In re Estate of Walworth

Chase, J.: By chapter 483 of the Laws of 1885, relating to the taxation of gifts, legacies and collateral inheritances, lineal descendants were wholly exempt from its provisions. By chapter 215 of the Laws of 1891, lineal descendants were included in certain cases. The prior-acts relating thereto were repealed by chapter 399 of the Laws of 1892. The act of 1892 provided : “ § í. Taxable transfers. * * * 3. * * * Such tax shall be at the rate of five per cent upon the clear market value of such property, except as otherwise prescribed in the next section. “ § 2. Exceptions and limitations.—When the property or any beneficial interest therein passes by any such transfer to or for the use of * * * or. to any lineal descendant of such decedent, grantor, donor, or vendor * * * such transfer of property shall not be taxable under this abt unless it is personal property of the value of ten thousand dollars or more, in which case it shall be taxable under this act at the rate of one per centum upon the clear market value of such property.” In cases where a decedent has given property to one person for life with power of appointment in such person and the owner of the life estate dies having exercised the power of appointment, the [174] decedent referred to in the statute quoted is the decedent creating the power. - The appointees under the power take by virtue of the will creating the power of appointment and riot by virtue of, the will "by which the power is exercised. (Matter of Harbeck, 161 N. Y. 211.) Under such statute it is necessary in determining whether a tax should- be assessed at all, and if so at what amount, to write the names of the appointees into the will of the decedent, creating tlie power of appointment. The right of succession vests, not at the time of the execution of the power, but at the time the will creating the power goes into effect. The Tax Law of 1896 (Laws of 1896, chap. 908) did not materially change the statute of 1892 above quoted, but by chapter 284, Laws of 1897, section 220 of the Tax Law is amended, and as so amended it provides: “ § 220. Taxable transfers. * * * 5. Whenever any person or corporation shall exercise a power of appointment derived from any disposition of property made either before or after the passage of this act, such appointment when made shall be deemed a transfer taxable under the provisions of this act in the same manner as though the property to which such appointment relates belonged absolutely to the donee of such power and had been bequeathed or devised by such donee by will * * This amendment of the statute makes every fund passing pursuant to a power of appointment derived from any disposition of property taxable without reference to the time when the will or instrument creating the power went into effect, providing the same is taxable at the time of the execution of the power. (Matter of' Harbeck, supra.) The respondents here claim that the -only purpose of the change in the statute is to increase the list of taxable transfers. In our opinion the.change created by the act of 1897 was clearly intended not alone to. increase the list of taxable -transfers, but also to change the rule as stated in Matter of Harbeck (supra) and in many -other cases. Under this act, instead of its now-being necessary to read the names of the appointees into the will of the person creating the power, the tax should be fixed “ as though the property to which such appointment relates belonged absolutely to the donee of such power and had been bequeathed or devised by [175] such donee by will.” The exercise of the power is by the statute made a transfer taxable under the act. The Appellate Division, second department (Matter of Seaver„ 63 App. Div. 283), in construing section 220 of the Tax Law, has recently held, “ The words clearly imply that the transfer tax is due upon and by reason of the exercise of the appointment.” The plain, language of the statute cannot be overlooked even, if a possible difficulty in enforcement might be encountered, in case of two donees of the power, of different relationship to the appointee. Such possible difficulty should be obviated by the Legislature. The decree of the surrogate is modified by fixing the tax at $3,901.50 instead of $780.30, and as so modified affirmed, with costs to the appellant. All concurred, except Smith, J.', dissenting.