Schneider v. Zink.

• Decision Date: 23 March 1949
• Docket Number: No. A-60.,A-60.
• Citation: 64 A.2d 612
• Parties: SCHNEIDER v. ZINK.
• Court: New Jersey Superior Court

64 A.2d 612

SCHNEIDER

v.ZINK.

No. A-60.

Superior Court of New Jersey, Appellate Division, Part A.

March 23, 1949.

Appeal from Determination of Department of Taxation and Finance, Division of Taxation.

Action by Anne Schneider, executrix of the last will of Samuel Schneider, deceased, against Homer C. Zink, Commissioner, acting as Director, Division of Taxation, Department of Taxation and Finance, to review a determination of the defendant assessing a transfer inheritance tax against certain inter vivos transfers made by the deceased, and increasing the value of the deceased's partnership interest bequeathed to the plaintiff by adding thereto a value of good will as an asset of the partnership. From an adverse judgment, the plaintiff appeals.

Judgment affirmed.

Before JACOBS, Senior Judge, and EASTWOOD and BIGELOW, JJ.

Leo M. Rogers, of Ridgewood, and Samuel J. Foosaner, of Newark, for plaintiff-appellant.

William A. Moore of Trenton, and Theodore D. Parsons, Atty. Gen., for defendant-respondent.

EASTWOOD, Judge.

This is an appeal from a determination of the Director, Division of Taxation, Department of Taxation and Finance (hereinafter referred to as Director), (1) assessing a transfer inheritance tax against certain inter vivos transfers made by the decedent and (2) increasing the value of the decedent's partnership interest in Schneider Mills, bequeathed to his widow, Anne Schneider, by adding thereto a value of “good will” as an asset of said partnership business.

Decedent, Samuel Schneider, died testate on May 29, 1944. Under the terms of his will, decedent bequeathed $5,000 to each of his children, Isadore, Albert and Martha, and his residuary estate to his wife, Anne Schneider, who survived him. Appellant filed a transfer inheritance tax report, indicating a net taxable estate of $78,659.33. The Director computed the net taxable estate to be the sum of $499,602.91. The increase is represented by (1) the Director's determination that the transfers by the decedent to his sons Isadore and Albert Schneider, on January 3, 1941, of a one-twelfth interest and a one-third interest respectively in Schneider Silk Mills, and the transfer of a one-twelfth interest in the Mills to Anne Schneider, on January 3, 1942, were made in contemplation of death and (2) a determination by the Director that one of the assets of Schneider Silk Mills was “good will”, and that it had a value of $328,495.32. The Director's valuation of the good will increased the taxable value of the business of Schneider Silk Mills to $650,179.04.

The inter vivos gifts in question were made more than two years prior to the death of decedent and hence no presumption arises under the statute that they were made in contemplation of death. The Director concedes that he must, therefore, assume the burden of establishing that the transfers were made in contemplation of death. Appellant contends that the transfers were not in contemplation of death, but were complete and unconditional when made and are, therefore, not within the purview of R.S. 54:34-1, subd. c, N.J.S.A. The Director argues that appellant's contention conflicts with the evidence and the reasonable inferences to be drawn therefrom; that a logical and reasonable appraisal of the facts and circumstances here under consideration supports the Director's determination, to wit: that the transfers were in contemplation of death and motivated by decedent's intent to make such transfers in possession and enjoyment after his death.

To determine whether the decedent made the transfers in contemplation of death makes necessary an inquiry into the decedent's state of mind as evidenced by his actions and the facts and circumstances surrounding the transfers. The transfers not having been made within the prescribed period, “Therefore, no artificial statutory presumption arises that they were made in contemplation of death. However, a transfer is not necessarily to be regarded as free from the tax merely because it was accomplished beyond the specified period. The legality of the tax levy in either circumstance must be determined in view of the peculiar facts of the given case.” Squier v. Martin, Prerog. 1942, 131 N.J.Eq. 263, 24 A.2d 865, 871. The decedent was the sole owner of Schneider Silk Mills at the time of the transfers. His wife, the appellant, contends that she was possessed of a half interest therein, but the testimony to that effect is not persuasive. At the time of the transfers, decedent was approximately fifty-one years of age and died at the age of fifty-four years. The only testimony as to his state of health at the time of the transfers was furnished by members of his family, who testified that he enjoyed good health and continued to do so until December, 1943, when he relaxed his business activities under directions of his doctor to “slow up and take it easy”. The cause of his death was acute myocarditis. The Schneider Silk Mills represented practically all of decedent's assets and the transfers constituted approximately two-thirds thereof. Appellant contends that the motivating reason for making the transfers was to persuade their son, Albert, to undertake a course in “textiles” at a southern college so that he might qualify himself for active participation in the business; that Albert was disinclined to do so, but finally consented to follow his father's counsel when it was proposed that the father form a partnership and make a gift of a one-third interest therein to Albert. This was accomplished in January, 1941, by decedent transferring a one-twelfth share to his son Isadore, and one-third to Albert. Albert's share was held in the name of decedent as trustee, because of Albert's minority. Subsequent to the formation of the partnership, Mrs. Schneider testified that she began thinking about the new partnership arrangement, reaching the conclusion that she should have had an equal share therein. As a consequence of her demand, a formal partnership agreement was executed on January 3, 1942, and Mrs. Schneider was admitted on an equal basis with her husband and two sons. Decedent transferred one-twelfth of his interest in the partnership business to his wife, recaptured a one-twelfth share previously given to his eldest son, Isadore, and arbitrarily reduced the share held in trust for...