
    In the Matter of the Transfer Tax upon the Estate of Cornelius Vanderbilt, Deceased. Erastus C. Knight, as Comptroller of the State of New York, Appellant and Respondent; Alfred G. Vanderbilt, Individually, and William K. Vanderbilt and Others, as Executors, etc., of Cornelius Vanderbilt, Deceased, Respondents and Appellants. The New York Christian Home for Intemperate Men and Society of St. Johnland, Respondents.
    
      Transfer Tax Law—gift to a diaritable or benevolent corporation by a testator dying before the passage of chapter 382 of t7ie Laws of 1900 — deductions of executin'*s commissiotis and of the United States tax—what future estates are not taxable at the testator's death.
    
    Section 243 of the Tax Law (Laws of 1896, chap. 908), added by chapter 382 of the Laws of 1900, which provides that the exemptions mentioned in section 4 of the Tax Law are not to be construed as applying to the provisions of article 10 imposing a transfer tax, does not apply to a bequest to a charitable or benevolent corporation, exempt from taxation under section 4 of the General Tax Law, made by the will of a testator who died prior to the passage of the ' act of 1900.
    The legacy tax due to the United States government under the Revenue Law of June 13, 1898, should be deducted from the total assessed value of the testator’s estate before the succession tax under the New York Transfer Tax Act is imposed.
    Where the will bequeaths certain legacies to the persons named as executors and trustees therein, and provides, “ I direct that no compensation or commission, as such, shall be paid to any living executor or trustee under this will for any services as executor or trustee hereunder,” the commissions to which the executors and trustees would be entitled by law should not be deducted in ascertaining the taxable value of the estate under section 227 of the Tax Law which provides, “If a testator bequeaths or devises property to one or more executors or trustees in lieu of their commissions or allowances, or makes them his legatees to an amount exceeding the commissions or allowances prescribed by law for an executor or trustee, the excess in the value of the property so bequeathed or devised above the amount of commissions or allowances prescribed by law in similar cases shall be taxable under this article,” when it appears from a survey of the will that the legacies given to the executors and trustees were not given in lieu of commissions and were in no way dependent upon or affected by the performance of executorial duties by the legatees.
    
      Section 230 of the Tax Law, as amended by chapter 76 of the Laws of. 1899, / which provides “ when property is transferred in trust or otherwise, and the fights, interest or estates of the transferees are dependent upon contingencies or conditions whereby they may be wholly or in part created, defeated, extended or abridged, a tax shall be imposed upon said transfer at the highest rate which on the happening of any of the said contingencies or conditions would be possible under the provisions of this article, and such tax so imposed shall be due and payable forthwith out of the property transferred,” does not . operate to render remainders, created by the will of a testator, taxable at the time of the testator’s death, where it appears that there was at that time no person absolutely entitled in possession, or absolutely in expectancy. Ingraham and Laughlin, JJ., dissented.
    Cboss-appeals by Erastus C. Knight, as Comptroller of the State of New York, and by Albert G. Vanderbilt individually, and William K. Vanderbilt and others, as executors, etc.,. of Cornelius Vanderbilt, deceased, from an order of the Surrogate’s Court of the county of New York, entered in said Surrogate’s Court on the 16th day of May, 1901, affirming upon appeal an order theretofore entered in the proceeding confirming the report of the appraiser and fixing the amount of the transfer tax upon the estate of Cornelius Vanderbilt, deceased.
    
      G. D. B. Ilasbrouck, for the Comptroller.
    
      Henry B. Anderson, for the executors and Alfred G. Vanderbilt..
    
      William Ives Washburn, for the respondent New York Christian Home.
    
      John II. Cole, for the respondent Society of St. Johnland.
    
      
       See Matter of Gihon, (169 N. Y. 443).
    
   Patterson, J.:

These are cross-appeals from an order of the Surrogate’s Court in in the county of New York, fixing the amount of tax payable upon transfers of interests passing Under the will of the late Cornelius Vanderbilt. The Comptroller of the State of New York appeals from the failure, neglect and refusal of the surrogate to fix the tax on certain interests in remainder created by the testator, and also from the failure, neglect and refusal to fix the tax upon legacies to charitable corporations. The executors of the will appeal from the surrogate’s refusal to allow, by way of reduction of the total assessed value of the estate, a sum paid to the United States government as taxes upon legacies, and also from a refusal to deduct from such total assessed value an amount equal to the commissions to which the executors and trustees named under the will would he entitled by law as and for their commissions. Alfred G. Vanderbilt also appeals individually from the decree of the surrogate, substantially upon the same grounds as those taken by the executors.

First. The bequests to charitable or benevolent corporations were not subject to the transfer tax. Since the argument of these appeals at the bar of this court it has been held in the court of last resort (Matter of Huntington, 168 N. Y. 399) that under the act of 1900 (Laws of 1900, chap. 382) bequests to charitable corporations such as those respondent here, are subject to the imposition of a transfer tax, that act having added to article 10 of the General Tax Law (Laws of 1896, chap. 908) a section (243) which enacts that the exemptions mentioned in section 4 of the General Tax Law are not to be construed as applying in any manner to the provisions of article 10 imposing a transfer tax. But in the same case it is said in effect that legacies to such corporations exempt from taxation under prior laws are only taxable under the act of 1900 in cases where testators have died after the passage of that act.

Second. The legacy tax due to the Federal government under the United States War Revenue Law of June 13, 1898 (30 U. S. Stat. at Large, 448), should have been deducted from the total assessed value of the estate of the testator, the succession to which is taxable under the Transfer Tax Law of New York. Since this matter came before us this subject has been considered and decided by the Appellate Division in'the second department (Matter of Gihon, 64 App. Div. 504), and it was there held that in ascertaining the value of a succession to property for the purposes of the State transfer tax, the legacy tax due under the Federal Revenue Law should first be deducted. The reasoning by which this conclusion was reached is set forth in the opinion of Silkman, Surrogate, which was adopted by the Appellate Division, and we are not disposed to differ with that court in the view it has taken of this question.

Third. In Matter of Gihon (supra) it was also decided in effect that commissions allowed by law to executors and trustees should also be deducted in the same manner as United States legacy taxes, but. the special provisions of Mr. Vanderbilt’s will are such as to render inapplicable as authority what was decided in that behalf in the (fihon case. It.is provided, in article 10, section 227, of the Tax Law that “ if a testator bequeaths or devises property to one or more executors or trustees in lieu of their commissions or allowances, or makes them his legatees to an amount exceeding the commissions or allowances prescribed by law for an executor or trustee, the excess in value of the property so bequeathed or devised above the amount of commissions or. allowances prescribed by law in similar cases shall be taxable under this article.” Mr. Vanderbilt in his will provided as follows : “ I direct that no compensation or commission as such, shall be paid to any living executor or trustee under this-will for any services as executor or trustee hereunder.” It is obvious that the testator intended that his estate should not be diminished by these ordinary expenses of administration, and it is equally obvious from a general survey of the will that the legacies given to the executors were not so given in lieu of commissions. The meaning of section 227, above cited, may bé that where legacies are given for the services of executors and are to be a substitute for statutory allowances, an exemption from taxation, to the extent of such legacies, is created; but we cannot find, from anything in this will, that these legacies to the individuals appointed executors were in any way dependent upon or affected by the performance of executorial duties. This view receives enforcement from thé provisions of the 19th clause of the will, concerning the authority and power given to the executors and trustees under the will to transfer and'' convey any single trust fund or any number of trust funds set apart pursuant to the provisions of the will, to the Union Trust Company upon the same trusts as those named in the will. If those transfers are made and the execution of the trusts or any of them devolve upon the Union Trust Company, that would not entitle that company to the fees or compensation provided by statute for trustees, and for the reason that by the 19th clause, the terms upon which such transfer of the trust funds are to be made are 'such as may be agreed upon between the trustees and the Union Trust Company, thus, leaving the whole matter open as a subject of treaty between the executors and trustees and the Union Trust Company. We can find nothing in this will that would authorize the deduction from the total assessed value of taxable interests of the. fees' and commissions of executors and trustees.

Fourth.. The surrogate refused to fix the amount of a tax upon, certain future interests in shares or portions of the testator’s estate bequeathed to legatees having life interests, or set apart to constitute capital sums from which annuities were to be paid to certain persons or which could accrue under powers of appointment. All these future estates or interests are grouped together and treated as remainder interests, in respect of which it appears that there is no person now absolutely entitled in possession or absolutely in expectancy. The provisions of Mr. Vanderbilt’s will concerning these future interests are substantially as follows: He gave to his wife for life certain household furniture in his residence at Newport, R. I., with a power of disposition by will of such property to and among four of his children^ He also required his executors to divide a capital sum of $20,000,000 into four shares, to hold one of such shares in trust for each of his;-four children named, the trust as to each child to endure during the life of that child. Upon the death of each life beneficiary of that trust, to pay the capital sum of his or her share to such persons and in such proportions as he or she might appoint by last will and testament, and if no such appointment were made, then to the children of such' life beneficiary per stirjp.es, and if either of these life beneficiaries died without issue, the capital of the share from which he or she derived income was to be distributed among the survivors of those four children, share and share alike. The testator also created a trust of $1,000,000 for the benefit of one of his sons, during the life of such son, with directions upon his death to divide the capital of that specific trust fund among the children of such son and to hold such divided shares during the life of the youngest child of such son living at the. time of the death of the testator, and upon the termination of the trust, the capital to be divided among the persons for whose use it was held, and if the son, the primary beneficiary of the trust, died without, issue, the capital of that particular trust was to pass into the residuary ‘estate. By another clause of the will, the testator gave his wife an annuity of $250,000, and required his executors and trustees to set apart an amount of securities sufficient to produce the annual income given.. Upon the death of his wife, the securities so set. apart are to be divided among four of his children in such proportions as his wife might by last will and testament appoint, and upon default of such appointment the securities constituting the capital from which the annuity for the wife was to be raised were to be divided among the four children named, the issue of a deceased child to take the sharé the parent would have taken if living. The testator also directed that certain sums of money be set apart to pay annuities to several persons who are named, and on the death of the annuitants, the fund or security out of which they were raised to pass into the residuary estate, which residuary estate is given to the executors in trust to pay the income therefrom to one of the testator’s sons until that son becomes thirty years of age, at which time he is to. receive absolutely one-half of the residuary estate. This trust is to continue as to the other half and the income óf that other half is to be paid in such sums until he attains the age of thirty-five years, at which time possession of the whole amount is to be given to him. Provision is then made in the will for the disposition of the principal of the residuary estate in case of the death of the son before reaching the age of thirty-five years, leaving issue; also in case of his death before attaining that age without issue.

The Comptroller of the State of New York contends that the sfirrbgate should have fixed a tax on the succession to the residuary •estate, on the transfer of the remainders on the annuity, on the transfer -of the remainder interest in the trust fund of one-half of the residue when the son to whom that residue is primarily- given arrives at the age of thirty years, upon the transfer of the remainder of the residue when that son reached the age of thirty-five years, and upon the transfer of the income of one-half of the residue for the period of five years between that son attaining his thirtieth 'and his thirty-fifth years.

This contention of the Comptroller is based upon a provision of section 230 of the Tax Law, as amended by chapter 76 of the Laws of 1899, and which enacts in this relation that “when property is transferred in trust or otherwise, and- the rights, interest or estates of the transferees are dependent upon contingencies or conditions whereby t-héy may be wholly or in part created, defeated, extended or abridged, a tax shall be imposed upon said transfer at the highest rate which on the happening of any of the said contingencies or conditions would be possible under the provisions of this ¡article, and such tax so imposed shall be due and payable forthwith out of the property transferred.” Prior to the passage of the amendment of 1899, the statute contained the following provision : ■“ Estates in expectancy which are contingent or defeasible shall be -appraised at their full undiminished value when the persons entitled thereto shall come into the beneficial enjoyment or possession thereof, without diminution for or on account of any valuation theretofore made of the particular estates for purposes of taxation, upon which said estates in expectancy may have been limited.” As the section now reads, taxation at the time the estates in -expectancy fall into possession is only to be made in cases in which proceedings for the determination of the tax have not been previously had or have been held in abeyance.

It is conceded that prior to, the amendment of 1899 such future interests as are sought to be assessed for taxation in this proceeding •could not have been so assessed Until they vested in possession. Such was the decision of the courts. (Matter of Hoffman, 143 N. Y. 327; Matter of Curtis, 142 id. 219; Matter of Davis, 149 id. 539; Matter of Roosevelt, 143 id. 120.) It is not the mere vesting of remainders that renders them contingent taxable interests under the law. (Matter of Curtis, 142 N. Y. 219.) The substantial question here is : What is the effect of the amendment of 1899 •of section 230 of the Tax Law ? Does it operate to render taxable the transfer of such future interests as these now under consideration before they vest in possession ? An easy solution of the question may be reached by saying that the Legislature having enacted the new provision of section 230, as it now stands, and by remodeling that section, having virtually expunged that absolute provision which related to the taxation of estates in expectancy which are contingent at the time when the persons entitled thereto should come into the possession or beneficial enjoyment thereof,, intended to adopt an entirely new rule and to make those future and contingent interests taxable as of the time of the death of the testator. But when we come- to consider what has been retained in the statute, that conclusion is inadmissible, for those retained provisions are totally repugnant to it.

If the future defeasible or contingent interests disposed of by Mr. Vanderbilt’s will, including those that may ultimately vest under the exercise of powers of appointment, are presently taxable, then, in practical effect, the tax is imposed upon property, but it is obvious that it was not the intention of the Legislature to change the nature of the tax. It still remains a tax upon succession, It is imposed upon the transfer of property. The nature of a transfer is not changed, as that term has been judicially defined. The word. “ transfer ” in the Inheritance Tax Law is used in its ordinary signification, namely, that the owner of a thing delivers it to another' with the intent of passing the rights which he has in it to the latter. (Matter of Gould, 156 N. Y. 423.) By section 230, .which is said to control this case, it is provided that when property is transfjerred in trust or otherwise, a tax shall be imposed upon said transfer, and shall be due and payable forthwith out of the property transferred. The law still requires an appraisal' of each interest transferred and the fixing of the tax upon each interest and its collection from the executors or trustees out of the property transferred. The transfer referred to here is that which is made by the -testator to the recipients of the interest bequeathed by him. It is still the right of a transferee to succeed to such .portion of the testator’s estate, and only to such portion-, as is given to him by the will. It certainly could not have been the intention of the Legislature to take any portion of the property of' one legatee to-pay the tax upon the transfer of another portion to some other-legatee,, and yet, if a tax upon remainders is to be presently payable by executors, the principal of the funds out of. which such life interests are to be paid will be diminished by just so much as the amount of the tax on the remainders, and the holders of such life interests will be compelled to pay a tax upon their own interests, and a portion of the taxes imposed upon the transfers of the remainders. It is true that in this particular case that effect would not be operated, because there is a provision in the will of Mr. Vanderbilt which requires that all inheritance and' transfer taxes upon bequests. shall be paid out of the estate generally; but such would be the effect under wills not containing such a direction. The difficulty in the present case is, that these future interests created by the will are of such a character that they cannot be assessed- at present without imposing a tax on property. That property could in no event be assessed at other than the market value of the interests in it that are transferred, and that market value is not ascertainable by a resort to mortuary tables, as is pointed out by Judge Finch in Matter of Hoffman (supra). Whatever may have been the intention of the Legislature in enacting the amendment of 1899, the provisions of that amendment are ineffectual to change the nature of the transfer tax, and more definite and particular legislation is required before such future interests as those created by Mr. Vanderbilt’s will and now under consideration may be made the subject of taxation before they vest in possession.

We think the surrogate was right in refusing to impose a tax on these remainder interests, as they have been called for the purposes of general description.

The order or decree of the surrogate should be modified in accordance with the views above expressed, and as modified affirmed.

Van Brunt, P. J., and Hatch, J., concurred; Ingraham and Laughlin, JJ., dissented.

Ingraham, J.

(dissenting):

I concur with. Mr. Justice Patterson, except as to .the liability to taxation of the interest of the remainderman under the 17th clause of the will to taxation. I think the surrogate was right so far as the remainders were contingent, there being at the death of the testator no person in being in whom the remainder vested. In such a case there was clearly no transfer of the remainder upon the death of the testator, for there was no transferee, and I assume that to make a valid transfer there must be a transferee as well as a transferrer. Where there was a life estate given with a power of appointment of the remainder, it would seem that until that power was exercised there was no transferee, so that the provision of the Tax Law which taxes a transfer could not apply. A different interest, it seems to me, was created by the bequest and devise of the rest, residue and remainder of the estate by the 17th clause of the will, for by that clause there was a devise and bequest to the executors in trust to hold the property for the benefit of the testator’s son Alfred G. Vanderbilt until he should arrive at the age of thirty years. Upon his arrival at that age he was to be paid one-half of the remainder of the estate. The executors were to hold the remaining one-half in trust for him until lie should arrive at the age of thirty-five years, when he was to receive the balance of the estate, with a provision for the final disposition of the property held in trust in case Alfred G. Vanderbilt should die before he arrived at the age at which he would be entitled to the possession of the estate. I think that this created a remainder whicli vested in Alfred G. Vanderbilt, subject, however, to be divested by his death prior to the time at which he would be entitled to receive the absolute title to the property. There was, therefore, a transfer of the property to Alfred G. Vanderbilt, and that brings the case, if it was taxable, within the provision of section 230 of the Tax Law (Laws of 1896, chap. 908), as amended by chapter 76 of the Laws of 1899. That section now reads as follows: “ - * * Whenever a transfer of property is made, upon which there.is, or in any contingency there may be, a tax imposed, such property shall be appraised at its clear market value immediately upon such transfer, or as soon thereafter as practicable. "x" * * Where any property shall, after the passage of this act, be transferred subject. to any charge, estate or interest, determinable by the death of any person or at any period ascertainable only by reference to death, the increase of benefit accruing to any person or corporation upon the extinction or determination of such charge, estate or interest, shall be deemed a transfer of property taxable under the provisions of this act * * * .”

By the 17th clause of the will this remainder was transferred to Alfred G. Vanderbilt, the actual- possession being postponed until lie should arrive at the age of thirty and thirty-five years respectively. It is true that his absolute interest would be subject to be defeated by his death prior to his arriving at the age of thirty-five years, but there was a valid transfer of the property to him, and it was that valid transfer that was taxable under the provision of the statute to which attention- has been called. - By express provision of this statute, the tax was to be paid out of the property transferred, and I can see no reason why this provision of the act should not be enforced in this case. Upon no contingency could there be either a less or greater tax than if the property had vested actually in Alfred G. Vanderbilt, for the will provided that in case of his death prior to the time at which he would be entitled to receive the property it should go either to his children, if he left any surviving, or to his brothers and sisters who were of the same kin to the testator. All that was necessary to make this estate now taxable was that there should be a transfer of the estate. In my view, there is such a transfer, the legal title vesting in Alfred Gr. Vanderbilt, the right to possession being merely postponed until the termination of this trust, and such transfer is, I think, taxable.

I think the order of the surrogate should be modified to the extent indicated.

Laughlin, .1.

(dissenting)':

I agree with the views expressed by Mr. Justice Pattebsokt on the first, second and third propositions, but I dissent from his discussion of the fourth proposition and from his construction of section 230 of the Tax Law (Laws of 1896, chap. 908), as amended by chapter 76 of the Laws of 1899. The construction of the statute given in the prevailing opinion renders the amendment nugatory, as it is the same as that which prevailed prior to the adoption thereof. The Collateral Inheritance Tax Law, as it formerly existed, provided,, in effect, that the tax upon contingent remainders should not be payable until the remainders vested in possession. Consequently, part of the tax was collectible immediately, and the collection of part was postponed uutil the vesting of the remainders.

This system was given a trial, after which the Legislature, by the amendment of 1899, in my opinion, intended to enact, and did very clearly prescribe, that all such collateral inheritance taxes should be imposed and collected forthwith. This amendment took effect prior to the death of the testator and it applies to his will.

The Legislature has not interfered with the disposition of property by will. It has, however, distinctly provided that where property is transferred in trust or otherwise to await the happening of a contingency, which is to determine the ultimate right thereto, the share and interest of the property which is to be forfeited to the State as a collateral inheritance tax shall be forthwith ascertained and deducted; at a future time when it shall be known definitely who takes then if their relationship to the testator would have required a lower rate, if that had been known when the tax was imposed, the statute provides for a return of the excess.

.To my mind this intention on the part of the Legislature is manifest. The provision is general, and I see no constitutional objection to its enforcement. The Legislature has, in effect, said that if property is so devised that the relationship of the ultimate transferee to the testator cannot be definitely determined, at the time of the appraisal of the property, for the purpose of imposing the collateral-inheritance tax, then a tax shall be presently imposed at the highest rate applicable to any of those whose interests'are uncertain or contingent, as if such interest then vested in possession.. In other words, the amendment of 1899 treats the transfer to the trustee, which takes place at the death of the testator, as the transfer upon which the tax is imposed, and it merely considers those who are contingently entitled as a means of determining the percentage of the tax.

Decree modified as directed in opinion, and as modified affirmed, without costs.  