In Re Burtman Estate

Johnston, J. “All property within the jurisdiction of the state . . . belonging to domiciliarles of the state . . . which shall pass by will, or by the laws regulating intestate succession ... to any person . . . except . . . the . . . wife . . . shall be subject to a tax.” R. L., c. 87, s. 1, as amended by Laws 1945, c. 3, s. 1, and c. 144, s. 1. The State claims that under this statute it acted correctly in assessing a tax on the residue of the estate before any deduction caused by the compromise agreement. The weight of authority supports this position, although the authorities are not unanimous. In Kidder, State Inheritance Tax and Taxability of Trusts, p. 28 it is stated: “The question arises as to whether the several successions shall be taxed as provided in the will, or as provided for in the compromise agreement. This question has been litigated in several states, and the great weight of authority holds that successions in such cases shall be taxed only in the manner as provided by the will, and not in accordance with an agreement subsequently entered into among the heirs or beneficiaries.” The author cites cases from the following jurisdictions to support this view: Arizona, California, Illinois, Iowa, Massachusetts, New Jersey, New York and Tennessee. To these should be added the case of Cochran v. Commonwealth, 241 Ky. 656. There are annotations on the subject in 78 A. L. R. 716 and 137 A. L. R. 664. Professor Joseph Warren in 33 Harv. L. Rev. 556, 574, discusses the conflicting views and says: “the . . . doctrine of Illinois, Massachusetts and New York, which taxes the estate according to the terms of the will and not according to the provision of the agreement, is preferable.” The advocates of taxing according to the terms of the will take this view because of the desire for “a plain, simple rule” (Baxter v. Treasurer, 209 Mass. 459, 463), and to avoid the possibility of collusive agreements to escape taxation (People v. Union Trust Company, 255 Ill. 168, 182). On this latter point of fraud, see also, Kimball v. Badger, *385 93 N. H. 345. Any inequity of a tax upon what is not received can be taken care of by including provision for the payment of the tax in the voluntary agreement for the compromise. The decision of Caskey v. State, 93 N. H. 438, is not necessarily in conflict with the above expressed weight of opinion. It was there held, in order to avoid the injustice of residuary legatees paying a tax upon money that they never received when the loss was due to a sale by the executor of stocks and bonds in a falling market in order to obtain cash to pay debts, legacies and expenses of administration, that the loss should be treated as an expense of administration. The principle of that case is not to be applied to the present one. It is limited to the facts then under consideration. Here we are concerned with a voluntary redistribution of the assets of the estate, not with a loss in no wise caused by the interested legatee or for his benefit. In the Caskey action, the loss was beyond the control of the legatee. It is true that a legatee may renounce and in that event, the legacy tax is paid by the residuary legatee and not by the one who renounces. This is so, however, because of the law relating to the passing of testate property and not because of any agreement between legatees. 33 Harv. L. Rev., 575. This fact confirms the principle that the tax on legacies should be assessed under the statute on the transfers made by the will regardless of dealings by the legatees among themselves. The Legacy and Succession Tax Department of the State is correct in exempting only the sum of $50,000. Petition dismissed. Branch, C. J., dissented: the others concurred.