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THE

TRANSFER TAX LAW

Sections 220 to 245, both inclusive, of the Tax Law, Chapter 62, Laws of 1909.

CHAPTER I.

RELATING TO THE TRANSFER TAX LAW.

1. Power of the State to tax. 2. The tax is upon the right of succession under a will, or devolution in case of intestacy. 3. The law is constitutional. 4. Provisions of the act declared constitutional.

5. Constitutionality of chapter 41, Laws of 1903.

6. Chapter 41, Laws of 1903, did not change the rule that the aggregate estate determines whether the transfer is taxable or not.

7. Subdivision 5 (now subd. 6) of

section 220 of the Transfer Tax Law held constitutional by the U. S. Supreme Court. 8. Provisions creating different rates of taxation, and tax

1. Power of the State to Tax.

ing transfers by trust deed where life estate therein is reserved to grantor, are constitutional.

9. Unconstitutional provisions: Chapter 76 of the Laws of 1899, amending section 230 of the Act of 1896.

10. Effect of the repeal of the Act of 1885.

11. Amendments

are not retroactive unless stated to be. sections of

12. Corresponding

former acts relating to taxable transfers.

13. Amendments by chapter 368, Laws of 1905.

14. Amendments since June 1, 1905, to June 1, 1909, inclusive.

The power of the State in respect to the matter of taxation is very broad, at least so far as the Federal

§ 220

Tax Is upon the Right of Succession.

Constitution is concerned. It may exempt certain property from taxation while all other is subjected thereto. It may tax one class of property by one method of procedure and another by a different method, without violating the due process and equal protection provisions of the Fourteenth Amendment. As a general rule mere inequalities or exemptions in the matter of State taxation are not forbidden by the Federal Constitution. Beers v. Glynn, 211 U. S. 477.

In respect to the settlement of succession to property on death, the States are sovereign, and may give to their courts the authority to determine finally as against all the world all questions which arise therein, subject to applicable constitutional limitations. Tilt v. Kelsey, 207 U. S. 43.

2. The Tax Is upon the Right of Succession under a Will, or Devolution in Case of Intestacy.

In several of the earlier cases the court stated that in deciding the question therein presented it was not necessary to determine whether the tax was upon the right of succession of property, or upon the property. Matter of McPherson, 104 N. Y. 306; Matter of Sherwell, 125 N. Y. 376.

It was determined, however, in the Matter of Swift, 137 N. Y. 77, that the tax imposed by the Act of 1885, as amended by the Act of 1887, was a tax upon the right of succession to property, and not a property tax. Other cases have since held that the subsequent acts of the Legislature affecting taxable transfers impose this tax upon the right of succession under a will, or devolution in case of intestacy. Matter of Merriam, 141 N. Y. 479; Matter of Hoffman, 143 N. Y. 327 (decided since the Act of 1892); Matter of Western, 152 N. Y. 93–99.

The Law Is Constitutional.

§ 220

In the Matter of Vanderbilt, 172 N. Y. 69 (decided since the Act of 1896), the Court of Appeals held that the fact that a tax is to be paid out of the property does not render it a tax on property, but that " a tax is a property tax when imposed by reason of the ownership; a transfer tax when imposed on the method of acquisition."

In the case of Magoun v. Illinois Trust and Savings Bank, 170 U. S. 283, the court says in support of an inheritance tax that such taxes are based on two principles:

"(1) An inheritance tax is not one on property but one on succession.

"(2) 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 State may tax the privilege, discriminate between relatives, and between these and strangers, and grant exemptions, and is not precluded from this power by the provisions of the respective constitutions requiring uniformity and equality of taxation."

3. The Law Is Constitutional.

The Act of 1885 was declared constitutional in the Matter of McPherson, 104 N. Y. 306. Judge Earl, in writing the opinion of the court, in which all concurred, says: "We entertain no doubt that such a tax can be constitutionally imposed. The power of the Legislature over the subject of taxation, except as limited by constitutional restrictions, is unbounded. It may impose all the taxes upon lands, or all upon personal property, or all upon houses or upon income

8 220

Certain Provisions Held Constitutional.

It is not very important to determine whether the Act of 1885 is to be regarded as imposing a tax upon property or upon the succession or devolution of property by will or intestacy. In either case it is a special tax

To the same effect, see Matter of Sherwell, 125 N. Y. 376.

The Act of 1887 was upheld in U. S. v. Perkins, 163 U. S. 625, Justice Brown of that court saying in his opinion: "While the laws of all civilized states recognize in every citizen the absolute right to his own earnings, and to the enjoyment of his own property, and the increase thereof during his life, except so far as the State may require him to contribute his share for public expenses, the right to dispose of this property by will has always been considered purely a creature of statute, and within legislative control."

The Act of 1892 was upheld in the Matter of Gould, 156 N. Y. 423, the court holding that it was certainly within the constitutional power of the Legislature to tax all property transferred by will, whether the motive was to make a gift or pay a debt.

4. Provisions of the Act Declared Constitutional.

Subdivision 5 of section 220, added by chapter 284, Laws 1897, taxing property transferred by the exercise of a power of appointment, is constitutional and not a violation of either vested or contract rights. Matter of Vanderbilt, 50 App. Div. 246, 63 N. Y. S. 1079; affd., 163 N. Y. 519, on opinion below; Matter of Potter, 51 App. Div. 212, 64 N. Y. S. 1013; followed in Matter of Vanderbilt, 58 App. Div. 619, 68 N. Y. S. 1150; affd., 166 N. Y. 640; Matter of Delano, 176 N. Y. 486.

Chapter 76 of the Laws of 1899 (§ 230), assessing

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