Mortgage Debts Direction to Pay.

§ 230

tion, if the devise or bequest be accepted by the beneficiary, the transfer is made by will, and the State, by the statute in question, makes a tax to impinge upon that performance."

To the same effect, see Matter of Rogers, 71 App. Div. 461, 75 N. Y. S. 835.

619. When Debts Owing by Nonresidents Not Allowed.

In assessing bonds and stocks of domestic corporations owned by a nonresident and located within this State, no deduction should be made for debts of decedent due to residents of this State and secured in part by a pledge of stocks of corporations of other States, when it appears that the value of the pledged securities is greater than the indebtedness and the general assets of the estate are five times in excess of the liabilities. Matter of Pullman, 46 App. Div. 574, 62 N. Y. S. 395. 620. Mortgage Debts Not to Be Deducted from Personal Estate.

Mortgage debts of testator are not to be deducted from decedent's personal estate prior to the assessment of the tax. Matter of Sutton, 3 App. Div. 208, 38 N. Y. S. 277; affd., 149 N. Y. 618; Matter of Offerman, 25 App. Div. 94, 48 N. Y. S. 993; Matter of Murphy, 32 App. Div. 627, 53 N. Y. S. 1110; affd., 157 N. Y. 679.

A direction by testator to pay certain mortgages out of personalty does not authorize the appraiser to deduct the amount from the value of the personal estate. Matter of Berry, 23 Misc. Rep. 230, 51 N. Y. S. 1132; Matter of DeGraff, 24 Misc. Rep. 147, 53 N. Y. S. 591; Matter of Livingston, 1 App. Div. 368, 37 N. Y. S. 463; Matter of Maresi, 74 App. Div. 76, 77 N. Y. S. 76. Under chapter 41, Laws 1903, mortgages are deducted from appraised value of the real estate.

§ 230

Tax Paid in Another State.

621. Tax Paid in Another State.

Taxes on transfers paid by the laws of other States are not to be deducted Matter of Clark, N. Y. Law Journal of December 26, 1904; Matter of Gihon, 169 N. Y. 443.

The fact that property may be subject to tax under the laws of another State does not relieve such property from our Transfer Tax Law if it is otherwise taxable under our laws. Matter of Burr, 16 Misc. Rep. 89, 38 N. Y. S. 811; Blackstone v. Miller, 188 U. S. 187; Matter of Kennedy, 20 Misc. Rep. 531, 46 N. Y. S. 906; Matter of Daly, 100 App. Div. 373.

While the Federal legacy tax was in force (1898 to 1902) a difference of opinion arose in regard to the question as to whether or not the amount paid to the United States for the Federal inheritance tax should first be deducted before computing the tax here. Several of the surrogates (Cattaraugus, Erie, and Orange counties) all held that as the Federal tax was not in the nature of a debt that it could not be deducted. Matter of Irish, 28 Misc. Rep. 647, 60 N. Y. S. 30; Matter of Becker, 26 Misc. Rep. 633, 57 N. Y. S. 940; Matter of Curtis, 31 Misc. Rep. 83, 64 N. Y. S. 574. The surrogate of Westchester county held that the Federal tax should be deducted, in the Matter of Gihon, 33 Misc. Rep. 206, 68 N. Y. 381, on the ground that the beneficiary as a matter of fact only received the amount of the legacy, less the Federal tax, and that she should not pay a tax upon something she would never receive. The Appellate Division sustained the decision (64 App. Div. 504, 72 N. Y. S. 1104), and the same position was taken by the Appellate Division of the First Department in the Matter of Vanderbilt, 68 App. Div. 27, 74 N. Y. S. 450. The Gihon case was

Repairs to Real Estate.

§ 230

taken to the Court of Appeals (169 N. Y. 443), and that court reversed the court below, holding that it was an error to assume that the Federal tax was primarily payable out of the estate. In this opinion Judge Cullen says: "The Federal tax is of exactly the same nature as the State tax; a tax not on property, but on succession; that is to say, a tax on the legatee for the privilege of succeeding to property. Knowlton v. Moore, 178 U. S. 41. The Federal tax is necessarily of this character, for a direct tax, unless apportioned according to population, would be repugnant to the Constitution of the United States. Under that statute, also, it is the amount of the legacy, not of the estate, that determines the rate of taxation. Therefore, though the administrator or executor is required to pay the tax, he pays it out of the legacy for the legatee, not on account of the estate. The requirement of the statute that the executor or administrator shall make the payment is prescribed to secure such payment, because the government is unwilling to trust solely to the legatee. No one questions that where a legacy is given for a specified amount the tax must be deducted from the amount of the legacy and the balance only given to the legatee. A testator may direct that the tax on a particular legacy shall be paid out of his estate; nevertheless, in reality, the tax is still paid out of the legacy, the effect of the direction of the testator being merely to increase the legacy by the amount of the tax."

622. Repairs to Real Estate Not Allowed.

The expense of repairs to real estate under a contract entered into by decedent in his lifetime and not fully completed until after his death are not deductible

§ 230

Tax Paid as an Administration Expense.

from the personal estate. Matter of McNeill, N. Y. Law Journal of June 21, 1902; Matter of Baudouine, 5 App. Div. 622, 39 N. Y. S. 1121. But see Matter of Tracy, 179 N. Y. 501, when such items are proper. 623. Tax Directed to Be Paid as an Administration Expense.

When the will provides that transfer tax shall be paid by the executor as an expnese of administration, the residuary estate should not be reduced by the amount of such taxes. Matter of Swift, 137 N. Y. 77. 624. When Debts Cannot Be Deducted after Appraisal.

Debts cannot be deducted after the appraisal has been made and the time to appeal has expired, unless they were reserved for future action at the time of the appraisal. Matter of Morgan, 36 Misc. Rep. 753, 74 N. Y. S. 478.

624a. The Husband's Right of Curtesy.

In the Matter of Starbuck, 63 Misc. Rep. 156, the surrogate of Westchester county held that where a wife dies intestate, her husband's right of curtesy in her real estate should be deducted from the amount of her estate before fixing the transfer tax thereon.

CHAPTER XVI.

DETERMINATION OF SURROGATE, § 231, TAX LAW.

625. Determination of surrogate.
626. Value of the estate and
amount of tax how de-
termined.

627. The surrogate is the assess-
ing and taxing officer.
628. Meaning of the phrase as
of course."