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Renunciation of Legacy Rate of Tax.

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given a deed of it, nor have reconverted it without the interposition of equitable rules. It was subject to the payment of debts, expenses of administration, general legacies, executors commissions, and the expenses primarily payable out of the personalty.

31. Renunciation of Legacy-Tax Is then upon the Ultimate Devolution..

Section 243 (post) defines a transfer as including the passing of property, or an interest therein, in possession or enjoyment, present or future, by inheritance, descent, devise, bequest, grant, deed, bargain, sale, or gift, and under the rule of strict construction the transfer tax is not laid on the property transferred, nor on the estate of the legatee, but merely on the transfer itself; and, with respect to legatees who renounce their legacies, no tax can be collected, but the succession thereupon becomes taxable in accordance with the ultimate devolution of the property.

In the Matter of Wolfe, 89 App. Div. 349, 85 N. Y. S. 949; affd. on opinion below, in 179 N. Y. 599, the testator by his will bequeathed $20,000 absolutely to his executors, who were unrelated to him. The residue of his estate he gave to his executors in trust for his surviving children. The executors, some eight months afterward, by instruments in writing, renounced and released the said bequest, but did not name any one in whose favor such renunciation was made. There was no claim in this case that the executors, by their renunciation, were attempting to evade the payment of the transfer tax at the higher rate.

The surrogate of Orange county assessed a transfer tax on this bequest of $20,000 to the executors at 5 per cent., such bequest being in addition to their commis

sions, upon the ground that the legacy to the executors became subject to tax immediately upon the death of the testator, and that they could not defeat the right of the State to that tax or any part of it, by any subsequent act of theirs. Citing Matter of Seaman, 147 N. Y. at p. 69; Matter of Greene, 153 N. Y. at p. 223.

The Appellate Division, in reversing the order of the surrogate, held that the force of this view might be convincing if the tax was upon the legacy, but that it was greatly weakened by the consideration that the tax is not imposed upon the property at all, although payable out of it, but is imposed upon the succession to, or transfer of, the property, and that the word "transfer" as defined in the statute means the passing of property in possession or enjoyment, and until there was such a passing of property in possession or enjoyment there was no transfer, as otherwise the tax would be imposed, not upon the transfer, but upon the attempt to transfer. This necessarily implies that there must be some act of volition, upon the part of the legatee, equal at least to an acceptance of the legacy before the State is entitled to the tax.

The court says, however, that a different question would be presented by a transfer operating under the laws of inheritance or descent, as in such case the transfer is effected by operation of law, and calls for no act of volition on the part of the heir or next of kin.

32. Assignment of Legacy - Rate of Tax Not Affected by.

A succession tax is measured by the legal relation which the legatee bears to the testator, and is not affected by the relation which an assignee of the legatee bears to him.

In the Matter of Cook, 187 N. Y. 253, the decedent

Assignment of Legacy - Tax Not Affected by.

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gave his residuary estate to various nephews and nieces, some of whom were also entitled to receive money legacies under his will. The widow and daughter filed objection to the probate of decedent's will, which raised an issue as to testamentary capacity. Pending the trial a compromise was arrived at, which was carried into effect by certain instruments executed by the widow and by each of the residuary legatees, whereby they formally assigned to the widow all their "right, title and interest in and to any part of the residuary estate of said Frederick Cook and all rights accruing to " them and each of them "by virtue of the provisions of said paragraph number thirty-eight of said last will." The appraiser found that the entire residuary estate should, notwithstanding the assignment thereof to the decedent's widow by the nephews and nieces, be taxed at 5 per cent., and upon appeal to the Surrogate this determination was affirmed, but the Appellate Division (114 App. Div. 718), by a divided vote, reversed the order of the surrogate and fixed the tax on the residuary at 1 per cent., upon the theory that the compromise was a renunciation by the residuary legatees of their interest in the residuary estate, and this conclusion was reached in reliance upon the Matter of Wolfe (89 App. Div. 349, 179 N. Y. 599).

The Court of Appeals reversed the order of the Appellate Division, holding that the Matter of Wolfe did not apply to this case, the court saying, at page 258:

"Here the transfer of the residuary estate was to the residuary legatees named in the will. They neither renounced nor refused to accept. On the contrary they accepted the bequest, not in express terms, but by necessary implication, for they transferred

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Assignment of Legacy-Tax Not Affected by.

the same to the widow, who accordingly took the residuary estate not through transfer by the will, but through transfer by the assignment. While they could renounce they could not assign without accepting. The widow did not take the residue from the testator, for he did not give it to her. She took as assignee, not as legatee. Unless she took as assignee she did not take at all. The legatees assigned to her, and the rate of taxation is fixed by their relation to the testator."

CHAPTER III.

TAXABLE TRANSFERS - § 220, TAX LAW

INTERESTS TAXABLE.