Opinion
June 23, 1925.
Cadwalader, Wickersham Taft, for the executor.
Charles A. Curtin, for the State Tax Commission.
This is an appeal by the executor from the order fixing the transfer tax on the following grounds; (1) That the appraiser failed to deduct from the value of the assets within this State the indebtedness due New York creditors arising out of a pledge to them of certain securities owned by the decedent; (2) that a tax has been imposed on the sum of $340,000 as capital invested by decedent within this State; (3) that shares of the common stock of the New York Times Company have been appraised in excess of their actual value; (4) that a tax has been imposed on a reversionary interest of decedent in shares of stock in a New York corporation transferred by a deed of trust; (5) that the provision in the order setting forth the tax which would be due if the contingencies had happened at the date of the appraisal fails to take account of the surviving life estates of certain beneficiaries; (6) that a tax has been imposed upon the transfer of chattels owned by decedent and physically located in the State of New York.
The decedent died August 13, 1921, a resident of the State of Rhode Island. He had borrowed money from two New York banks and had pledged as security stock of foreign corporations. These debts due to resident creditors should be deducted in full from the New York assets prorated between the taxable and non-taxable New York assets. ( Matter of Fearing, 118 Misc. 595; affd., 206 A.D. 657; affd., 237 N.Y. 528; Matter of Hallenbeck, 231 id. 409; Matter of Grosvenor, 124 A.D. 331; 126 id. 953; affd., 193 N.Y. 652; Matter of King, 71 A.D. 581; affd., 172 N.Y. 616; Matter of Brooks, 119 Misc. 738; affd., 212 A.D. 868.) The force of these decisions has not been affected by the following addition to section 230 of the Tax Law by its amendment by chapter 476 of the Laws of 1921: "No deduction shall be allowed from the appraised value of the property transferred on account of any liability of decedent incurred or assumed by the acquisition, care, improvement, use, enjoyment or disposition of property without the State, the transfer of which is not subject to tax under the provisions of this article." The obvious intention of the amendment was to disallow deduction of mortgages on real estate situated outside the State and deduction of sums of money expended in connection with the maintenance or improvement of such real property. It has no application to the instant case. The appeal on this ground is sustained.
The decedent loaned to a copartnership doing business in the State of New York and of which his son was a member sums aggregating $340,000. The decedent was not a member of the firm and the agreement evidencing the advancements specifically stated that the decedent was not to receive any share of the profits but was limited to six per cent interest on the moneys loaned. The decedent was not "doing business in this State either as member or partner." His contribution to the firm was not taxable, therefore, as a transfer by the provision of section 220, subdivision 4, of the Tax Law (as amd. by Laws of 1922, chap. 430), in effect at the date of his death. The appeal on this ground is sustained.
The report of the transfer tax appraiser does not disclose the basis of the appraisal at $730.86 per share of the common stock of the New York Times Company. It is asserted in the brief of counsel that this value was based on the appraisal of the same stock in another estate. The executor contends that the stock should be appraised at $205, which is the price at which twenty shares were sold on January 26, 1922. This isolated sale made more than five months after the date of decedent's death does not establish the market value. ( Matter of Hoffman, 204 A.D. 497.) The stock should be appraised at its book value since it is closely held and sales of shares are infrequent. ( Matter of Dupignac, 123 Misc. 21; affd., 211 A.D. 862; 212 id. 831; Matter of Jackson, N.Y.L.J. Nov. 6, 1924; Matter of Davidson, Id. Nov. 18, 1924.) If it is conceded by the appellant that the value fixed by the appraiser is the book value of the stock, the appeal on this ground is denied. If this concession is not made, the report of the appraiser will be returned to him to take proof as to the value of these shares.
The fourth ground of appeal is sustained. The interest of the decedent under the deed of trust was a mere possibility of reverter. It is only in the event that the widow of decedent survives both sons that the corpus of the trust will pass by decedent's will. The taxation of this interest should have been suspended in the report of the appraiser.
The fifth ground of appeal is denied. For the purpose of ascertaining the tax which would be due if the contingencies had happened at the date of the appraisal, the vesting of the remainder by the termination of the prior estates must be assumed. ( Matter of Cummings, 115 Misc. 276.)
The sixth ground of appeal is denied. ( Matter of Brooks, supra.) The report of the appraiser will be remitted to him in accordance with this decision if counsel are unable to agree on the form of order modifying order assessing tax.