Limitations, to 5-Per Cent. Class.

§§ 220, 221

relationship commenced, or to any lineal descendant of such decedent, grantor, donor, or vendor, born in lawful wedlock, such transfer to those named shall not be taxable under this act, if the property, or any beneficial interest therein transferred, is less than $10,000; if the property is of the value of $10,000 or over, the transfers are then taxable at 1 per cent.

286. Limitations

To the 5-Per Cent. Class.

Any transfer to a transferee other than those mentioned in section 221 necessarily come under the provisions of section 220, which provides that an estate of $500, or over, is taxable at 5 per cent., except as otherwise prescribed in section 221. In proceedings to assess the transfer tax upon the estate of Herman M. Peck, late of New York county, deceased (Surr. Dec. 1905, p. 464), an appeal was taken June 23, 1905, from the order of the surrogate assessing the transfer tax upon said estate, upon the ground that the tax should have been assessed at 1 per cent., instead of 5 per cent., as the beneficiary was the grandmother of the decedent and should be classed among the persons named in the first sentence of section 221.

The surrogate held that the bequest to the grandmother was taxable at 5 per cent., upon the ground that the enumeration in the statute of certain classes as taxable at 1 per cent. excluded from that rate of taxation all those not specifically mentioned.

The same question arose upon the appeal in the Estate of Bertha Katz, N. Y. Law Journal, June 29, 1908, and Surrogate Beckett, after referring to the opinion of the Court of Appeals in the Matter of Cook, 187 N. Y. 255, defining a lineal descendant as one who is in the line of descent from a certain person,"

66

§§ 220, 221

When Next of Kin Are Unknown.

and further defined the line of descent as "the course that property takes according to law when the owner dies," says: "The decisions are not very clear as to the exact status of grandparents with reference to their right to inherit from their grandchildren, but in Bogart v. Furmen, 10 Paige, 496, it was held that the grandmother was to be preferred to uncles and aunts, and in Hurtin v. Proil, 3 Bradford, 414, the court said that a brother is to be preferred to a grandfather, and the latter to nephews and nieces. It would appear, therefore, that the term 'lineal descendant,' as mentioned in section 221 of the Tax Law, does not embrace within its signification a person standing in the relationship of grandparent to decedent."

In the appraisal of the estate of Otto Lind it appeared that he was a native of Sweden, but inquiry failed to disclose any knowledge of his family or next of kin. The surrogate of New York county, after reciting that the property was in the hands of the public administrator and that the next of kin of the deceased were unknown, ordered that the taxation of the shares of the persons entitled to the decedent's estate should be suspended until such time as the next of kin were ascertained. The Comptroller appealed, and the Appellate Division of the First Department reversed the order of the surrogate, holding that the presumption is that the decedent left next of kin, but there is no presumption that he left a widow or descendents; that it is presumed therefore that the property vested in the next of kin of the deceased, and is taxable under section 220 of the Tax Law, and as it does not appear that it is exempt under section 221 of the Tax Law, the tax imposed by subdivision 6 (now subd. 7) of section 220 applies, and it is taxable at the rate of 5 per cent. Matter of Lind, 131 App. Div. —.

Agreement by Heirs to Distribute Estate.

8 221

287. Agreement between the Heirs as to Distribution of Estate Does Not Affect the Rate of Taxation.

An agreement as to the division of a decedent's estate, made upon the discontinuance of the contest as to the probate of the will, in so far as it makes a change in the rights of the parties, does not affect the rate of tax on the transfers from the testator to the various legatees, the imposition of the tax on the transfers from the testator being determined without prejudice to the rights of the parties claiming under the agreement as between each other. Matter of Cook, 187 N. Y. 253; Matter of Blake, N. Y. Law Journal, March 5, 1909, Surrogate Thomas.

288. Taxable Persons.

The term "taxable persons" includes both those in the 1-per cent. and the 5-per cent. classes, and such persons are not "specifically exempted" the same as a bishop or a religious corporation (Matter of Corbett, 171 N. Y. 516), for the reason that if the estate had been sufficiently large to equal or exceed the limitations, the legacy or share passing to each class respectively are liable to taxation, while a legacy to a bishop or a religious corporation is not taxable, no matter how large the estate may be. Matter of Garland, 88 App. Div. 380, 84 N. Y. S. 630; Matter of

McMurray, 96 App. Div. 129, 89 N. Y. S. 71; Matter of Corbett, (supra); Matter of Costello, 189 N. Y. 288.

289. The Value of the Whole Estate Transferred to Taxable Persons Determines the Liability of Each Transfer to Taxation.

Prior to the Act of 1892, the amount of each legacy, distributive share, or other interest was considered

§ 221

Value of Whole Estate Determines Taxability.

separately for the purpose of determining whether the taxable limitation was equaled or exceeded, and the word "estate" was held to refer to the estate passing to the beneficiary, and not the aggregate estate of the decedent. Matter of Cager, 111 N. Y. 343; Matter of Howe, 112 N. Y. 100; Matter of Westurn, 152 N. Y. 93-99.

By section 22 of the Act of 1892 the words "estate" and "property were defined (substantially the same as in section 242 of the Act of 1905) to mean the property or interest therein of the testator intestate, grantor, bargainor, or vendor, passing or transferred to those not herein specifically exempted from the provisions of the act, and not as the property or interest therein passing or transferred to individual legatees, devisees, etc., and the Court of Appeals, in the Matter of Hoffman, 143 N. Y. 327, in construing the provi sions of this section, held that it was the aggregate amount of the estate passing to taxable persons and not the share of any particular legatee or distributee which determines the liability to, or exemption from, the tax, although the fact remains that the amount of tax is determined by reference to the value of each legacy or distributive share and not by reference alone to the decedent's aggregate estate. In the Matter of Bliss, 6 App. Div. 192, 39 N. Y. S. 875, the court held that, where a testator leaves an estate of $829.16, giving $414.58 to his sister and $207.29 to each of two nephews, the legacies to the nephews are not taxable, as the legacy to the sister (being less than $10,000) is "specifically exempted" within the meaning of the statute, and the amount passing to the two nephews was less than $500.

Where Estate Is Over $10,000.

§ 221

290. Where Net Estate Is $10,000 or Over, Transfers to Both the 1-Per Cent. and 5-Per Cent. Class Are Taxable. In the Matter of Corbett, 171 N. Y. 516, the Court of Appeals, following the Matter of Hoffman (supra), held that it was the intent of the Legislature to provide that all of the testator's property, passing to those not specifically exempted from taxation, is to be included in determining whether the amount of the personal estate passing is of the value of $10,000; that the statute only "specifically exempted" a bishop or religious corporation (at that time) from the provisions of the act, and that where a brother and sister are each entitled to one-third of an estate valued at $11,880.69, and two nieces are each entitled to the remaining one-third, that the portion thereof passing to the brother and sister is taxable at 1 per cent., although when considered alone the amount passing to the 1-per cent. class was less than the $10,000 limitation. The effect of this decision was to overrule the Matter of Bliss (supra), and establish that both the 1-per cent. and the 5-per cent. class are "taxable persons," and that where the aggregate amount transferred to both classes of taxable persons was over $500 but less than $10,000, the portion thereof passing to those in the 5per cent. class is taxable. See Matter of Rosendahl, 40 Misc. Rep. 542, 82 N. Y. S. 992; Matter of Garland, 88 App. Div. 380, 84 N. Y. S. 630; Matter of McMurray, 96 App. Div. 129, 89 N. Y. S. 71 (overruling Matter of Conklin, 39 Misc. Rep. 771, 80 N. Y. S. 1124, and affirming an earlier decision on this same question, Matter of Hall, 88 Hun, 68, 34 N. Y. S. 616); Matter of Mock, 113 App. Div. 913, reversing same case, 49 Misc. Rep. 283, on the authority of Matter of Corbett, 171 N. Y. 516.