
    Matter of the Transfer Tax on the Estate of Ferruccio A. Vivanti, Deceased.
    (Surrogate’s Court, New York County,
    June, 1909.)
    Executors and administrators — Collection and reduction to possession of property or claims of estate — Property constituting assets — Estates in real property — Leases so long as rent is paid.
    Taxes — Inheritance and transfer taxes: Property and interest subject to tax—Property situated in another State: Assessment — Appraisal — Of particular property — Good will of business.
    The good will of a business carried on by a decedent at the time of his death is a taxable asset of his estate; but, where the business is one that depends for its success upon the confidence which its patrons have in the personal skill and integrity of those who carry it on, it should not be estimated above the amount the decedent actually realized from it during the last year of his life with his capital and personal assistance.
    Leases of lands in Japan by the Japanese government at a fixed rent so long as the rent shall be paid are not assets and the interest of a decedent as tenant thereunder is not taxable under the laws relating to taxable transfers.
    Appeal from the report of an appraiser fixing and assessing the transfer tax.
    John S. Jenkins (Edgar N. Dollin, of counsel), for State Comptroller.
    W. M. Rosebault, for executor.
   Thomas, S.

If, as both of the parties to this appeal appear to assume, Mr. G-reenbaum upon his admission as a partner in the firm of Vivanti Brothers acquired the right and assumed the obligation to continue, to carry on the business of the firm for at least ten years after the death of the decedent, paying for the good will thus acquired a portion of his annual profits during such period, this was a transaction inter vivos, and, if any advantage accrued to Mr. Greenbaum because of it, the value of that advantage was not a taxable asset of the decedent. As I construe the documents 1 cannot agree that any such bargain was made between the decedent and Mr. Greenbaum, or that he acquired by virtue of any contract with the decedent a right, either absolute or contingent, to the good will or to the use of it, and this construction appears to be the one adopted by the parties, for the contract under which Mr. Greenbaum is carrying on a business similar to that of the old firm is one made between him and the widow, and differs substantially in its terms from the contract with Mr. Tegner, to whose rights Mr. Greenbaum is supposed by counsel to have succeeded. The good will of the firm of Vivanti Brothers was, however, an asset in which the estate of the deceased partner had an interest, though not an absolute title to the exclusion of the surviving partner, and the value of this interest, which passed beneficially to the widow of the decedent, was properly taxable. The appraiser values this good will at $59,-088.21, and treats the whole of this value as an asset of the estate. The method of appraisal adopted by the appraiser would seem by the figures to have been to take the average annual profit of the firm for the four years preceding the decedent’s death, to wit, $39,392, compute fifteen per cent, of that amount as being the probable profits which would hereafter be payable by Mr. Greenbaum under his contract with the widow, and multiply the result by ten, the number of years for which the contract is to continue. This method of computation ignores the fact that the nature of the business was that of brokers in silks, and was largely personal, depending much for its success upon the confidence reposed by vendors and purchasers of silks in the capacity and integrity of the persons acting as such brokers, and that the decedent, who created the business, contributed to carrying it on, in addition to his own knowledge, skill and business reputation, at least $125,000 in the way of capital, besides the credit arising from his large wealth. For all of this he demanded only sixty per cent, of the net profits of the firm for the last year of his life, and seventy-five per cent, for previous years. The business is now to be carried on by his former junior partner, without any capital from the estate, and the decedent’s reputation is a mere memory. The present capital employed is contributed by a special partner, .and amounts to only $50,000. It is, of course, utterly impossible to estimate with any degree of accuracy the annual payments which will be made by Mr. Greenbaum under his contract, and I think that the interest of the decedent ought not to he estimated at any sum exceeding the amount actually received by the decedent as his share of the profits of the business for the last year during which it was conducted under his direction and with his capital and personal assistance, to wit, $25,374. The valuation is, therefore, reduced to that figure.

The decedent’s rights in certain lands in Japan were taxed as personal property. Each parcel of this land is represented by a lease from the Japanese government to the decedent or to the grantor of the decedent, his heirs, executors, administrators and assigns, at a fixed and stipulated annual ground rent, to run as long as such ground rent shall continue to he paid, with the right to the lessee to transfer the lease or rights therein acquired to any person who is a citizen or subject of a country having a treaty with Japan. In the terms of our law these leases can perhaps be described as perpetual leases reserving rent. Under our law a perpetual lease of this kind is not an asset passing to executors or administrators, hut is real property, which passes to the heir (Code Civ. Pro., § 2712; Millard v. Mulling, 68 N. Y. 345, 352), and it is real property within the definition of that term contained in chapter 18 of the Code of Civil Procedure relating to Surrogates’ Courts. Code Civ. Pro., § 2514, suhd. 13. In imposing transfer taxes we are administering a statute of this State, and if the rights of the decedent in these Japanese lands are, within the meaning of our law, real property situated in a foreign jurisdiction, the Transfer Tax Law furnishes us no authority for imposing the tax. If the nature of the property he determined according to the Japanese law, and if we are permitted to examine and rely upon the evidence of that law contained in the record, the result will he the same. It is by the rules furnished by one or the other of these bodies of law -that the question is to be determined. Savage v. O’Neil, 44 N. Y. 298. On broader and perhaps less technical grounds the courts of this State should not be astute to impose a tax on interests in land situated within the limits of a foreign jurisdiction of a character which we in this State would regard as real property, in view of the fact that the lawmaking body of this State has carefully refrained from imposing any tax or charge upon real property outside the limits of this jurisdiction. The order must be reversed as to the tax upon the transfer of this Japanese real estate.

The ruling of the appraiser, refusing to deduct from the appraisal the value of the widow’s dower right, is affirmed. Estate of Henry I. Barbey, N. Y. L. J., March 2, 1908, and cases cited.

The valuation of the properties Nos. 50 and 52 East One Hundredth street will be reduced to $28,000 each upon the evidence submitted.

As to the excess commissions, upon the stipulation filed . their amount must be fixed at $2,864.68, and a tax will be imposed thereon against the executor at five per cent. Tax Law, § 226. This sum is included in the valuation of the income of the life beneficiary, and there is consequently a double taxation. To avoid this the sum of $2,864.68 must be deducted from the value of the property passing to such life beneficiary.

Settle order on notice.  