MacGregor v. Martin, 251.

• Decision Date: 21 May 1941
• Docket Number: No. 251.,251.
• Citation: 20 A.2d 427,126 N.J.L. 492
• Parties: MacGREGOR et al. v. MARTIN, State Tax Commissioner.
• Court: New Jersey Supreme Court

20 A.2d 427

126 N.J.L. 492

MacGREGOR et al.

v. MARTIN, State Tax Commissioner.

No. 251.

Supreme Court of New Jersey.

May 21, 1941.

Certiorari proceeding by Mary E. C. MacGregor and another, as executrices of the last will and testament of Emma F. Childs, deceased, against J. H. Thayer Martin, State Tax Commissioner, to review a decree of the Prerogative Court affirming a determination assessing transfer inheritance taxes on gifts.

Reversed and tax assessments set aside. Argued October term, 1940, before BROGAN, C. J., and PARKER and PERSKIE, JJ.

John H. Schmid, of New York City, for petitioners-prosecutrices.

David T. Wilentz, Atty. Gen. (Wm. A. Moore, Asst. Atty. Gen., of counsel), for respondent-defendant.

BROGAN, Chief Justice.

The writ in this cause was allowed to review a decree of the Prerogative Court which affirmed a determination of the State Tax Commissioner, assessing transfer inheritance taxes on certain inter vivos gifts made by Emma F. Childs to her two daughters. The donor, Emma F. Childs, died Dec. 25, 1936; she was the widow of Samuel S. Childs who died on March 17, 1925, leaving her his entire estate of approximately $1, 193,000. By April 1, 1926, the administration of the estate left by him had been completed and the account prepared in an informal manner by Mrs. Childs, who was the sole executrix and beneficiary under the will. The gifts under consideration were made at intervals, to wit, in 1926, 1932 and 1934. The donor was seventy-three years old at the time of her death and each gift was made more than two years before that event. The first of the gifts was made ten years before the donor's death; the last a matter of two years and eight days prior thereto. None therefore was made "within two years prior to the death of the grantor * * *" whereby it would be "deemed to have been made in contemplation of death." R.S. 54:34-1, N.J.S.A. 54:34-1. Consequently the burden is upon the taxing authority to establish that the gifts were made "in contemplation of death." Moore v. Martin, 125 N.J.L. 189, 14 A.2d 482, 483; In re Sacks' Estate, 101 N.J.Eq. 709, 712, 139 A. 53.

The transfers under consideration consisted chiefly of securities and a comparatively small value in real estate. The transfers fall into three classes, those made between Nov. 30, 1926, and Sept. 18, 1928; those made in March and June, 1932, and the final transfer of Dec. 17, 1934. The return filed with the Inheritance Tax Department by those administering the estate of Mrs. Childs listed these transfers as having been made without consideration, being gifts not made in contemplation of death. Proofs were taken at an examination conducted by Mr. William P. Seddon, an investigator of the Transfer Inheritance Tax Bureau. The testimony of the decedent's physician tended to prove that at and during the periods when the transfers were made from Mrs. Childs to her daughters there was "nothing in her physical condition that led her physician to consider early death even as a remote possibility," and the learned Vice-Ordinary so found. We concur in that finding; indeed such conclusion was hardly debatable.

Mrs. Mary MacGregor, a daughter and one of the donees, testified concerning these gifts. With regards to those of 1926 she said that her mother had received her father's entire estate, by will; that her father's will was made in 1900 when the witness was four and one-half years and her sister, the other donee, seven months old; that the mother felt it was the father's intention that what he possessed should be equally divided between the mother and daughters; that they were a "very close family and knew his wishes"; that they were "a family that talked things over"; that the nature of the division was left to the mother's discretion; that there was no agreement when the transfers were made to pay income to the mother or that the property should revert to the mother if the donee should predecease her; that no rights were reserved by the mother; that she, the witness, took no inventory to ascertain if she had received her full one-third share of her father's estate but that so far as she knew it was so divided at the time.

With regard to the 1932 transfers the witness said that they were made pending a tax on gifts about to be imposed by proposed Federal statute and that her mother wanted to make gifts to her two daughters at the time and advanced as a further reason for the gift that Mr. Raphael, her sister's husband, was planning to leave the firm with which he was associated and start an independent law practice. The mother, it appears, had a separate estate of her own, the amount of which this witness did not know. As a matter of fact, the mother had an independent estate of about $350,000.

The mother lived with the MacGregors and Mrs. MacGregor managed the household. The mother owned her own automobile, employed a chauffeur and bore the expense incident thereto; she made contribution to the daughter for household expenses for the things "she used." The other daughter, Mrs. Raphael, married in 1930 and lived elsewhere.

Lawrence MacGregor corroborated the testimony of the former witness, his wife. He, accustomed to such matters, effected the actual division of Samuel Childs' estate into the three parts. He testified that it was Mrs. Childs' desire to carry out the wishes of her deceased husband. He frankly admitted that after the gifts were made one result would be to "throw all three (Federal income tax) returns into lower income tax brackets * * *"; that the 1932 transfers were made to avoid impending gift taxes and that Mr. Raphael, the husband of the second daughter, was about to establish his own law practice. The 1934 transfers, partly in securities and partly in real estate, were made so that the MacGregors might have the farm land in Morris County, owned by Mrs. Childs, and the Raphaels a value equal thereto in securities, the former being desirous of owning a farm, the latter not; that the MacGregors considered currency inflation probable and desired to get "back to the land"; that in keeping with the donor's policy of equal treatment for her children Mrs. Raphael received her gift in securities.

The learned Vice-Ordinary held that these several gifts were made in contemplation of death, i.e., "that the controlling motive was the purpose and intent to make a final disposition of a material part of the donor's estate, by present gift in the place and stead of a testamentary disposition thereof" and sustained the tax commissioner that the transfers were so made and therefore taxable.

Like all general concepts, the phrase "in contemplation of death" is not capable of exclusive or precise definition. It is impossible to state a formula which will embrace transfers made "in contemplation of death" and exclude all others. The facts and circumstances of each transaction must be examined and appraised to detect the motive of the donor.

The phrase "in contemplation of death" is not to be considered in relation to the universal expectation that everyone knows that it is appointed that some time he will die. As our Federal Supreme Court said in the case of United States v. Wells, 283 U.S. 102, 51 S.Ct. 446, 451, 75 L.Ed. 867, "It must be a particular concern, giving rise to a definite motive. The provision is not confined to gifts causa mortis, which are made in anticipation of impending death, are revocable, and are defeated if the donor survives the apprehended peril. * * * The statutory description embraces gifts inter vivos, despite the fact that they are * * * irrevocable and indefeasible. * * * The dominant purpose [of the statute] is to reach substitutes for testamentary dispositions and thus to prevent the evasion of the estate tax. * * * As the transfer may otherwise have all the indicia of a valid gift inter vivos, the differentiating factor must be found in the transferor's motive. Death must be 'contemplated,' that is, the motive which induces the transfer must be of the sort which leads to testamentary disposition. * * * The words 'in contemplation of death' mean that the thought of death is the impelling cause of the transfer, and while the belief in the imminence of death may afford convincing evidence, the statute is not to be limited, and its purpose thwarted, by a rule...