Mere Postponement. Where a title to a certain farm vested in the devisee and no estate for life or years intervened but he was to have the use of the farm for ten years and at the expiration of ten years to have the farm in fee, and where certain legacies with interest were to be paid to the legatees after the expiration of ten years, the time of the payment of the legacies only was postponed; and hence, neither the devise nor the bequests come within section 3 of the Pennsylvania statute of 1887, so as to postpone the payment of the collateral inheritance tax. In re Dalrymple, 215 Pa. St. 367, 373, 64 A. 554. See State v. Probate Court, 100 Minn. 192, 110 N. W. 865. State v. Probate Court, 101 Minn. 485, 112 N. W. 878.

The words "on his settlement" referring to payment of tax do not refer to a final settlement of the estate, but its settlement so far as the legatee or distributee is concerned, out of whose legacy or share the tax is to be retained, and the tax on each should be paid as soon as this legacy itself was paid. Attorney The same construction was given to the federal

General v. Allen, 59 N. C. 144.

act of 1898 in Fidelity Trust Co. v. United States, 45 Ct. Cl. 362.

2 In re Masury, 159 N. Y. 532, 53 N. E. 1127, affirming 28 N. Y. App. Div. 580. 3 May v. Slack, Fed. Cas. 9336.

4 Commonwealth v. Gaulbert, 134 Ky. 157, 119 S. W. 779.

5 United States v. Pennsylvania Co., 27 Fed. 539 (under the federal act of 1866.)

Sec. 300. On Future Interests.

Statutes usually postpone the tax on future interests until they come into possession, as in case of remainders, or it may be left for the remaindermen to elect not to pay until they come into possession. So the tax may be levied when the beneficiaries come into possession in case of contingent interests, annuities, or interests not immediately ascertainable.5

1 Ayers v. Chicago Title & Trust Co., 187 Ill. 42, 58 N. E. 318 (remainders to collaterals, strangers and the body politic). Dow v. Abbott, 197 Mass. 283, 288. Appeal of James, 2 Del. Co. Rep. (Pa.) 164 (by election of future beneficiaries under St. 1850, c. 170). In re Wharton (1881), 14 Phila. (Pa.) 279. In re Von Storch, 7 Pa. Dist. R. 204. In re Budd, 12 Pa. Co. Ct. 476 (provided security given under St. 1887). Bailey v. Drane, 96 Tenn. (12 Pickle) 16, 33 S. W. 573. In re Coxe, 181 Pa. St. 369, 37 A. 517. Hellman v. United States (15 Blatch. 131), Fed. Cas. 6341, affirming Fed. Cas. 15, 343. Clapp v. Mason, 94 U. S. 589. Vanderbilt v. Eidman, 196 U. S. 480, 25 S. Ct. 331, 49 L. Ed. 563. Sections 29 and 30 of United States statute of 1898 do not impose any tax upon a vested future interest before the period when possession or enjoyment had attached. The practice under the act of 1898 was to tax only beneficial interests where the right to possess or enjoy had accrued. It was thought that the amendment of March 2, 1901, 31 Stat. 946, changed this situation. The amendments which the tax officials decided made vested interests subject to taxation were that the tax or duty should be due and payable within one year after the death of the decedent, and that the executor, administrator or trustee should make the return of the estate in his control within thirty days after taking charge. The court holds, however, that these amendments did not justify

this construction that Congress intended to cause death duties to become due within one year as to legacies and distributive shares which were not capable of being immediately possessed or enjoyed, and were therefore not subject to taxation under the original act. Vanderbilt v. Eidman, 196 U. S. 480, 498, 25

S. Ct. 331, 49 L. Ed. 563.

Where the remaindermen do not or cannot (as where they are uncertain) make an election not to pay the tax until they come into actual enjoyment as provided by the statute, the tax must be paid at once. Furthermore, where there is no provision for the remainder going to collateral relatives, a stranger to the blood or to a corporation, there is no one to make an election and the tax on the remainder becomes due under the statute. Ayers v. Chicago Title & Trust Co., 187 Ill. 42, 58 N. E. 318.

In re Wallace, 4 N. Y. Suppl. 465. In re Westcott, 11 Misc. Rep. 589, 33 N. Y. Suppl. 426, following In re Hoffman, 143 N. Y. 327, 38 N. E. 311. In re Plum, 37 Misc. Rep. 466, 75 N. Y. Suppl. 940. In re Hooper, 6 Low D. 560, 4 Ohio N. P. 186. Bailey v. Drane, 96 Tenn. (12 Pickle) 16, 33 S. W. 573.

The New York act of 1899 made future interests presently taxable. In re Huber, 86 N. Y. App. Div. 458, 83 N. Y. Suppl. 769, where property is left in trust on the death of the life tenant to a daughter for life and on her death to her issue. Miller v. Tracy, 93 N. Y. App. Div. 27, 86 N. Y. Suppl. 1024, considering the effect of the amendment of 1901. In re Runcie, 36 Misc. Rep. 607, 73 N. Y. Suppl. 1120, where the remaindermen are known.

The tax under the act of 1899 is not required to be paid by the conditional transferee, as it is to be paid out of the property transferred, so that whoever may ultimately take the property takes that which remains after the payment of the tax; it therefore contemplates defeasible transfers as well as absolute transfers. In re Vanderbilt, 172 N. Y. 69, 72, 64 N. E. 782, modifying 68 N. Y. App. Div. 27, 74 N. Y. Suppl. 450. In re Brez, 172 N. Y. 609, 64 N. E. 958, reversing 69 N. Y. App. Div. 619.

Disston v. McClain, 147 Fed. 114, 77 C. C. A. 340, reversing 143 Fed. 191. In re Millward, 6 Misc. 425, 27 N. Y. Suppl. 286 (income of estate to widow for life but in case of remarriage then use of one-half only). In re Simon, 7 Ohio N. P. 667, 39 Wkly. L. Bul. 369 (remainders after life estate with power of using principal).

If the remaindermen are not ascertainable that is no reason why the tax should be collected from the life tenant who is exempt. The only effect of such condition would be that the tax would not be presently collectible at all, and the commonwealth would have to depend on its lien on the real estate, and its claim on the executors when they make distribution. In re Coxe, 181 Pa. St. 369, 378, 37 A. 517.

Where a future estate depends on such possibilities as the marriage or having children of life tenants it is a mere possible interest which could not have a market value; and the courts in order to enforce immediate collection of the tax cannot change the tax from one on succession to one on property. No other course is left open in the practical administration of the statute than to postpone the assessing and collecting of tax upon such remote contingent interests as are incapable of valuation and as to which the rate and the exceptions cannot be determined. Billings v. People, 189 Ill. 472, 59 L. R. A. 807.

Life Estate in Remainder. Where a testator gives to his wife for life and on her death the life estate to G., the estate to G. comes within the statutory definition of a vested remainder, but it is very different from a case where the will gives a life estate to A. and the remainder to B. and his heirs. At the present time G. has no estate that she could sell to any one at any price and therefore the inheritance tax must be postponed until the death of the life tenant. In re Westcott, 11 Misc. Rep. 589, 33 N. Y. Suppl. 426.

Sec. 301. Merger of Remainder.

Where the title to a succession has been accelerated by the extinction of prior interests by agreement of parties,1 or by conveyance, the tax is payable upon the whole.

1 Brune v. Smith, Fed. Cas. 2053.

2 Two remaindermen after a life interest to the wife of the testator conveyed their interests to the wife, but the court holds that a conveyance by these two parties does not withdraw the estate from the operation of the collateral inheritance tax law and defeat its collection. It was claimed that by the conveyance the estate of the wife became merged into a fee and that therefore there was nothing left for the remainders. The only question remaining is whether in view of the transfer made the period for the collection of the tax has been accelerated so as to make it collectible at once and if so from whom shall it be collected and upon what basis. The statute provides that the remainder is taxable only when it comes into possession and beneficial enjoyment. The court concludes that when the life tenant became the owner of the remainder interests in the property the two estates thereby merged into one and the remainder vested in possession to all intents and purposes and for all beneficial uses, and she might at once dispose of the whole estate in fee. She became thus entitled to the possession as fee simple owner of the estate and the beneficial use of it as a whole, and by virtue of these transactions a tax upon the remainder interest became at once payable and upon an assessment at its value at that time. The state as the effect of the transactions between the parties became at once entitled to an inheritance tax upon the full value of the remainder interest as fixed by the appraisement. Harrison v. Johnston, 109 Tenn. 245, 70 S. W. 414, 417.

The interest of the decedent in the estate of another is presently taxable although the net amount due thereunder is not yet fixed. The right of the decedent to the net amount was irrevocably fixed at his death, when he was in constructive possession of the property.

In re Milliken, 206 Pa. St. 149, 55 A. 853. See In re Clinch, 180 N. Y. 300 73 N. E. 35, affirming 99 N. Y. App. Div. 298, 90 N. Y. Suppl. 923, 44 Misc. 190 89 N. Y. Suppl. 802.

§ 309.

310.

As between Life Tenant and Remainderman.
Where no Next of Kin are Known.

§ 311. Lineal Descendants.

Descendants of Collaterals.

§ 315. Where Relative was Both Nephew and Stepson.

§ 312.

§ 318.

§ 319.

Executors or Beneficiaries.

Payments of Tax Should Appear in Executor's Account.
Adoption.

§ 320. Mutually Acknowledged Relation of Parent.

§ 322. Loss of Tax Paid Unnecessarily Falls on Residue.

Sec. 303. Under Direction of Will, or of Court.

Whether inheritance taxes are a charge against the estate or are to be deducted from the several legacies is a question of the testator's intention, as expressed in his will. The will may direct. the executors to pay all legacies out of the estate, but not unless clear reference to the inheritance tax is made,3 and such direction cannot affect the tax on the residue by causing the tax on prior legacies to be deducted before its appraisal. 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. The provision in a will that the collateral inheritance tax shall be paid out of the residue but not out of the pecuniary legacies is not restricted to the legacies then given, but includes legacies given in a subsequent codicil.

Where a decree of distribution orders a deduction only of "the amount of the inheritance tax as required by law," and does not fix the amount of such tax nor expressly adjudicate that any tax should be deducted but leaves the matter dependent upon whether or not the law requires any inheritance tax, the distributees are entitled to the entire residue of the estate under that decree where no inheritance tax could be collected."

1 Kingsbury v. Bazeley, 75 N. H. 13, 70 A. 916.

2 To Individuals. Where the will directs the executors to pay taxes that may become due upon any legacies "given by this will to individuals" this language has no reference to legacies given to individuals in trust for establishing a charity. Kingsbury v. Bazeley, 75 N. H. 13, 70 A. 916.

Money Includes Annuity. Where the will provides that all bequests of "money" shall be paid without deduction for the inheritance tax, this included an annuity payable by a devisee out of the rents of the land. As the annuity is a bequest in money not subject to a deduction for the tax, the burden falls on the residuary estate, even though the bequest was payable out of rents coming from a particular source. In re Lea, 194 Pa. St. 524, 45 A. 337.

Charge of Tax Subsequently Enacted. Where the testator's will was drawn in 1895, and she died in 1900 and directed the “collateral inheritance tax" to be paid by the executor out of the corpus of the estate, this did not charge the estate with the federal inheritance tax of 1898. There was a clear disposition to charge the corpus of the estate with the collateral inheritance tax only, which was at that time the only legacy tax in existence. In re Baker, 21 Pa. Super. Ct. 536.

A will provided that the executors were authorized and empowered to pay any or all of the legacies within one year after the decease of the testator "without any rebate or deduction whatever." The will was executed in 1884, and the court holds that this clause can hardly have been intended to apply to a succession or legacy tax although it was reaffirmed by a codicil executed after the passage of the statute. Apart from this the court holds that the words used would not have the effect of entitling the legatee to the legacy free of tax even if the will had been executed after the passage of the inheritance tax. The tax is paid on account of the legatee and in legal effect is precisely the same as if the legacy was to be paid over to the legatee intact and then the tax was to be collected from him. Strictly speaking, therefore, the tax is not a “rebate or deduction" from the legacy. The tax is not a tax upon the estate or legacy devised or bequeathed, but is a tax imposed upon the legatee for the privilege of succeeding to the property. It is merely for the convenience of the state to ensure certainty of collection of the duties cast upon the executors of paying the tax. Jackson v. Tailer, 41 Misc. Rep. 36, 83 N. Y. Suppl. 567.

A direction in a will that an annuitant "is to receive not less than $1,500 a year" is not of itself enough to show an intention to place the burden of the tax on the general estate and relieve the annuitant from the inheritance tax. In re Holbrook, 3 Pa. Co. Ct. 265, 20 Wkly. Notes Cas. 69.

4

In re Swift, 137 N. Y. 77, 87, 32 N. E. 1096, 18 L. R. A. 709, 64 Hun 639, 16 N. Y. Suppl. 193, 19 N. Y. Suppl. 292.