Sec. 167. Real Estate Subject to Mortgage.

Where real estate is devised subject to mortgage, the interest or equity of the testator in the real estate only is to be considered as devised, and the executors have no right to deduct the amount of the mortgages from the value of the personal estate in settling the inheritance tax in New York.1

The testator at the date of his death owned equities in real estate subject to mortgages and directed by his will that these mortgages be paid out of his personal estate. The court holds that the personal estate should be appraised as it was at the testator's death, less debts and mortgages payable. The court holds that the estate must be appraised in the condition in which it was at the death of the testator.2

1In re Sutton, 3 N. Y. App. Div. 208, 38 N. Y. Suppl. 277, affirming 15 Misc. 659, 38 N. Y. Suppl. 102. In re Kene, 8 Misc. Rep. 102, 29 N. Y. Suppl. 1078. See, however, further, post, s. 353.

In re Offerman, 25 N. Y. App. Div. 94, 48 N. Y. Suppl. 993, following In re Sutton, 3 N. Y. App. Div. 208, 38 N. Y. Suppl. 277, and In re Livingston, 1 N. Y. App. Div. 568, 37 N. Y. Suppl. 463. In re De Graaf, 24 Misc. Rep. 147, 53 N. Y. Suppl. 591, 2 Gibbons 516. In re Livingston, 1 N. Y. App. Div. 568, 37 N. Y. Suppl. 463.

[Real estate of non-resident, see post, s. 197.]

Sec. 168. Share of Co-Tenant.-Liability for Improvements. Where the decedent was a co-tenant of land on which other cotenants had made improvements, and where each co-tenant presumed and knew what the others were doing, and the improvements

were made under such conditions that on partition the co-tenants would be entitled to allowance for the improvements, only the balance of the interest of the decedent should be taxed, notwithstanding the fact that no proceeding for contribution had been commenced, and notwithstanding the fact that it might be claimed that no contribution would ever be asked. Still this does not justify the taxation of property that the decedent did not own, which does not pass to the heirs at law as her property. In re Wood, 123 N. Y. Suppl. 574.

Sec. 169. Effect of Decree as to Title.

A decree of a district court passing upon a title to land involved in an agreement of compromise of a will is of no effect on the question of inheritance tax, as the state treasurer was not a party to that suit and was in no way interested therein.

Lacey v. State Treasurer, (Iowa, 1909,) 121 N. W. 179.

Sec. 170. Effect of Partition Proceedings.

The succession tax is not a tax upon land. The fact that partition proceedings were held under which the plaintiff's equitable interest in certain real estate was satisfied by an assignment to him of personal property, does not relieve him from the payment of a succession tax on his share of the estate, for the obvious reason that he received the full value of the real estate in other property assigned to him belonging to the same estate.

Scholey v. Rew, 90 U. S. (23 Wall.) 331, 349, 23 L. R. A. 99. See further, post, s. 186, n. 5.

Sec. 171. Delivery of Deed.

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Where the beneficial owner of land for whom another is holding the legal title as bailee directs the holder of the legal title to give the property to his son, and the holder of the title executes a deed, which he gives to his son, telling him to give it to the person named by the beneficial owner when he calls for it, this is a good delivery of the deed, and the land cannot be held for an inheritance tax from the estate of the beneficial owner, especially where the grantee under the deed had entered on the land and made improvements on the property.

Stinger v. Commonwealth, 26 Pa. St. (2 Casey) 422, 428.

Sec. 172. Leasehold Interests.

Leasehold interests under long leases made real estate by statute should be treated as real estate.

Perpetual leases on real estate in Japan are real estate. In re Vivanti, 138 N. Y. App. Div. 281, 122 N. Y. Suppl. 954, reversing 63 Misc. 618, 118 N. Y. Spupl. 680.

Where the estate is insolvent so that there is no inheritance or legacy for the heirs, no inheritance tax can be collected.

The plaintiff brought suit to recover the amount of the internal revenue tax he paid in 1872 to the United States collector, on the ground that he as lessee of the real estate was obliged to pay the tax to avoid eviction and that the payment inured to the benefit of the succession. The court holds that as the succession was insolvent there was no inheritance or legacy for the heirs and it was not liable to an internal revenue tax, and therefore no recovery could be had. Johnson v. Dunbar, 28 La. Ann. 271.

Sec. 174. Charge on Future Rents.

A legacy charged on the future rents and profits of land is still subject to tax as personal property.

Where a devise is made to a lineal descendant with the direction to her to pay two thousand dollars a year out of the rents and profits of the land devised, the words of the Pennsylvania act of 1887 are sufficient to cover this bequest although payable by the devisee of the land out of its future rent. Lea, 194 Pa. St. 524, 45 A. 337.

In re

Sec. 175. Claim against Estate of Another.

A claim against the estate of another is property subject to the inheritance tax.

In re Huber, 86 N. Y. App. Div. 458, 83 N. Y. Suppl. 769. In re RohanChabot, 167 N. Y. 280, 284, 60 N. E. 598.

Appraisal of claims, see post, s. 340.

Sec. 176. Gift on Condition Legacies Paid.

Where an estate is given to a widow on condition she pay legacies to collateral relatives, the gift to the collateral relatives is direct and is subject to the inheritance tax.

Nieman's Estate, 131 Pa. St. 346, 351, 18 A. 900.

Sec. 177. Fraudulent Conveyance.

Where a partner in a firm invested the profits with the firm and transferred this account to his wife to protect his wife from his creditors, on the death of the wife a transfer tax should be levied on the property.1

The executor claimed that certain property had been given to one of the heirs under the will, and the heir also claimed the gift, and the surrogate in a proceeding to assess the tax failed to assess this property on the theory that it had been given to the heir. Subsequently, in a contest between the heirs, it was determined that this gift was fraudulent and void and the court then decided that as it now appeared that the property was transferred by the will of the testator and not by gift, it became taxable under the statute.2

1 In re Anthony, 40 Misc. Rep. 497, 82 N. Y. Suppl. 789.

2 In re Lansing, 31 Misc. Rep. 148, 64 N. Y. Suppl. 1125.

The good will of a firm is taxable under the transfer tax,1 and so where a business was conducted and carried on by an administratrix in the name of the decedent, the good will of the business is an asset in her hands, and as such it is taxable.2

1 In re Dun, 40 Misc. Rep. 509, 82 N. Y. Suppl. 802, reversing 39 Misc. 616, 80 N. Y. Suppl. 657.

See further, post, s. 341.

2 In re Keahon, 60 Misc. 508, 113 N. Y. Suppl. 926.