OFFICE OF THE ATTORNEY GE~~L OF TEXAS 

AUSTIN 

i-bnoraue George Ef. sheppud 

Ca@rollar of Pablla 4oouda 

Au&in, %xaO 

De8r Slrl 

Tour lrttor xoquost. 

aubleot raadr u follow, 

tt, Tonr, on t 

ewr er d o f a n l 

l o d; 8nd the _ 

l o o uel the î 

to the DePo lo h la 

1* lnot1tutiea 

ra u lnhorlt8noo 

8 kwm8l B&c ln 

Erroator of fho will 

the olkto. 9%. ino x t ior a l8 l t8t8 hu boo n 

op8xtrmit ur d o x8mlned. ëW ha10 

r k tr fo x lnher lta tu no e p u* 

oat8ta to the twfa rlstoro oi tb do00880: 8nd ttio ro!al8l&dr~to the 80 
Hoaonblo Gooxgo 8. shoppad, z!rgo 8 

%r. EQurQ 5. Boylo8, of IIoustan, who ra 

resent8 the Flr'atlhtioaal Bank haonrittent iz 

buik-an opinion in rhloh ho holds that tbla mwindor interest ia not taxable for t&o m8aon 

that it w not be doton&wl a t- fhia time whothor 

or not tbo nophw will etor bon&it in the r+ 

ulndor or the 86td4, aa hi8 dut&, before the 

death or l lther o f the two a ieto rwm, o uld ultlmtolf rlaos tho oorptu of this T~uat Eatat in tho 

hada of the W'slohin 'Faith Ikmo. 

*You will find doha hereto the opinion 

of l’r. Boyle8 and the oopy oi the last will and 

taatamat of the d@au(LIIed, for your uaa In advii~- 

ix&g thin daputment whothor or not we have dintrlbutod the o&ate in a oorrsot mannor ror inheritanor tax purp6tw." 

I2~a prooi& question pntimted by your lotter haa 

nblor haul ,B555Od Uson by an apwmto o0ul-t in. Rxaa. Thr 

p-051~ or 555055bg inme5~00 tu05 

intemata, ho, he&mar, 

and trqenufty ai 

very nature of tho problem la auah thct 110 .parfaot rolutlan 

la posriblr. ia etatad by Rotsaror Bagart in hia tmt, *The 

rAK Of wWt5 urd mlteO8” (1935), vol. 8, IWO 986, ( 879, 

wha dirfi0titf ht18 ~OCTI t0 rind 5f3~fi0 mtih0d wbi0h 15 5t th5 

aaw tiwe oqultrblo tathollfotoxmstmd~tha porma or : 

;eraona to rhoa future lnterosta am llmitsd 5nd yot givoa 

udequ8t.a protaotioa to the rwenuu of the atate." 

'&ore the orentual moiplantr oi the taatabor~a 

bounty am aot 40rinitaiy a5aortainatkat his aoath bsoauw, 

au in the lmtant oaaa, tbs are nude depmaottt upon ruturv 

ocntlngenoioa, the total i ai orltama tax llabllita map vary 

O-~n3id6lrhl 

say take (2 f 

dopending qen (1) tho number or persona who 

thrlr mlationahip to the featator or, 13)- tlw 

tax examption or poaalbls t&or8 8uoh a5 oh5rltioa. A5 

hflnits rmarbtr or aimnti adiod8 0r aaaoariae lnhorltmee taxes ugmn thaao unoartsin futura i~ntererta hsvo bsori 

ev0lvod by airierat atutor at difiennt timea. 
'sow atatma m&a the tax on unoarta3.n futun intmosto pysblr lnuaedi8toly et the hi&8st wraible r&o 

(i.e.' UQO~ t&o l aauaptIoa~th& tha o&tfn~:imat, hmotor 

lmpm&abl., r1l.l OOOUT u!zlgh will m8ult ifi the gnatsat 

tax) with pmf aion for ~run4 ia the weat th0 prop~rtt, 

aotually mzara to beneflalar&r 6akIng at a lower Mt.. 

In zw 91.oo*s iiat8te (108.8) 164 klaa. 139, 204 X. k'. 84s1 fn 

Rllrm'8 aad.i5 (1916), 176 A pq 31,lr. l&w, l&2 :I. Y. t. 458. 

Ptbor tiatute8 d:atingnIah to twwn fsolmioally rented rad 

otmtlE.~:ent rwzahdwa m t& tax payable u oa tba a.&21 

0r the teatator in t&o ma0 (ji t awe P 

!~oatgmlag the-ynent or the ~tax 

rider;; but 

the hrrppd.ag 0r tlu 

oontln:enop in ,tho oaae o2 a aontln~ant xtwiaitraer. canmonwealth v. s'crbr+u'8 Sxaautor (3914),-156 ;;'y, 877 la 5.~. 

9791 In re Rociwrelt, ~(18941 J45 l?. Ye ~120 Z.Z',i; x, ~81 ' 

25 I ,. 9. A. 4961 Ayore P.~~ch~oago,ntl6 * &t CO.~ (Ill*'>-. 

19mM) 58 ::. ?s. 310 %Illla6a, Omu~llk~loner v. Uallerlurb: 

(rnonnf 37 9; '3. (i&16. 

In other oases, we find the tax,yortpomd, until 

?.:'ie ersntual takers OGW into poaao8a1on, even upon the 

taob&mllg vested rovaindora, if the reemlnder,~ though 

rested ir'a~bjaot~t~ befouume, or oponIn&to a&sit o$hard 

0r the oha0, ??oorr ~-8. c fmlmau*6lth,~ (V~.~l930) lsg s;~ B.'~ 

035. .~ .,., :~~ $~. 

?ho history of the cbanglng pmrisiom in tt8" 

Wmrlturor tarat~tuto of NW York ior the treatment of 

rutqro oontlngent lntsm*W ( ifew 

York 0r an estate tax .inl*SO B 

rlor to thd adtigtion b 

olamrlr illrwtntoa t L 

rcrlatr of poealblr appromhoa to tha problm. Thlr lo(p 

islatlve ~hlstcry &a traoti lo a moaf intw8af.Ing -r 

by !',r. cTuotfas~?!ram?oIU in Zalo&m v* Stale ikx &maIaaIon, 

(lQZ0) El-5 II. E* 464 at phlgo 467t 

"8 , . zinw the enaateon6 et the ‘Bangor 

Tax Law in lO(ie (Oh. 483). the ala @f th0 L&a28tuxe baa boa at all times to rPopt a mathod 

of 1opi.n~ the tax rhlaji would ba iair to both 

,the life tinant and the fatura interoat and would 

pmtaot the revenura~o? fhs St&e. Fran time to 

tlmo, varlow nethnilm for dobig thin acre triad, 

3pcrieaoe revealed tholr defook. Under the orlgi~i 15~ wd ‘tka early omao~n65, the *rerursre 

to eontfngent rwaindomoa uexe not,taxab~o upon 

t\io tcatetar*a do&h, PLattor of Cagrs ill N. Y. 

m 

. 

: 

:; 
Hanamble 08orge.H. 8hOpmrb, Pago 4 

343. ‘l%ey war. taxable at the t3.n.a what thay 

veetrtl in porw~r 

?a 

Mtter of Stewart, lS1 

II. I, 874. AM tlm z than payable uw om 

patad upon the value, l 8’of the testrtti’r death, 

a? the pmp%rty tMlreIT.d, less ths 1Qlus or 

tb int8n~n1iiing 0 l d.0mtt0r ,. 0r CJGCSB, 

lS4 7:. P. 109. unaor thlr method the xwvt4nio 

derlvocl rm fh% tax CD the oontin#xtt r~s1nd.r 

wea lesa than it *ould have’bwn hcd the ru6ninaor ” 

b%eB 8 vetltsa .eJao* rel- the stats loat t&e bonofit or the mamy during the porlod intsrvsni~ 

between the Math af the tcmtator and that OS 

the ll.rs tenant. To ovemw this loiia to the 

state and the di#oriaiPaUari thmroby in favor of 

the oontin~wt mmdndemon, tha, b&8l.atum pro- I, ,~,,~ 

vl13al ‘by Cha tar lb84 of the Jbtr of 1097 t&at 

tte tax pye Ii lr on the veatlnfj df tim eontingsnt 1 

rezdntler~shoultl be mu.aumd by the full val?aa 

of the pro brt aI, of tho testoter*s atith, ritllout arauot f ng t he value oi~tha intervanla&l.iio 

estate, !:attar et L%llg4amn, 819 FL Y, 886. Thir 

statutte, whlls da Its lkoe eUmirutln8 tM dinorieiaatitm In favor of oontlas~ont.ron;eiorxot& 

WB iauad t0 fU\rlt i?l l Wioru, ~10@6 “Of XOV0BU0, 

to the Stats. Tax08 ~aroepod oelleotiaor wha they : ~1~~ : ’ 

booam duo beoawa lt proved to be ingoasiblo 

tom tis~srteln ourmatly whur the ooatt4gonoioe 

hrrpnea and heneo wtw a tax baoawa paynble. To 

mn8ay this doroot it ua8 p2cda0a by Ohapter 76 

of the laws of lt39i that the tax muot be paid u@n 

the ta&ator*r tlutkt and t&t it ehouL4 then bo 

pdd out 0r the, oorpur ‘of tba srtate at the hlgharr(r 

a plioabla ‘mt0, With 4 prOVi8iOA tQr patilLs t0 

&a rmiaindelrmrm tbr rycprun with interort~ if 1t 

should prove t&t a loeer rata wae rpsUoabl* 

Patter of 7sndmfit 198 X. Y. 69. *IMa prodcion, while iull m#.wiaq the State’6 revSavokod ti 0 nwlnda r 5ub a t the l x p o na ao t 

E@ho tenant. Mattar of Brw, 178 N. Y. 60% 

For under thin pat81011 th+ 1lf0 teMnt loat 

t.h* inow on the full muat deauotad to enaIr@ 

ptiprpsnt ar’ths tax on the oontlnwtt romdndrr 

and the nnalndarrss rooeiro6 rz0m tlw State w t. th 

intarmt such pa?t:hamof u prqvatl not PO bo 

~~~qu.lnd for tha ultiaato peymosnt of the tax. 

Themupon 8W rolld to th lifs t*nant *m aiforded by chapter so0 of the Lmaa oi 19U~ . .” 
Ronorable Esorga Hi Shippard, Tags S 

. . -MSTINCTIQN 

I se have at&ad tho problem hsre involnd to be 

t&o esa%asmeat of 1BheritaBoe tax%. upon 

illt%resta. Ye u80 the term *uncartaln 

atl~iaeely, intendlog theroby to InoluQo all interrata 

when ultlxato l'..ipi.Bt. la poasaraioa oannot be d%flnItc 

iy memined at the a0dh of tha donor. ma inma . 

not oaly w&t wore teohnioally knmn to tL0 otwduo~ law aa 

,okntIng%nt remaInd%re, and l xoout6ry tlavlt~es but also thoao 

rw~lnUom, ah&oh, tbnueh taohnloa:ly V%st%kr ar% l +bjeot, 

upon oontIn,~.tmoiea,,to partial or,fmnpl6ts am3tb~0~. so 

. far a8 t&O aifliO&iOB~ Of iahOl'ittU%CO tU8. a&?0 0OllQWWd, 

the tikphydlotal di8tin&ioM 6f -01-t prOi!Orty tin botween *nated* and ~0onttiDEttMF retaIn0era aboulti heme no 

~igniri0~~108~ 

T%o ArmrIoan Tar fnatltuto, in it% Hemtatoxent 

of thei law or property ha8 dlaoardsd sntlrelp th% t%zm, 

noontlnneat mtdnaar*, uml olaaaIflaa all rexalndwa In 

(a) lndof%aalb~y veated; 

lllwtration: 'to B for llte, m+7alnaer 

to C anA his heira* - C hae a rsoginder indoteesIbly vested. 

~-- (b) v%Stfnl eubjsot to &OA 

~rm8twi0nl w0 n for iit0 ret::clinaer 

to the oUl&on ot B' - B has l oil1.d i C. C he. 

6~ M!IdRaOr VOStOd 8UbjeOt t0 Open 8ad 1st iB 

other ohIldr%n born tc D 

(c) varb~a aubleat to oaimleto~ dereaoane 

fllustrat~onr It P r iir 

r. shall by will arlpot:t. b:: In :kfii$ 

lhder ari 

of a~- 

rolntwent~ xwnalndet to-Q uul hle heIra* - C has 

a rmdn4er toot06 t~ ubjeot to ocmpletd, asfemmnoe 

by wa sxbroin cr the ptmer 0r o~~polntmtht oonfermb on him. 

two-oluaas of roma$adora h.va am baca almast 

UQI~C~UUY ~~~Ulflcd b7 8tdUta." - 19 liarvard. 

Law &3*Iow lee. 

“That an 4.t.k In maa1ad.r la V?!.t.d 

dcea not &up17 a aart.inty that it will ever 

aot\ully take offset la persassion, beoauar 

every rskmIndar oi . llfo eat&a or ice tall 

la subjaot to uno.rt.lnty la this raapeot, 

oonsoquant on tha poralbIllt7 that the prao.- 

~asnt l kk may o&lot the est~ta In rsfmiadrr by raason of the drth Oi the r6m.lndefaUJI, 

or his duth without 188~8, ktori~ the datsr 

zdnatloa or the pprsosdant satato.* - 31 corpus 

Wff.E..ugdum 90, S.oe 69, oitjlw oumarou. 

T&e modern tmdeno7 to dltsngard the bohalml 

d1atlnotIon batwwa "veeto4* md *oont~aPt* rutarc lataraata in ths l pplloatlan oi iabarltuwa or estats tams 

lo l xa~lIfIad bf tha iallawing quetatIoaa~ 

Yta6alabem arc to bo appraised at tholr 

pm~ont V.lU.. latter Oft zbormsk1 al3 r-Y. Y. 

U$l.~;s3. X:44.. T&a7 are sift. ilk. pmsont 

In ilxla& fholr telue a0 distlaotloa la ti ba drawn tmtwua the o~aasaa U 

cmaa8rs. maher rutad or ooatinmat. (lbhu1. oursj F 

kntlngsno~ is 

tha parpoe. of taxation the 

%mlmtsd and tha gift in olasaad 

a s l baoluW. aratter o? Tam, W3 Y. Ye 8l.8, 

lilt IT. H. 9Sl." - Card000 tr in Tn CB ParkarQ 

Eatata (1919) 886 X. I. 8&O, ieS n. B. 366. 

“iv. do not straea the distlnotlon bstwsaa 

the gift of . oontl~oat r.mal~d.r and the gift 

of a vested ram.ln6.o whioh 1. l ubJaot to dlvastmaat upon the &ppudag of a matla&6onoy. %e 

b4843 ws a40i410n pa5ariiy UPM the mtum UI~ 

praotloal afiaot of tbr oontlngaaop.~ - Lahmm, 

la 3s Zragan (1939) 873 N. Y. 337, 9 ?L X. 

fhd, 953, 111) h. L, R. k430 at p. ZY% 

*The inosoapablo ratl0n.l. oi thaa daoisIoa 

(xl.in v. U. Se, &?@3 0. 8. 8911, randared by a 

ummlmua Court, wg. that the StbtUta taxatd not 

x4r.l;~ thou inter.&. whloh ara daamad to pa.. 
Honorable Osorgs i3. Shappsrd, PM. 0 

at ,daath aooordlng to raflaad t*obaloalltIas o? 

tho laiu o? propsrtt. It also texea inter viva6 

tra.?afara that l ra too muoh akin to toatamantary 

dispositions not to be aubjaoted to the cans es01.8. 3y brl.n&ag Into the grass aatata at his 

death tht whloh the settlor gave oontingently 

upon It. thin Court ?aataaa4 on the vital. feotor. 

Ji mfuiad to subordln&a the plain I)urpoaa O? 

or ancient 

st p. ll.01 6Q y. ct. 444. 04 t. Ed. 604, 12!3 A. 

. --. 3. 13a& 

lhara Is no auggedloa In the Taxaa lnbarltsnss 

ttu attstuta to lzdloate a le~lslatIv8 Intent to dlf?a~atIata 

batwiaa taobnIoally *vaat@td* and *oontlwent* future intarasta. 

Cur Inherlt6noa tax atatuto aatd?aate throughout L olrar in- 

~teUtiOA OR the :art Of tho L.~i.l~tU$'a to Mk. all th4 

er~ty passin& tram tha daoedeat to his baaadDarIss t 

mptuta Ia 

at his bath, whsthar tha latmasta of the savarai benafIoIarIsa ba ~0880440ry or futura 

1 

vastatl or oontlngeat. No- 

:.‘:.ara (lo we fin4 aup prorlalon wh oh would authorlao tha 

~ost~onsmnt of the aaaassmaat or oollaotIon of the tax to 

aWait happaah3 Of OO~i~CMieO Or the X%pCdA& Of ?UtWa 

lntarsata Into posaaaaory estataar In hot, th* oontmry 

Intention Is to ba found throughout Chapter 8 of TIt.1. 122. 

3~1s faot was lost iorolbl7 pointed out in the opinion of 

,;gslatant Attorney Canaral F. C. Pomrimoy to the Cmptrollar 

re?tWng to the fFataea of J, ferry muma, dated July 27, 

133SJ ?-heroin it was held that tha eAtin artate O? ths 

zcstetor was 

his xl11 s 

rsauitlp taxable la aglte of the faot that 

;:rov dad for a gl?t to oh&rltp in the avant Of th0 

~:aath of his two ohlldren without lssw. ‘i:e quota frcm this 

o~lnlon: 

Vha first quostloa la as to whothar our 

statute ymvides ?or,the pressat payment a? an 

inherltaaoe tu or whathor, in a oua llka this, 

pay&At ahou3.d ba portgonad u&t11 the taksrs oolarr 

Into poaaeaaion of their est$a. 
"SOL & L. lb wJ4?e, ~tlox.11, mltae 

thi lam (18 followat 

m*tttr or Itututory ooll88ruaaie& 

inquiry nu to tha lnu la anf putloulsr State 

shculd start with an '4mmination c? the ourreat 

etatuto.' 

“!?4farr&~tO the atauto, Article 7117'QroTldU that proputy 'ahall \tpon passing to or ror 

the ~8. of my paaon * + * bs subjoot to l kx.' 

*We sub&t that the pmpwty *panout at 

the bath oi/tha tea t& l o rltbmqb , hlr fnfontlon bntl ~the etlreof of thr uQl isthat it t&o 

4rf00t ,*b ~OWW~,OII ~83 -Joma* Ofknr~d8. 

Adwnr aouao81 oaaoqda that th4 tu on tha a01 

tate shaulb k lorla6 at thla tin., 'buf that 

paywant dmald not ba -do uatll whsn an4 ii thr 

oontingsnal4s prmmed for in the WI11 aatual1.y 

hagwr ~' 

"By Artlalo 7150 the kxablo values of owh 

taxable laterad in the eatato must be pnma8- 

ly datamlaad. 

*&tia14 Tl?% prooti6u ,for l mm4.n ill 

the proprrty mbjoet to tratlon to tw~uro the 

paym4lt oi dl taxam, pezbatiw rod 008ta prorl-6.4 tar in th4 ohpkr, This me8as that a 

lien exbtr not 8lea4 on tlm wtrml Mmtloa8 
or lutemete to 800~ the tax UW 0x1 tech, bu% 

tbd tha tu QUO 6n moh hequest or in:rraet is 

a lien on all the prqmrty of the astate. 

w-ti.014 7154 pmia08 that is th4 a~l0wst 

of the t4x du4 undm tha law~is not pi&cl in tf?mb 

eonthe tram the -d&to or said aee4sem4nt, 44m4 

sIxl1~dx-a~ tw per oent penalty, etc., end ii 

not paid in nine matbm the ootknty or 4ietriot 

attorney shall ills l ullnd -a ctlio Soa-- tely 

close the t8x urn. 

"Article 7135 proda that no siml aacwnt of any cxeoutor ede.inlatmtor or trustee 

shell be appoled by the oouatp judge unless 

ouoh arcour$t show‘, aa the JUl&e finds, tm s 

*I. 

‘~I) 

L’ 

"Artiaie 7lZ6 prorids‘ that no notes bands, ,~, 

stocks, eta., tub eat to taxation, shall &I ‘? .A_ 

tranricrrsd oi ao i liared to lagatee or h&r 

until the to z.p tr ohlla u s l ea4rteiaad a nd c utltied that all the iahcrltaaoo~ taxes: due tha 

State'hare been paid, and Irtlole 71Z7 We8 

any 0orjxirat1on who rl@letoe Said proYleio8 

llablt for the ~~eid tue8 and peUlti4s riad 

aoetr oollootloa. 

)%Taok I!?UXTUS is thirty-dght am! hie sloter, 

Tatbryn is forty yruo or rqsg t&r iirb.8xpact&46 are ~applVA.mtely twnty-nina Urd 

ttianty-right y;iare, r0o,potlV0ly.~ Md t0 thW@ 

tlie twenty-cm yaar trust rrrlod p;covideC for 

etter thrir’G4ath l rrd we kam a~prozln~telf fifty 

yaws before it omld be daiialtrly aeoertainad 

rho will cltixately hme isto enid raxiaddor 

@stat&. Tador the oaatrntloe ot coull~el, the 

~aymnt OS tbs WOS tight be ~~4pt~d4d SOT 

fifty yaars, and during t&et goriod the finel 

rtport or the exscutora coula not bF Br~roPedi 
A 

‘, dim 

,Hanorable George B. ,Sheppard, %ge U. 

the l etetcr oould not be oloeed, and no dietrlbuGoa. thanof could k tie. So au&It that maoh 

is antirely inoonsletontnith the prarislana of 

our statute end that th8 Loglelatura mild not 

have intended say 8uah zwu&t. Xt la, thoreiora, 

our.oonoluel6a thet all inheriknoo taxes provided 

ior by ths T4bue rtdwtre ar6 pmsrntly pueblo. 

“It .le oonteadml by oounerl that the seta& 

.’ 

renmlnln~ upon the aoath oi Jaok and f:athrfn oaaoat b4 tued until it shall be 40rinimy aemrtalnad rho will ultimeta~y oame into oal4 setak. . 

1 oaanot agxw with this oontratloa. 

Wur statute pmwidee for just iuah a oonteatiaa. Artlclo 7l23 r~~ldee that ii the preparty puslag spell 'k 4 P ri4id~loto~two or mm0 

eetat*e,~ ah an retata ror~~liro or for 11~4 end 

a ramlnder, the tu rtuLl be levied oa eaoh estat0 or intereat separately, *ooording to the 

value of the 6amo et tb do&h of tho dooe4oat. 

Th4 value of artake r or. yeare oetatee for life, 

mmnlnder~ and mnultlaa, 8hd ba determlao4 .by 

the Aotuulae Omblaod Zxporlrnoo Tables, at 

Sour par awt ampound interest. * 

la his ~oplaioa ih Galama vq 

It ma be ~aoaoedd (u lndioated by Su4ga Cordoso 

%Wia ?Bx Comaieelen,~ quoted 

above) thet to require all lnherltuto~ tuw~ to be mid at 

the denth or the tmtator ls uafdr (1) in tha8 tlu llrr 

tenant’s lnqme is -due d laeoiu a# the prlnol*t$ 2 

trust 18 mduom4 to my tha inhorltutoo tuee 

malnder lntsnete, (21 in that higher or lowar T axoa ouy 

bo raid than the ultismte 418pOritlW ai Urrmmti f’utUn 

iatsnete would roquirw Unquertlombly urder tk hne 

statute this ie roquirod to be 4eae. ad suoh a raqulrw 

mat, la~olvlog this l lo ma nt of~tborotloal uufalrneeb, 

does not render the rtatuts invalid. To quota emin fr4m 

Salaam v. Stat0 Tu Carrirelon (lO281, 876 U. 8. 484 at 

pe&4 491: 

vhr rsot that a better t axing wstom mlsht 

ba 6o~~lved &me not raadu the 1~ ti~aLi4. Aa 

me aal4 lrl Y&rep0118 Thratre Co. ** b%laago 

220 u. s. $1, 6940, *Tu bo able In find fed 

with a law La not to domoaetrut* It8 lnlfalldlty 

. . . Tha groblsme of gararnment are praotloaS 
&m 9d WY ju~tiry, ii they a0,not~ mqu5r0, 

r o w-l > ooco mo da ti--lllogioal, o n8 it say be; 

and uaaoloatiilo.” l ‘. . IWall ruuh objoo-, 

tlonr lt may be amwmd that minor ineq~lltl~ 

and hardships ere incidents of every system of 

taxntlon~and do net ?oader the leglrlatlan obnoriou6 to the ~adorel Constitution. *nsral 

h!!!erioeB mlk car carp. 1. nay, 278 u. n. 337." 

Annd at peco 4V.Ot 

‘ibe duo pmoe8a alawe l?l~ae8 ue 

restrZti0i on a Stat0 a0 to thu t&4 at whi& 

on inhorltanoo tarohall bo lstled or the pmpl rtg valuodror purposee’or 8uoh tar. Co~pam 

Cahen *.‘~?mvmter, SOS U.:6. 54%” 

AS salb in ZWaOlmabla bw Rariw 160 (lWQ)s 

“It has lo@$ boon undi8putsd tbmt the portponsmcmt or 

l 

084asrioa or the trueerr43d rn8 

doe8 not or taelf prsrsnt the t&l:U iPpo8ftloa 

0r an lnherstam* .texl~ sino* io theory the trak8- 

rertex 18 a tu on tha priilqe 0r.8~000881~~~~ 

and not, on the propwtg tranefarmd, It 8eQu 

quite prOper that the 8weo88ar8 t0 any part O? 

the dwmlaut% interest, ubthar tho vaetlng in 

porreealon be la the preoont or future, ohmld 

be subjeat to the ah@rga.* 

Prm the rorogoiag, w have aonoludidrd! (1) That 

r0r inheritenee tar ptZqO806, ft ir f.lm’trrial whether 

mum k~~~ertfd~ intsmsta6m teotai0axiy *vmad= or 

*tioatingezW (8) that thu pxeaetatute requinr the a8oeasment aa paysent or all iahrrit8nor tu*r upon the 'aath 

or the .aeoedsrst, even thou& (a) it waker the raealndor 

nan1~1 tues vaymblr out CU the aarpur Of the ecltata (b) 

it mculree the rate an& tha -t or tax to be barad 

on aom *guctw ar to the oltlcmte disposltlon Of fatura 

intersots, (5) that in rplto 0r auah ralllng8, 8ueh a tar 

16 noneth8ls68 cmstltutienal~ 
-- 

< 

Ylth there ooaelu8loae ln mind,':-!8 turn te a 

oonaidcration of the propor lBOtbd Oi aeeeeelng the tax 

upon unoortain hmuu laterester 3 sub@? t that th3 only 

alternatiVe under ,cttr 8tetutr is to beao the a.p8eoewnt 

u~aa the P.08t robsble 0r paeefble ruw0 oontlnp3noieo. 

Rsle rule is &weaelg eecpted ky atatute in the Ztnte~of 

Xeeh,in:t~, and applied by the co*& in fn re %tr)n*B 

Zetete (lose) 107 Faeh. X60, 15 ::ao. 1 I3d) $33. 

In'thet oeee the teetatrlx had left her propert9," 

to her two ailopted children leged X3 end 16 rSSpSOdV*lyi 

at her de&h with 3~Wi8iO32 that~win the ~eveat that both 

or 6ty wld &80d~*iamn ahall die b9rm ~~~irfng at..; .! ~. 

n;ajoritt umar.rieQ 'lend ~tit-hout laaue, then (to,1 m;r aister 

,Julia or her heirs."~ Under t3o ‘3whlnyton atstcto, tho 

propertp paeeing to tho ohlldren me8 texeble at a rate of 

lf, but lr it went to the eiettrqa heirs, it wao taxable 

at 10% '=ho oeurt held that the tax wan te be cuaputed 

ee thocgh .the proparty wculd otentually paos under the 

eoet probable oont$ngenoy. Fe attoter 

"The. DrSOWt tl.oBQ) 'etituts mnulrta,-th* 

paywtnt of the tax $.m?eiil8toly upon-the,~tr&%. " 

rsr cr the,propOrty at *Am hi#mt rate ~, ~bable; that 18 the word ~poeeible @ wee c 

p$sL ,'~. aged 

to*probablet end the 00urt wa8 meted ni.th the 

power to abjust the tax ir fame *appear to ba 

exoeesl~e. * 

'%Bile It Is poe~ible thet the two ohj.ldren 

mep.not reaoh~thelc majorltp, It ie likewlae 

poesible thet some or the ctl-k3r oant.lik~encioa 

me9 never he?-l‘en. %-6 jualcfelly know that it 

le mcre grobeble or mar0 likely that the two 

ohfldren will errire attheir rajoritp, reflmr 

tbon~prsdecoase the dao8deqtve sister or the 

heire cr the latter. We oan herdly hold as & 

urttor Gr law thet the probability ie that tho 

tuo ohllbma or themea ci? f6 end 10 years will 

not eur?i~s theieir sother's efetor, :-e agrw 

with the trial oourt thet the pmb&bilitlee are 

ell in ravor ot the eat&o rootSng& tho lineal 

heirs, and that tho tu woukl tWNm]~Utsll 

that baela under the pruWdon of tha stat gy;, 
It Is true that in the above case the :?eehin~on 

atztute expreaaly dlreoted the computation of the tax baaed 

upon the happenIn&! ot the moat probeble ecntingenolea proridod in the ~~111. It l obma to ua, however, that even ia’ 

the absence OS auah axpraas statutory provialon, the tar 

met of nwesalty be ocucputed upon the baala of the moat 

!‘Giima 

robaptle ooutlnganoloa, where the statute requiroa (as in 

paymeunf of alLtasea upon the 6eath of the teatafor. Suoh uas the eonolualon r-r the oourt In In ra Neabitt*s 

lCatate (19231 198 n. Y. 0. 451, atid. by Ct. ot APR., 237 ,,_ 

II. Y. Se7, 145 H. E. 72Q where tbare was no statutory 

~i~otlon to eeaesa the &ax on the unoerfaln future lutereats u9on '*probebilitiaav~, land whore ths will rovidetl for 

a oharltahlo gift upon a remote poueibllity. fh l ~8ea a ing 

the tax, the oourt alm9ly looked to the probabilttlea o?' 

the oase and Ignored entirely the remotely pooafble @it 

to the tax uempt oharity. Ye quote, fmm ,the oy.lnion of 

~~_~ 

the dourt in the ITeab$tt owe, et i-age 454: 

,, 

Vhe oontlngent r&an0eiataxod in the 

two trues with a atit over to an exempt hospital oorporatlon in tha eventof the failure 

or issue or the orlulndl aeatule que trust 

cannot be held too remote to be aaesaaed a 4 

their preeeant value atthIS ,tine. Yatter~of~ 

~YarkerI8 

\, 

Rateto, Eab Vi ‘I. i%O, 123 Ii. 3. 30& 

the devise II to then ohlldren OS the tuetator's 

deceased dau&ter and in default of their taklng by death b&ore vesting, to their irsue, 

an4 in default of Wvuo, to the hospital oorporeticn. lbe oontiwpnoy bare is not rweoto~ 

It Is llmlted'ouly on two llver,~an6 the rcbablllty of lonue of the grtmd00n8; and t & 

poaaibility of their taking is presently tarable:' 

Slnoe lnhrltanoo tuor are baaed upon the value 

or pmporty rooel-go4 by the varioua beneflelariaa, and the 

statutes unually preaorlbe a graduated tu and l poo iiio 

axamptiona ior the benefloiarleo dopending an the sire of. 

their rea9eotive bequests and their degree Of rolatlonahip 

to the deaeaaed, the problem oi taxing ;mcertain future 

lnterctoto la usually more aomplexundsr an lnherltanoa tax, 

than under an estate tax ouoh as tho Federal Govermant~a. 

The problem is ldentloal, however unOer the two typos of 

statutes where .thero is an una~ 

I, 

l-4 sin iutUre gift to a tax 

exempt c rlty. the federal deoi~lone In suoh oaaoa, are 
Honorable George 2. Sheppard, Pmgo 15 

themfori balp?ul. It la f&pl?loant that la thaa* Oaaea 

the V111tad Stabs Supreme Court tna adopted the rule of 

probability, as illuatratd by the ?ollouing two dealsions. 

In Itheaa Tr3at Co. v. t’. 9. (1923 1, &78 U. S. 

151, 49 F. Ct. ml 73 L. Ed. 64V tha aourt ooMlaeraa the 

areoament o? the +odaral estate lax upon or: estata nhlsh 

had bean ls?t in trust, the laaoma, .and M mob of the 

rrlinoipel as *may be neoea8ary to suitably neintain her 

Itn as aueb oonrort as 8he non en oya* 

wJaou or the testator for bar 11 t 

to .bo j?uiU to tN 

o, with the ontlre renelnder r:aaolq to a tax-exalt Oharlty. The nldow aotually died within ‘a year of the death e? the teatator, and 

barore tha tu had boon Wooseed, ~Tbhi gorsrnwnt ur& 

that that proportion of the lalue of the eatata attributable tom the taxakempt oharlt 

Ii 

should be reauoed beaaum 

cr the ri&t given to intaao t 0 

of the rida% 

prlnclpal Sor the support 

The eatata o~ntended, on the othar,hand, 

t&t slnoe the widow aotWly dlod before the aasoramont 

or the tax; her life estate should be valued upbn its 

aotual short Curation, nthor than upon the wldow*e llroexpeotanoy at her hurrband~a bath. Both o? theeo~ouatexb 

t!ona asremjeotad by th OOWt, OA the t.~rOWd that the 

tax muat be ~aaseoaod u&ion tha baa18 &. the probebilitir8 

as of the date of the foatator’a do&h. The ootwt found 

that tha inoogo frun tho property vma In hot amply auffialtint to’aupport the ridw rithaut thr naaaaalty o? 

dipring into the, prlnol@aL) an& that the uldarr’a lit& 

rxpeotanoy at her huaba;id*a drth baaed 0 on the a000 to6 

mortality ta b les, mur t b e thm boat or l va E Ustin& her P I?* 

oatato 

il 

even though aubaequent aroa$a belied the l oouraoy 

of au0 pre~lotlw. Said Pr. Tuatloa Fmlmar 

Thera was 

greater than the 

tends human affairs.* 

%!iira 9. c. s., ~76 v. 3. 4e7, 40 1::. at. s47, 

7E J.. Ea. 567, 

G 

tenanted B tax problsa very similar to tha 

fnatant oa8a. he teatator left his prworty %ri trust for 

his nieoa (aged 18 at bla death), slm t(’ t&o the pro~~Q 

rrae of the truat at t&e age of 40, but If sha &led witbout 

issue bsioro attaining thq e&g c& 40, then the propwty 

was to go to oertain a!mritiiea, The eatsto aOught to mc’uoe tho taxable value a? tbq ertata by the satlsatad pro81 

ent velue a? the poeaiblllty that the! oharltfsa m&zht ocmo 
iBt0 pome88toa. wit the court, again MBouBoing that 

the tar asart be bawd vpa the moat probable iutu?a otoatu, 

,rejeotedWc contcntlan end held that the poselbillt~ of 

the aMtie# taking wa8 eo ruwte ae ta be dime&&Ned 

for kekx pnrpeou, Branbole, J l , #p a k ing ror the aourt at 

pa- 4941 

TXC Congmar, in providing for the deteminatioa ~of the aat eatate taxehle, Intend 

that a ~dtihotltua 8hould be aade Sor a coatlnasea a y, the l otuel value or rthioh oannot br de- - 

tearained tron any kaonr data: Neither the taxpayer, aor the revenue offiocr-even if equipped 

with all the aid mbiob the aotuarlal art oaa 

aupply-o~tib nort than Ru,W tit t!x va;luo O? 

this oontingeaof. 3t 16 olear-that Congreso 

did aot Intend wt a do&a&ion should be medo 

for a ObBtiB&OBt gift Of ttit Ohar(LOtdJr~" 

4~1 these padaoi~lea to t.hw0rao.e Me 

it ,ia our ep P on tba9'yon hwo oomectly wseaaed t L 

Betato, 

l a outllBe4 in your lottar, Aa l tatod in the b r i*i r ub & l 

by t&e l ttonwy for tha bMk wbothrlstere efdooedaatare 

elderly and rotordl 0#n o&r thn the mphw.* Ruti 

upa thr.ir mapootive life mpertanoiu! it 18 prabablo that 

the JW@VSV will m&live the bibtOP& & porslblo oantiageney thet the alacrity al&ht take rho~ld be dlon$ati~I for 

purpms or oomputi~$the tax. ,The 

die out or the oat&e anil jpaafaeat 

ooverrd ageiaet the awOUtOre 3fde ‘I* R 

Tex. 668, 70 2. w. (Mial 699‘ on n&adag 

Vo do aot 8gree vltb tha 

03. 

faioa et the Bank'6 

attorney that the a88oMsaoat ea4 0 sot&on 0r the tax upon 

\ the rwmain&rr intalwt'~to the a.ph.w at&et b. ddW'& Wt%l 

the death of tha liie twt8. XB support af thicl eonfation, he oltea the following pwa6ge.fram Xa ro HollunW'~ 

E8t&e, ~1% 1T. 3. IQ. 92 198 Atl. $08 vhloh W68 qU?fird 

E 

mith approval by tba A&.n Oourt eS dvll Apxmlr in %thea 

v. Shevpud, J&3 3. We (2&J 9961 , 

*me tw9 or tuability is not the tiae 

of the omaplets diverting of the treneroror~e 

I 

t 

Interest or ovnerehip, it ie the tim6~ of the 

t 
. 

complete auooesal~n by the ttanaieree. 1Qm-e 

there la 6 tnnaier ol' .a 6pulfio interert in 

property and the auooeaaion 0r the tzularerso 

doesnot beeoa~emduaderth4 fezma of tie trezuSer is uot to hemono, dcmplote until a tlw at 

or after t&e duth ct the trencferor, ttrt t-7 

fer 3.6 tanble.. '7210 Elatinotio~ . . , rest0 cm 

G-QAt 

Aether the doaee is dejdred of an iaof some kind . . . until the donor's math." 

In both the Rollarrdor end :*thscr aa8es the acurts 

were di6cuaalng the problem Of vben a6 inter tiro6 tnbafer 

may be taxed u a teatementary disposittcm under the prorlaloaa ot the 6tatutea la the mapeotlre 8tatea meklag 

auoh tranaiera 6ubJeot to en lnheritanoe tax when *rydo or 

intendedto take etioot la posse6alon or enjoyment l r ter the 

death of the pmntor or ,Conor.* It is a::parent that tha 

l bo~o quoted 1-r umot eppl~ to the questlen of vhether 

the aaae66ment and p6yment of a tax upoa a ruadldor In; 

toreat my be pOatpOBd until the duth of the llie tenant, 

boamae the words Ctraqferor" ena “doaorw ournot bo applies 

to a life tenant, udler# he heve l power of appolntmmnt. 

The o o a tentl o f tohe a Thnkl tsorney a a s to the 

the when the tu cipoxi the crnslnde~ iatenat oi,the nephew 

;;waG;y is refuted by the oaurf in the -thea a~aae , at 

"At the 6th a? rantor or aottlor the 

rull poaeeaaien an4 0 $ oymeat of all of the 

trurt eatate vested in appellant throwh the 

t 

one or tho ralur of 
Eo~orable Oaorge Ii. Sh6pmr4, ParJe 18 

, 

estate, ~ahloh rQht ot 6njaymnt~tho 6tatute 

taxes. * (bphula mm4 1 

l%r are we persuedea by the oirort to Qlatlnguiah 

be~een %a. ?athe6t,6 lBtsr66t and the interest. of the. tiphew 

Vader the okaeItl~ation of rmainder, made by the 

~&&an Law f8atltute. guotad l b we, the ocphaw has a roatti 

reaainclor, aubjeot to ooapl6te befeaaaaoo: 

Tbd 13anksr attorney Brgu68 that If 'tlm ahrrity~ 

shoWI e7imtBally oaw bto possesalon, the enoutor reight 

b6 llablo to It Sor Inh6rlt6~00 tuea pBId BPOB tho Bephn*s 

rW6iBd.r interoat. @On thii threry, SVO2?y ahuity hOliBr: 

6 rwalndrr abaolutaly VeStOd, UWendent upon 6 lit6 eatat., 

ro~l4 halo a right to mover iron the exooutor for part 

ot th6 iaherit~oo taxes pal4 on behalf of the llio~ taawt 

la tha event the life tuut .4164 prior to hIr life l xpootaaoy, upon whloh the tue6 wre 8aueaetY and paid. Such a 

theory is refuted by It&on Trust Co. v* W. 3. (l.OM), 87 

c. s. 151, 49 s. Ctr 891, 73 2. Ea. 647, aited above. 

c:e UM retur&ng to you herewith your rile a this 

Eatat& 

Yours vuy truly 

ATlwaEY CERW OF TEx&3 

mlt.er a. Eoeh 

Aulatmt