies amount in the aggregate to the sum of $1,224,872.45, and, for the purposes of taxation, the courts below have found: That the possibility of reverter to the heirs at law of testatrix-nephews and nieces, or more remote relatives-is taxable on the cash value of $1,223,872.45, arrived at by deducting $1,000, exempt from the aggregate amount, and that the tax to which such transfer is liable is presently payable at the highest rate, pursuant to section 230 of the Tax Law, which, so fra as applicable, reads as follows:

‘When property is transferred in trust of otherwise, and the rights, interests or estates of the transferees are dependent upon contingencies or conditions whereby they may be wholly or in part created, defeated, extended or abridged, a tax shall be imposed upon said transfer at the highest rate which, on the happening of any of the said contingenices or conditions, would be possible under the provisions of this article, and such tax so imposed shall be due and payable forthwith by the executors or trustees out of the property transferred.’

That a tax is imposed upon all transfers immediately upon the death of the transferror, regardless of the fact that particular transfers may be of contingent estates in remainder, which might not ultimately be taxable (Matter of Zborowski, 213 N. Y. 109, 107 N. E. 44), and that the tax, amounting to $82,171.07, must be deducted from the amount payable to the McGregor Home. To accomplish this result the possibility of reverter to the heirs has thus been dealt with as a present contingent transfer of property to them and given the highest possible valuation, i. e., the full amount of the legacies, and the interest of the Home has been given the lowest possible valuation, i. e., nothing.

The executors contend: That the provisions of section 230 of the Tax Law above quoted have no application here; that they deal only with the rate of the tax where the valuation of the transfer of a future interest is certain and the transfer is contingent as to the persons to whom it goes. That the interest of the McGregor Home in such legacies should be valued at the amount to which it is entitled to immediate possession under the clause of section 230 which provides, ‘In estimating the value of any estate or interest in property, to the beneficial enjoymentor possession whereof there are persons or corporations presently entitled thereto, no allowance shall be made on account of any * * * contingency upon the happening of which the estate or property or some part thereof or interest therein might be abridged, defeated or diminished,’ and which provides also for the return of a proportionate amount of the tax if the present estate is in the future diminished. That the interest of the heirs therein under the terms of the will cannot now be valued, and is, therefore, not presently taxable, and, therefore, the provisions of section 222 of the Tax Law apply, which read as follows: ‘All taxes imposed by this article shall be due and payable at the time of the transfer, except as herein otherwise provided. Taxes upon the transfer of any estate, property or interest therein limited, conditioned, dependent or determinable upon the happening of any contingency or future event by reason of which the fair market value thereof cannot be ascertained at the time of the transfer as herein provided, shall accure and become due and payable when the persons or corporations beneficially entitled thereto shall come into actual possession or enjoyment thereof.’ That this provision alone has to do with the valuation of such future contingent interests as cannot be taxed at any rate until the fair market value thereof can be ascertained.

[1][2][3] This contention of the executors must be sustained, so far as it exempts the contingent interest of the heirs from present taxation. The Tax Law must be given a meaning whereby, if possible, all its provisions are read together and made effective. Such construction presents no unsurmountable difficulties when we consider the further rule of construction that the Transfer Tax Law is to be construed favorably to the persons taxed (Matter of Vassar, 127 N. Y. 1, 12,27 N. E. 394;Matter of Cooley, 186 N. Y. 220, 227,78 N. E. 939,10 L. R. A. [N. S.] 1...