Plum v. Martin
| Decision Date | 03 June 1942 |
| Docket Number | No. 6421.,6421. |
| Citation | 132 N.J.Eq. 1,26 A.2d 529 |
| Parties | PLUM v. MARTIN, State Tax Commissioner. In re HAY'S ESTATE. |
| Court | New Jersey Supreme Court |
Syllabus by the Court.
1. Where inter vivos transfers are made more than two years prior to the death of the transferor, the burden is upon the taxing authority to prove that the transfers were made "in contemplation of death."
2. Evidence examined; held, that the taxing authority failed to prove that the inter vivos transfers in question were made in lieu of testamentary dispositions.
3. Lacking satisfactory evidence of current market value, the Commissioner was justified in utilizing book or asset value in determining the value of shares of stock of a close corporation.
Proceeding in the matter of the Transfer Inheritance Tax in the estate of Mary Gaddis Hay, deceased. From a decision of the taxing department holding that certain gifts made by the deceased during her lifetime were in lieu of testamentary disposition and therefore taxable, Matthias Plum, executor of the last will and testament of Mary Gaddis Hay, deceased, opposed by J. H. Thayer Martin, State Tax Commissioner, appeals.
Decree advised in conformity with opinion.
Thornton C. Land, of Newark, for appellant.
David T. Wilentz, Atty. Gen., and William A. Moore, Asst. Atty. Gen., for respondent.
JAYNE, Vice Ordinary.
The demise of Mary Gaddis Hay, a resident of Rumson, Monmouth County, New Jersey, occurred on January 6, 1940. She had predetermined a testamentary disposition of her estate and had nominated her representatives who, in conformity with the existing law, apprised the Transfer Inheritance Tax Bureau of the assets to be administered, her inter vivos transfers and the testamentary successions. None of the inter vivos transfers was represented by the executors to have been made by the decedent in contemplation of death. The usual inquiry by a special investigator ensued. Evidence of the pertinent factual circumstances was adduced, succeeded by a laconic report of the investigator in an epistolary style that by reason of the age of the donor (she was then 64 years of age) and the aggregate amount of the gifts, the transfers were in lieu of testamentary disposition and therefore taxable.
Concurring in the conclusion, if not in the reasons, expressed by the investigator, the taxing department incorporated the inter vivos transfers in the taxable estate. The executors challenge the propriety of these assessments and in the prosecution of this appeal they project two problems for decision: (1) Were the inter vivos transfers made by decedent in contemplation of death (N.J.S.A. 54:34-1, subd. c.); (2) were certain shares of corporate capital stock justly appraised?
The determinant of the taxability of an inter vivos transfer as one made in contemplation of death is the intent and purpose of the transferor and the relevant factual circumstances of each case must be studied to justly determine whether the transfer was made as a substitute for testamentary disposition. The age of the donor and the substance of the transfer must not be allowed to entirely conceal the surrounding circumstances which may, perhaps, reveal the motivating cause of the transfer.
The uncontroverted evidence in the present proceeding from which a decision must be derived discloses that the decedent was once the wife of Matthias Plum, Sr. The marriage was procreant of three children. Mr. Plum possessed an estate of approximately $600,000 and his occupation yielded a substantial annual income. His wife, the decedent, enjoyed even greater resources which she had inherited from her parents. Somewhat prematurely in his life, Mr. Plum executed his last will in which he bequeathed his entire estate to his wife. This testament antedated the birth of his third child.
In 1926 and 1927 Mr. Plum and his wife conversed in the presence of their children about the advisable disposition of their respective estates. The continued security of the household and the welfare of the children were subjects of superior solicitude. It was the concurrent desire that the estate of each parent should pass to the children. Mr. Plum, however, appreciated the expense entailed in the maintenance of the Rumson homestead and alluded to the uncertainty of future investment returns. He believed it to be expedient for him to leave his will unchanged, supplemented by an informal understanding with his wife that she would distribute his estate among the children whenever her own financial position in the existing conditions seemed secure. Mr. Plum died suddenly in January, 1928.
An event then occurred to which considerable significance must be ascribed in evaluating the credibility of the evidence in the present proceeding. It was previously observed that Mr. Plum executed his will prior to the birth of his youngest son, Matthias, Jr., and having failed therein to make provision for him or expressly disinherit him, this son became entitled to a two-ninths share of his father's estate. This interest was valued in excess of $125,000. In recognition of the expedient proposed by his father and in furtherance of the understanding between his parents, Matthias, Jr., transferred and assigned this distributive share of his father's estate to his mother.
Mr. Plum was a generous parent and he bestowed on each of his three children an annual monetary allowance of about $6,000. His wife perpetuated this practice. She retained the country estate for the continued comfort and enjoyment of the family.
In 1932, Mrs. Plum contemplated accepting the proposal of marriage of Mr. John Lewis Hay, a widower, who had been a friend of the family for many years. Mr. Hay possessed a substantial estate of his own. He was the father of four children by his former marriage. An ante-nuptial contract between Mrs. Plum and Mr. Hay reserved their estates to their respective families. It is said that upon her remarriage, the decedent considered it then opportune to distribute the estate of her former husband among her three children. Matthias, Jr.,...
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