In re the estate of Clark , 5 N.Y.S. 199 ( 1889 )

The Surrogate.

The question here is, has the appraiser erred in reporting the value of the contingent annuities, under chapter 483 of the Laws of 1885 ? If not, should he have further reported them as now subject to taxation?

Counsel for the executors contends that it is impossible to fix the value of the contingent annuities until the death of the present living annuitants (who are not subject to the tax) should happen.

It is contended on the other hand that when the amount can be ascertained, the Surrogate must assess and fix the tax, even though the person who is interested in the contingent estate may never come into the actual possession or enjoyment of such property; that this proceeding is a proceeding in rem, and consequently follows the property.

To make the tax accurate at once, two things are necessary, first to determine definitely the fair market value of the property subject to the tax, and, second, the person to whom such property passes.

The first proposition can be ascertained with sufficient accuracy for the purposes of taxation, but the second cannot be definitely determined until the death of the life tenant.

“ The tax is not imposed upon the estate of which she was seized or possessed, but only upon such of it as passes to certain persons; not all persons or any person.....There are many other provisions of the act requiring the same construction, and tending to show that in the matter of taxation it is simply the ‘ estate ’ or share of the beneficiary acquired through the will or statute of distributions, which is to be valued and the duty estimated according to its value.” Matter of Howe, 112 N. Y. 100.

The duty of the appraiser to report the value of these contingent annuities is settled by the Court of' Appeals in the Matter of Cager, 111 N. Y. 343. Ruger, C. J. : “When the present value of the property which is devised to one with a limitation over to others upon the happening of some event which may or may not occur can be ascertained, then ground upon which an approximate estimate of the value of the ultimate devise appears, and it may be made.”

Nothing is said about the assessment or payment of the tax, although the court said that contingent estates might be appraised if their values could be ascertained. The question is, can the tax be assessed and fixed ? The executor cannot dimmish the funds which produce the annuities.

The contingent annuitants cannot be required to pay for something they may never receive. The act does not say that where property is left to “A,” an exempted person for life, with a contingent life estate to “ B,” that “A” shall be taxed to pay for “B’s” prospective enjoyment, even though “B” may never enjoy it. The act expressly exempts certain persons, and taxes others, and it cannot be rightly held that where property was left for life to an exempt person, and after his death, for life to one not exempt, should she survive, that, in that event the corpus of the estate which is exempt, should be diminished by the amount of the tax upon the happening of an event which would not make the life tenant liable to the tax, whether it did or did not happen, and which, if the contingency should fail, might throw the estate back to persons who were exempt.

Neither the first estate, nor the last, should be taxed for the contingent second estate. It must be that, in cases such as this, where it is absolutely impossible to decide to whom the property will go, the intention is that the appraiser shall report the fair market value of the property at decedent’s death, and that the matter must be regarded as suspended until the contingency does, or does not happen, at which time, that is at the death of the tenant, it can be determined to whom the property will pass, and whether or not it is subject to the tax. The appraiser was right in reporting the fair market value of the contingent interests at the date of the death of the decedent, and it is further reported that in view of the contingent character of the bequests, he could not report the remainder as presently taxable.

An order should be handed up confirming the report of the appraiser, and assessing and fixing the tax upon the interests reported as now subject to the tax, and reserving those contingent interests for future action.