Opinion
February 18, 1954.
On Motion for Reargument April 1, 1954.
Proceeding in matter of appraisal, under estate tax law, of estate of decedent. The Surrogate's Court, Nassau County, entered a pro forma order fixing the tax, from which an appeal was taken on ground that the cost of certain realty which had been acquired by decedent and his wife as tenants by the entirety was borne equally by decedent and bis wife", and hence should have been included at one half the amount at which it was actually included. The Surrogate's Court, Nassau County, Bennett, S. held that evidence was insufficient to show any specific contribution by the wife which would entitle her to have any portion of the tenancy by the entirely omitted from the tax proceeding as a part which originally belonged to her.
Order affirmed.
Frey Harkow, Jamaica, for appellant.
Albert Dorf, Brooklyn, for State Tax Commission.
This is an appeal from an order of this court dated October 20, 1953 fixing the tax in this estate upon the ground that the inclusion of Hicksville real estate in the amount of $99,211.50 was erroneous. It is contended that in the acquisition of this real estate by the decedent and his wife, Catherine Buckhardt, as tenants by the entirety, both contributed equally to the cost thereof and the amount which should have been included in this proceeding was one-half thereof or $49,605.75.
A hearing was held before this court on January 20, 1954 at which time the testimony of Henry C. Frey, Esq., an attorney, was taken, The New York State Tax Commission, objected to such testimony on the ground that it was a privileged communication between attorney and client and barred by section 353 of the Civil Practice Act. The original objections appear at pages 8, 10 and 11 of the stenographer's minutes and a. renewal of the motion at page 21. The same question was presented by a. motion to-exclude the affidavit of August 11, 1953 made by the attorney and submitted by him to the transfer tax appraiser. Such a motion to exclude appears to be timely in accordance with Matter of Bell's Estate, 94 Misc. 552. 158 N.Y.S. 142.
At the hearing the trial counsel who represented both the estate and Catherine Buckhardt introduced the testimony without claiming any privilege. The Tax Commission contends that once the lips of the decedent are sealed by death, no one has the power to waive the privilege of attorney and client. The court has grave doubts if this rule is applicable in the present case where a stranger is asserting the privilege to the detriment of the estate of the client for whom the privilege was created. Fortunately this question has become academic
The attorney testified that he acted for both August Buckhardt and Catherine Buckhardt for forty years (p. 2) in the condemnation proceeding (p. 5),.the securing of the deed to them as tenants by entirety of the Queens property (p. 12), in handling the proceeds of the condemnation proceeding (p. 5) and in the purchase of the Hicksville property (p. 2). There is also testimony that Catherine Buckhardt was present when the contract was executed and when the title closed (p. 23). Under those circumstances, any statements made by August Buckhardt to Henry C. Frey, Esq. were not confidential as to Catherine Buckhardt,, Doheny v. Lacy, 168 N.Y. 213, 61 N.E. 25S; Hurlburt v. Hurlburt, 128 N.Y. 420, 28 N.E 651, quoted with approval in Matter of Cunnion's Will, 201 N.Y. 123, 94 N.E. 648; Baumann. v. Steingester, 213 N.Y. 328, 107 N.E. 578. The testimony of the attorney and his affidavit will be, accepted by the court and the motions of the New York State Tax Commission to exclude the same are denied.
There is no dispute that property known as the Hicksville Farm was purchased in the names of the deceased and Catherine Buckhardt as tenants by the entirety. The funds used for this purpose were monies received, from the City of New York for condemnation of Linden Boulevard, Queens County, which property had been owned by the deceased and Catherine Buckhardt also as tenants by the entirety. There is a determination by the Board of Tax Appeals, 32 B.T.A. 1272, that the purchase of the Hicksville Farm was a conversion of the Queens County residence condemned by the City under section 112(f) of the Revenue Act of 1928, 26 U.S.C.A. Int. Rev. Acts, p. 95, and thereby became a replacement under which no gain or loss is recognized.
Under section 249-r, paragraph 5 of the Tax Law, the entire tenancy by the entirety is included for tax purposes "except such part thereof as may be shown to have originally belonged to such other person".
Omitting for the present the question of the ownership of the condemnation award, it is necessary to inquire if any money originally belonging to Catherine Buckhardt went into the purchase of the Queens or Hicksville properties or the reduction of the obligations thereon. There is no evidence which would warrant a finding that any definite portion of the value of the tenancy by the entirety was contributed by Catherine Buckhardt in her own right. There is testimony that she borrowed some money from a Mr. Stroebel (p. 12) but nowhere is any amount mentioned. There is also some testimony that such loan was repaid by the decedent and his wife from income they had both earned from working on the farm (p. 19) but nowhere is there any indication of what services were performed by Catherine Buckhardt, the value thereof or the. amount earned thereby. There is no proof of any specific contribution by Catherine Buckhardt which would entitle her to have any portion of the tenancy by the entirety omitted from the tax proceeding as a part which originally belonged to her.
We now come to the contention of the appellant that Catherine Buckhardt and the deceased each became the owner of half of the monies received from the City of New York and therefore contributed one-half of the money to the purchase of the Hicksville Farm. Such a contention might be possible on the facts submitted if it were not for the position taken before the Board of Tax Appeals and its decision in August Buck hardt, Petitioner v. Commissioner of Internal Revenue, Respondent, 32 B.T.A. 1272 previously referred to. This clearly establishes the acquisition of the Hicksville Farm to be a replacement of the Queens property under an involuntary conversion so that the net result is merely to substitute one piece of property for the other without changing the interests of the parties therein.
It is this election to treat the transaction as an involuntary conversion which distinguishes this case from the voluntary exchange in Matter of Driscolls Estate, 160 Misc. 97, 289 N.Y.S. 592. Therefore this court is not required to pass upon the principles set forth in Matter of Driscoll's Estate at this time.
The order appealed from is in all respects affirmed. Submit decree on notice in accordance herewith,
On Motion for Reargument
This is an appeal by a taxpayer from a pro forma order of this court dated October 20, 1953. On February 18, 19S4 this court rendered its decision in writing sustaining the State Tax Commission and affirming the order appealed from and dismissing the appeal. Upon this decision an order was made March 4, 1954.
By notice of motion dated March 16, 1954, returnable March 24, 1954, the appellant taxpayer moved for leave to reargue the appeal. An affidavit in opposition to such reargument was submitted by the State Tax Commission. On the return the court heard Mr. Harkow for the appellant and Mr. Shaw for the respondent. After due deliberation the court finds no reason to allow a reargument of the appeal.
The motion to reargue is denied without costs to either party. Submit order on notice in accordance herewith.