from the legacy or distributive share and to pay it, and permit him, where the legacy is specific, to collect the tax upon its appraised value from the legatee, and exempt him from liability to deliver any specific legacy until he shall have collected such tax thereon. Different rates of taxation are prescribed for different classes of legatees and distributees, and it would be impossible to apportion the different taxes upon the different kinds of property, and manifestly unjust to fasten a lien for all the tax upon any one piece or kind of property. "This view is not weakened by the other provision of the section giving to the executor, administrator, or trustee full power to sell so much of the property of the decedent as will enable him to pay such tax in the same manner as he might be entitled to sell for the payment of debts. Instances often arise where the testator directs that the general legacies be paid in securities, or that the residue of the estate be turned over in kind to the residuary legatee. In such case the lien attaches to the transfer, and, if the legatee does not advance the money to pay the tax, the executor may sell such securities as shall be necessary to do so. Our conclusion is that neither the whole nor any part of the transfer tax which the law imposed upon the various legatees under the will was a lien upon the real property contracted to be sold." 2 In another recent New York case the estate of the testator consisted in part of several farms. By his will he gave the real property to his widow for life, and the remainder to his brothers and sisters, share and share alike, with the provision that if any of them died without issue, the surviving brothers and sisters should take their shares. One of the sisters died, leaving a surviving child. It was decided that the entire property was subject to a lien for the payment of the 2 Brown v. Lawrence, 133 App. Div. 753, 118 N. Y. Supp. 132. whole inheritance tax, and that, if there was no money forthcoming to pay the whole tax, it was the duty of the executor to pay the same, and the court would direct the sale of so much of the whole of the property as necessary to make the payment." § 217. Priority of Liens.-The lien of the inheritance tax is not paramount to the lien of a mortgage on real estate which was in existence at the time of the decease of the mortgagor. The rights of the mortgagee are not impaired by subsequent devolutions of title and the creation of liens as a consequence thereof. The inheritance tax is not to be likened to the general taxes which are imposed by public authority, and which attach to the property as a whole, without regard to particular estates or interests therein. In such cases the rights of the state are always paramount. It is not concerned with the particular estates or liens that affect the property, but, dealing with it as a whole, imposes the tax, and leaves it to the parties interested in the property to secure, as between themselves, such an adjustment as the circumstances may seem to require. Different conditions surround the inheritance tax. It is imposed upon the right to succession, and is levied upon successors in respect to the shares to which they succeed. It cannot, therefore, be deemed to affect the interest of one who has a lien upon the property paramount to the ownership of the mortgagor and superior to any estate or interest which he might assume to create by will. Hence the only property or estate which becomes subject to the lien of the inheritance tax is the equity of redemption. But if the entire property is sold in proceedings to foreclose the mortgage, the liability to the estate for the unpaid tax still persists and renders the title unmarketable.* 3 Estate of Wilcox, 118 N. Y. Supp. 254. Kitching v. Shear, 26 Misc. Rep. 436, 57 N. Y. Supp. 464. § 218. Judicial Sale or Equitable Conversion of Property.-A few other decisions, in addition to the one mentioned in the preceding paragraph, have been made relative to the effect, on the lien of the inheritance tax, of a judicial sale of the property. In one instance it is affirmed that in case the proceeds of real estate, which has been sold by the executor, are in court, or will be paid into court, and in any event will be subject to the order of the court, the lien of the inheritance tax does not render the title of the property defective, for the court, with the entire estate under its control, can make such orders as are necessary to satisfy any claim of the state for taxes, inheritance or otherwise." In another instance the decedent owned an undivided one-third in real estate, and by his death a collateral inheritance tax accrued to the commonwealth by the devolution of his interest to his collateral heirs, his cotenants. After his decease they had partition of the property. The part allotted to one of them was sold, on a judgment against him, by the sheriff, and a sum realized therefrom in excess of the amount requisite to pay all of the tax upon all of the real estate. The commonwealth made no claim for the tax on the fund at distribution, and it was distributed to other liens. It was held that the partition did not have the effect of apportioning the lien of the tax, and the lien of the whole tax upon the entire estate was devested by the sheriff's sale." It has been adjudged in Pennsylvania that when a will converts real estate into personalty, the lien of the collateral inheritance tax is shifted to the fund which the conversion produces.' Mandel v. Fidelity Trust Co., 128 Ky. 239, 107 S. W. 775. • Appeal of Mellon, 114 Pa. 564, 8 Atl. 183. • Estate of Brown, 5 Pa. Dist. Rep. 286. § 226. CHAPTER XV. RATES OF TAX. § 225. As Determined by Value of Property. § 227. § 229. Law Governing in Case of Change in Statute. $ 225. As Determined by Value of Property.-Attention has already been called to the general features of the progressive theory of inheritance taxation, whereby the tax rate is made to increase with the value of the property transmitted. According to the California statute of 1905, where the property does not exceed in value twenty-five thousand dollars, certain rates are prescribed, varying with the relationship of the parties, which are called the primary rates; then upon all in excess of twenty-five thousand dollars and up to fifty thousand dollars, the rates are one and onehalf times the primary rates; upon all in excess of fifty thousand dollars and up to one hundred thousand dollars, two times the primary rates; upon all in excess of one hundred thousand dollars and up to five hundred thousand dollars, two and one-half times the primary rates; and upon all in excess of five hundred thousand dollars, three times the primary rates. Under this statute the entire amount of a distributive share, including the exemption, is considered for the purpose of fixing the rates of taxation. And in computing the tax the amount of the exemption should not be deducted from the value of the distributive share as a whole, but should be deducted from the first twenty-five thousand dollars of value thereof to which the primary rates are applied. Thus, if the 1 See sec. 26, ante. value of the distributive share passing to a child is sixty-three thousand dollars, the exemption of four thousand dollars should be deducted from the first twenty-five thousand dollars thereof, and a tax imposed at the primary rate of one per cent; on the next twenty-five thousand dollars the tax should be imposed at the rate of one and one-half per cent, and on the residue of the share at the rate of two per cent.2 The primary rates, prescribed by the California statute, are to be charged in all cases, whether the property is less than or exceeds twenty-five thousand dollars in value. If the property is of greater value than twenty-five thousand dollars, the primary rates imposed on the first twenty-five thousand dollars are computed, and the higher rates upon the excess over that sum. The South Dakota statute provides that the higher rates shall be levied upon the entire value of the property transmitted, not merely on the excess over the amount subject to the next lower rate. This statute has recently been upheld as free from constitutional objections.* In Minnesota the rate of taxation does not increase until the value of the inheritance, exclusive of the exemption, reaches the larger values named in the statute. The taxes must be computed in all cases upon the true value of the inheritance above an exemption of ten thousand dollars. When such valuation is less than fifty thousand dollars, the rate thereon is one and one-half per cent; when such valuation is fifty thousand dollars or over, and less than one hundred thousand dollars, the rate is three per cent; and when such valuation is one hundred thousand dollars or over, the rate is five per cent. In no event will the rate of taxa 2 Estate of Timken, 158 Cal. 51, 109 Pac. 608. |