In the Matter of the Appraisal of the Property of JONATHAN SMITH, Deceased, under the Taxable Transfer Acts. WILLIAM SOHMER, as Comptroller of the State of New York, Appellant; JAMES S. FITCH, as Administrator with the Will Annexed, etc., and as Trustee under the Will of JONATHAN SMITH, Deceased, Respondent.
APPEAL by William Sohmer, as Comptroller of the State of New York, from an order of the Surrogate's Court of the county of Westchester, entered in said Surrogate's Court on the 27th day of October, 1911, exempting the transfer of the residuary estate of the decedent from payment of a transfer tax.
Winfield L. Morse [John J. Sinnott with him on the brief], for the appellant.
Theodore Fitch, for the respondent.
Jonathan Smith died a resident of the county of Westchester in the year 1859, long before the passage of the first Inheritance or Transfer Tax Act in this State, leaving a last will and testament disposing of his residuary estate in the following manner:
'6. All the rest and remainder of my estate real and personal which I may now have or be entitled to, or may have or be entitled to at the time of my decease, I give, devise and bequeath unto my Executors in trust, to be by them held and kept invested together with all other moneys received by them under this will, on Bond and Mortgage on real estate in the city of New York of at least double the value of the amount loaned by them, and to pay over the interest and proceeds thereof to my wife Delia on her separate receipt, as long as she shall live, and upon her death to distribute and divide the principal and any accumulations equally, share and share alike among such of my nephews and nieces the children of my brothers Alexander, Nathaniel and Ralph, and of my sister Sarah, as may be living at the time of the death of my said wife, and if either of my brothers or my sister shall have no child or children living at the time of my wife's decease, then I desire
and direct that such brother or sister then living shall take the share of one nephew or niece, share and share alike with my nephews and nieces as aforesaid.'
The testator's widow died February 25, 1910. All the testator's brothers and his sister referred to above, and all his nephews and nieces, died before the widow, except four, who were the children of the testator's brother Ralph H. Smith, and who are the only persons now entitled to share in the distribution of said residuary estate. Those nephews and nieces were living at the time of the widow's death, but the record before us does not disclose whether they were living at the time of the death of the testator. This proceeding was instituted in the Surrogate's Court of Westchester county by the administrator with the will annexed for an order declaring the transfer of said residuary estate to those nephews and nieces exempt from transfer tax. The Surrogate's Court granted such an order, and the State Comptroller has appealed from that order.
The act taxing the transfer of a decedent's estate does not levy a tax upon the property transmitted but upon the right of succession thereto, and the tax is based upon the exclusive jurisdiction of the State to regulate and control the devolution thereof by inheritance or will. ( Matter of Swift, 137 N.Y. 77; Matter of Sherman, 153 id. 1; Matter of Vanderbilt, 50 A.D. 246; affd. on opinion below, 163 N.Y. 597; Matter of Dows, 167 id. 227; sub nom. Orr v. Gilman, 183 U.S. 278; Matter of Delano, 176 N.Y. 486; sub nom. Chanler v. Kelsey, 205 U.S. 466.) This jurisdiction of the State to regulate and control the transmission of property from the dead to the living is an attribute of its sovereignty (United States v. Perkins, 163 U.S. 625), very far reaching, if not unlimited in its possible extent over the privilege taxed (Chanler v. Kelsey, supra, 479). Thus, although United States bonds are exempt from taxation by the State, it may assess a tax upon the privilege of their acquisition by inheritance. (Wallace v. Myers, 38 F. 184.) So, too, the privilege of the United States to acquire property by bequest may be taxed by the States. (United States v. Perkins, supra.)
It has been held, however, that a tax cannot be imposed upon a right to the succession where the right accrued prior to the
existence of the statute. ( Matter of Seaman,147 N.Y. 69; Matter of Harbeck, 161 id. 211, 219; Matter of Pell, 171 id. 48; Matter of Lansing, 182 id. 238; Matter of Craig,97 A.D. 289; affd. on opinion below, 181 N.Y. 551; Matter of Backhouse,110 A.D. 737; affd., 185 N.Y. 544; Matter of Spencer,119 A.D. 883; appeal dismissed, 190 N.Y. 517; Matter of Ripley,122 A.D. 419; affd., 192 N.Y. 536; Matter of Haggerty,128 A.D. 479; affd., 194 N.Y. 550; Matter of Lewis,129 A.D. 905; affd., 1 ...