Слике страница
PDF
ePub

the state cannot tax the property of the United States. Assuming this legacy vested in the United States at the moment of testator's death, yet in contemplation of law the tax was fixed on the succession at the same instant of time. This is not a tax imposed by the state on the property of the United States. The property that vests in the United States under this will is the net amount of its legacy after the succession tax is paid." Per Bartlett, J., in In re Merriam, 141 N. Y. 479, 484, 36 N. E. 505.

N. Y. St. 1885, c. 483, as amended by St. 1891, c. 215, exempted from the inheritance tax societies, corporations and institutions now exempted by law from taxation, and the court holds that the United States is not a corporation exempt by law from taxation. It is a settled doctrine of New York that exemption from taxation is granted only to domestic corporations and this doctrine is applied to their inheritance tax law in the Matter of Prime, 136 N. Y. 347. The legislature intended to allow an exemption only in favor of such corporations as it had itself created and which might reasonably be supposed to be the special objects of its solicitude and bounty. We think it was not intended to apply the exemption to a purely political or governmental corporation like the United States. United States v. Perkins, 163 U. S. 625, 16 Sup. Ct. 1073, 41 L. Ed. 287, affirming In re Merriam, 141 N. Y. 479, 36 N. E. 505.

Sec. 264. Government Bonds.

Under the prevailing theory that the inheritance tax is a burden on the succession and not on the property the tax may be levied, although the funds of the estate may be invested in government bonds of various kinds. Thus United States bonds may be taxable under a state tax, or under the federal tax.2 State and municipal bonds are also taxable under state law. Such taxation does not constitute a breach of the obligation of the contract of exemption in the bonds under the federal constitution.*

1In re Howard, 5 Dem. Surr. (N. Y.) 483. In re Carver, 4 Misc. Rep. 592, 25 N. Y. Suppl. 991. In re Sherman, 153 N. Y. 1, 4, 46 N. E. 1032, affirming 15 N. Y. App. Div. 628. Strode v. Commonwealth, 52 Pa. St. 181. Clymer v. Commonwealth, 52 Pa. St. 181, 186. Plummer v. Coler, 178 U. S. 115. Succession of Levy, 115 La. 378, 39 S. 37, affirmed Cahen v. Brewster, 203 U. S. 552, 27 S. Ct. 174, 51 L. Ed. 310, following the case of Plummer v. Coler, 178 U. S. 115, 20 S. Ct. 829, 44 L. Ed. 998. Wallace v. Myers, 38 Fed. 184, 4 L. R. A. 171.

The court after an exhaustive review of the state and federal authorities concludes as follows: "We think the conclusion, fairly to be drawn from the state and federal cases, is, that the right to take property by will or descent is derived from and regulated by municipal law; that, in assessing a tax upon such right or privilege, the state may lawfully measure or fix the amount of the tax by referring to the value of the property passing; and that the incidental fact that such property is composed, in whole or in part, of federal securities, does not invalidate the tax or the law under which it is imposed." The court discusses the question of the evils resulting from a state tax on the transfer of United States securities and finds that those evils are insignificant. The court

finds that the tax is not upon the United States but upon the right to transmit the securities, and should be paid, as the charges of administration are paid out of the securities. Plummer v. Coler, 178 U. S. 115, 138.

"The mistake of the learned counsel for the plaintiff in error consists, we conceive, in treating this as a tax of the government bonds, when it is really a tax upon a decedent's estate, dying without lineal heirs. And it does not help the argument, that the bulk of the estate is made up of these bonds; for that estate passed into the hands of the executor for administration, and is taxed in his hands as an estate. The law takes every decedent's estate into custody, and administers it for the benefit of creditors, legatees, devisees and heirs, and delivers the residue that remains, after discharging all obligations, to the distributees entitled to receive it. One of the legal obligations to which every estate that is to go to collateral kindred is subject, is this five per cent duty to the commonwealth. And it is not until this work of administration is performed, that the right of succession attaches. The distributees may, indeed, consent to accept certain goods and chattels in specie without conversion, as is frequently done in settlement of estates; but such arrangement in no case affects the theory of the law, that the estate is first to be administered and then enjoyed. Now this five per cent tax is one of the conditions of administration, and to deny the right of the state to impose it, is to deny the right of the state to regulate the administration of decedents' goods. If an estate consist wholly of federal bonds and is indebted, conversion of them into money is necessary to pay the debts; and nobody would doubt that the sum that remained after payment of debts would be subject to a deduction of five per cent for the use of the state. But suppose the federal bonds be used to pay the only indebtedness that exists, and a residue of estate remains for distributees, is it not to pay the collateral inheritance tax? Clearly it must, though it may be less than the aggregate of the bonds. The act operates on the residue of the estate after paying debts and charges, and, theoretically, that residue is always a balance in money. The administration account always exhibits a balance in cash, not in specific goods, whether bonds or horses; and though an heir may take bonds or horses as cash, the account must show, and always does show, a cash balance. That is the fund taxed by this law, and not the bonds or other chattels which may have produced the fund. Therefore, neither the prohibitory clause of the Act of Congress of 1862, nor any of the principles of decision against state authority to tax that which federal authority has exempted from taxation, have any application here. The federal government has not prohibited the states from prescribing rules of inheritance and succession to estates of decedents, and it would be a grevious mistake of legislative and judicial authority to apply it with such effect." Per Woodward, C. J., in Strode v. Commonwealth, 52 Pa. St. 181 (2 P. F. Smith).

The New York statute of 1892 did not include government bonds as its language confined it to property over which the state has jurisdiction for purposes of taxation. In re Purdy, 24 Misc. Rep. 301, 53 N. Y. Suppl. 735, 2 Gibbons 527. In re Coogan, 27 Misc. Rep. 563, 59 N. Y. Suppl. 111. In re Sherman, 153 N. Y. 1, 5, 46 N. E. 1032, affirming 15 N. Y. App. Div. 628.

"The exempting clauses in the statutes and on the face of the bonds do not mean that a state or the United States may not tax inheritances and legacies, regardless of the character of the property of which they are composed. "That some of the holders of United States bonds may have paid franchise taxes to the

states, and others may have paid state or federal inheritance and legacy taxes, has nothing to do with the contract between the United States and the bondholders. The United States will have complied with their contract when they pay to the original holders of their bonds, or to their assigns, the interest when due, in full, and the principal, when due, in full." Per Shiras, J., in Murdock v. Ward, 178 U. S. 139, 148, 20 S. Ct. 775, 44 L. Ed. 1009.

3 Succession of Kohn, 115 La. Ann. 71, 38 S. 898. In re Dows, 167 N. Y. 227, 60 N. E. 439, 52 L. R. A. 433, 88 Am. St. Rep. 508, affirming 60 N. Y. App. Div. 630 (affirmed sub nomine, Orr v. Gilman, 183 U. S. 278, 22 S. Ct. 213, 46 L. Ed. 196).

Orr v. Gilman, 183 U. S. 278, 22 S. Ct. 213, 46 L. Ed. 196.

Sec. 265. Municipal Corporations or Public Institutions. The tax may be imposed on gifts for public purposes. The inheritance tax is not levied upon the fund but upon its transmission, and hence the argument that it is against the policy of the law to levy a tax upon a fund devised for a public school has no bearing upon the case at bar, for the reason that this fund does not become a fund devoted to the maintenance of a school until the law relative to its transmission has been complied with. The tax must be paid before the fund in question can become the property of the school or be devoted to educational purposes,1 though an exemption may be implied to gifts to public institutions 2 or municipal corporations.3

1Leavell v. Arnold, 131 Ky. 426, 115 S. W. 232.

2 In re Harris, 38 Ohio Wkly. L. Bul. 281 (Smithsonian Institute).

An implied exemption from taxation under Col. St. 1902, c. 3, should be allowed to state institutions, as laying a tax upon them would in the end produce no net revenue. And bequests to a state and county for a hospital and to the regent of the state university for an auditorium are not subject to the state inheritance tax. In re Macky, 46 Colo. 79, 102 P. 1075.

Under N. Y. St. 1887, c. 713, s. 1, the exemption of "societies, corporations and institutions now exempted by law from taxation," was not intended to apply to bequests to municipal corporations. The property of municipal corporations are never included in the terms of any law providing for the imposition of a tax, not because it is exempt, but for the reason that in the nature of things it never was and never can be taxable, as this would be a tax by the government upon itself and utterly useless. Exemption implies that the person or corporation to which it applies is or would otherwise be taxable. To include public property which is not and in the nature of things cannot be taxable at all within the terms of an exemption act, would be to do a vain and useless thing which cannot be imputed to the legislature. There is no sound distinction between this case and that of a bequest to the United States in which we held that the gift was subject to the tax. In re Hamilton, 148 N. Y. 310, 314, 42 N. E. 717, affirming 90 Hun 608. See In re Thrall, 157 N. Y. 46, 51 N. E. 413, holding that as the

§§ 266-267.] EXEMPTIONS FOR GOVERNMENTAL PURPOSES.

215

property of a municipal corporation was exempt a bequest to a municipal corporation for a public library is exempt.

Sec. 266. To Town in another State.

The testator made a bequest to a town in New Hampshire of the residue of her property as a perpetual fund in trust, the income to be expended in aid of the worthy poor of American parentage residents of the town. The testator died November 23, 1908, and the court holds that the Massachusetts statute of 1909, c. 527, section 1, providing that the exemption of gifts to charitable purposes shall be an exemption of gifts to "charities to be carried out within this commonwealth," and that the exemption of bequests to a "state or town for public purposes" shall be an exemption to "a city or town within this commonwealth for public purposes," is merely declaratory of previous statutes. The court notes that the charitable exemption has always been confined in Massachusetts to towns of Massachusetts and finds in the history of the statutes which it discusses no reason to think that this policy had ever been altered.

Davis v. Stevens, 208 Mass. 343, 94 N. E. 556.

Sec. 267. Fund in Hands of Court in Trust.

A bequest in trust for charitable purpose is not exempt simply because it is in the hands of the court.

The court reverses the order of the surrogate to the effect that where a devise in trust for the purpose of founding a home for the aged was made, the trust to last during two lives only, the fund after the end of the trust was in the hands of the supreme court and therefore exempt from taxation. The appellate division remarks that the fund is not a gift to the state and does not become the property of the state; that the omission of the testator to supply a trustee after the two lives is supplied by the legislative intervention, but that does not alter the character of the gift, nor give any control over it for any purpose beyond that outlined by the will. Knight v. Stevens, 72 N. Y. Suppl. 815, reversing In re Graves, 70 N. Y. Suppl. 727.

[blocks in formation]

An almshouse may be any home which is absolutely free.

Institutions to be exempt as an almshouse must be absolutely free and all benefits must be given gratuitously. In re Vanderbilt, 10 N. Y. Suppl. 239, 2 Con. Surr. 319.

An institution for the blind which does not receive pay from patients under any circumstances is exempt as an almshouse. In re Underhill, 20 N. Y. Suppl. 134, 2 Con. Surr. 262.

Sec. 269. Art Museum.

An art museum may be subject to tax,1 or may be exempt as an educational institution.2

1In re Vanderbilt, 10 N. Y. Suppl. 239, 2 Con. Surr. 319. In re Wolfe, 15 N. Y. Suppl. 539, 2 Con. Surr. 600, reversed, 137 N. Y. 205.

« ПретходнаНастави »