Court Opinion

ID: 3598560
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:45:37.963404+00
Date Added: 2024-06-11T14:07:25.619508
License: Public Domain

I vote for the reversal of the order below. It is conceded that the statute on its face provides for the immediate taxation of the whole corpus of the trust estate, regardless of the fact that the persons who may ultimately receive either the whole or part of such corpus cannot now be ascertained, and for the payment of the tax out of the fund. I concede that if the statutory scheme creates a property tax it cannot be sustained. I think that such is the doctrine of the Pell Case (171 N.Y. 48) in which I fully concurred. But in my opinion the tax now sought to be imposed is not a property tax and the Pell case is not an authority for such a claim. In that case the interests of the devisees and legatees attempted to be taxed were given by the will of the testator who had died long prior to the enactment of any inheritance tax. Technically they may have been, and probably were, vested subject to be divested by death before the demise of the life tenant, but in the ordinary sense of the term they were contingent, that is to say, it was impossible to determine who would actually enjoy the property until the death of the life tenant. Nevertheless the interests of the devisee accrued on the death of the testator, and at that instant, and were immune from legislative attack whether contingent or vested. (Brevoort v.Grace, 53 N.Y. 245.) We, therefore, held that the legislature could not impose a tax on the transfer of property which had previously been made. This case presents a situation the reverse. True, it cannot now be told who will ultimately enjoy thecorpus of the estate till the life tenant dies or arrives at the prescribed age. But the legislature *Page 74 
might have forbidden the suspension of the absolute ownership of the property for any period whatever as it has forbidden suspension for more than two lives in being. As said by the Supreme Court of the United States of the inheritance tax: "The right to take property by devise or descent is the creature of the law, and not a natural right — a privilege, and, therefore, the authority which confers it may impose conditions upon it. From these principles it is deduced that the states may tax the privilege." (Magoun v. Trust Co., 170 U.S. 283; Matter ofDows, 167 N.Y. 227.) There, fore, the state can say a devise or bequest may be made where the interests are contingent or the ultimate beneficiaries unknown till after some period, but in such case there shall be exacted from the beneficiaries, whoever they may prove to be, a tax to be presently taken out of the property. This, in effect, it has said, for the provision of the Transfer Tax Law under consideration was in force at the time of the testator's death. The fact that the tax is to be paid out of the property does not render it a tax on property. In both the federal and state inheritance tax laws are to be found provisions, in the case of personalty, requiring the executor to deduct the amount of the tax before turning over the legacy to the legatee, and in the case of realty making the tax a lien on the property; yet nobody has supposed that these provisions render the tax a property tax. If such was their effect, neither the federal nor state statute could be upheld. A tax is a property tax when imposed by reason of the ownership of property; a transfer tax when imposed on the method of its acquisition.