Estate of Clark — 22 N.Y. St. Rep. 354

Majority

p. 354

Estate of Mary C. Clark.

(Surrogate’s Court, New York County,

Filed March 4, 1889.)

Headnote

1. Collateral inheritance tax—Laws of 1885, chap. 483—Duty of appraiser.

It is the duty of the appraiser appointed to appraise the value of a contingent estate, under chapter 483 of the act of 1885, to report the fair market value of the contingent interests at the time of the death of the testator, and'also to report that in view of the contingent character of the bequests, he-could not report the remainder as presently taxable.

3. Same—Annuities to persons not liable to tax with remainder over-.

TO PERSONS WHO ARE LIABLE—WHEN ESTATE LIABLE TO PAY.

Where a testator directs the payment of certain annuities to persons who-are not liable to the collateral inheritance tax imposed by the act of 1885,. with bequests over of the remainder to persons who are liable to such tax,, the estate is not liable to pay the tax until the contingency happens, and the estate passes to those who are liable to the tax. The tax is not imposed-upon the estate, but only upon so much of it as possess, and not until it, •■does pass, to the persons whose interests are subject to the tax.

p. 355

John M. Knox, for executor; District Attorney, for the comptroller.

—The question here is, has the appraiser erred in reporting the value of the contingent annuities, under ■chapter 483 of the Laws of 1885 ? If not, should he have further reported them as now subject to taxation ?

Counsel for executors contends that it is impossible to fix the value of the contingent annuities until the death of the present living annuitants (who are not subject to the tax) should happen.

It is contended on the other hand that when the amount can be ascertained, the surrogate must assess and fix the tax, even though the person who is interested in the contingent estate may never come into the actual possession or enjoyment of such property; that this proceeding is a proceeding in rem, and consequently follows the property.

To make the tax accurate at. once, two things are necessary, first, to determine definitely the fair market value of the property subject to the tax; and, second, the person to whom such property passes.

The first proposition can be ascertained with sufficient accuracy for the purposes of taxation, but the second cannot be definitely determined until the death of the life tenant.

“The tax is not imposed upon the estate of which she was seized or possessed, but only upon so much of it as passes to certain persons; not all persons or any person. * * * There are many other provisions of the act requiring the same construction, and tending to show that in the matter of taxation it is simply the ‘estate ’ or share of the beneficiary acquired through the will or statute of distributions, which is to be valued and the duty estimated according to its value.” Matter of Howe, 20 N. Y. State Rep., 477,

The duty of the appraiser to report the value of these ■contingent annuities is settled by the court of appeals in the Matter of Cager (19 N. Y. State Rep., 500). Ruger, C. J.: “When the present value of the property which is ■devised to one with a limitation over to others upon the happening of some event which may or may not occur can be ascertained, then ground upon which an approximate estimate of the value of the ultimate devise appears, and it may be made. ”

Nothing is said about the assessment or payment of the tax, although the court said that contingent estates might be appraised if their value could be ascertained. The question is, can the tax be assessed and fixed? The executor -cannot diminish the funds which produce the annuities.

p. 356

The contingent annuitants cannot be required to pay forsomething they may never receive. The act does not say that where property is left to “A,” an exempted person for life, with a contingent life estate to “B,” that “A” shall be taxed to pay for “B’s” prospective enjoyment, even though “B” may never enjoy it. The act expressly exempts certain persons, and taxes others, and it cannot be rightly held that where property was left for life to an exempt person, and after his death, for life to one not exempt, should she survive, that, in that event the corpus of the estate which is exempt, should be diminished by the amount of the tax upon the happening of an event which would not make the-life tenant liable to the tax, whether it did or did not happen, and which, if the contingency should fail, might throw the estate back to persons who were exempt.

Neither the first estate nor the last should be taxed for the contingent second estate. It must be that, in cases-such as this, where it is absolutely impossible to decide to whom the property will go, the intention is that the appraiser shall report the fair market value of the property at decedent’s death, and that the matter must be regarded as suspended until the contingency does or does not happen, at which time, that is, at the death of the life tenant, it can be determined to whom the property will pass, and whether or not it is subject to the tax. The appraiser was right in reporting the fair market value of the contingent interests at the date of the death of decedent, and in further reporting that in view of the contingent character of the bequests,, he could not report the remainder as presently taxable.

An order should be handed up confirming the report of the appraiser, and assessing and. fixing the tax upon the interests reported as now subject to the tax, and reserving: these contingent interests for future action.