On certiorari to the Prerogative Court.
For the prosecutors, Pitney, Hardin & Skinner (Charles R. Hardin, of counsel).
For the defendant, David T. Wilentz, attorney-general (William A. Moore, of counsel).
Before Justices Case, Donges and Heher.
The opinion of the court was delivered by
HEHER, J. The question here is whether an inter vivos gift of property, by the testator to his son, was made "in contemplation of death" within the intendment of section 1 of chapter 228 of the laws of 1909, as amended by chapter 90 of the laws of 1935 (Pamph. L. 1909, p. 325; Pamph. L. 1935, p. 264; now R.S. 1937, 54:34-1), and is consequently a taxable transfer.
The testator died on August 3d, 1937. He was then the senior member of the firm of Robert Moore & Co., cotton merchants and brokers of the city of New York. He had been associated with this firm for about sixty years. The donee was his only child. The son entered the firm as a junior member in 1924. The gift in litigation was made on June 27th, 1935. It consisted of a transfer by testator of $60,000 of his capital account in the firm to that of his son. In the federal gift tax return made by the donor at the time, he certified that "a transfer of funds was made to my son * * * to provide capital for business 6/27/35 -- $60,000."
Some three weeks before this transfer, the donor made his will, leaving his estate (with the exception of a few general legacies) to his wife and son in equal shares, and providing that the son's share should "be paid and transferred to him as soon as conveniently may be after" the testator's demise; and the Prerogative Court, in sustaining a succession tax assessment made by the State Tax Commissioner, concluded that "the natural inference" to be drawn from the evidence "is that after making the will," the testator "determined to transfer this much of his property to his son immediately instead of waiting for the transfer which he had provided should occur at his death under his will; that it was made as the result of a considered choice between testamentary transfer and present transfer; that it was therefore a transfer made with the intent and purpose that it should be in the place and stead of a testamentary final disposition of that much of his estate, and hence was a transfer made in contemplation of death * * *." We do not entertain this view.
While the testator was in his seventy-ninth year when the gift was made, his health was unusually good for a man of his age. He was very active in business and the ordinary pursuits of life; and there is nothing to suggest awareness of mortal disease, or apprehension of death in the near future. His physician testified that his "organic condition was good, no high blood pressure, no heart leakage, no severe arteriosclerosis or hardening of the arteries and pretty good circulation for a man of his years, very, very good." His was a family of singular longevity. His father died in his ninety-fifth year; and the deceased was survived by three brothers all beyond seventy-five years of age. He continued his customary business and other activities until ten days before his death. There had been no discernible physical or mental impairment. The cause of death was bronchial pneumonia; and the attending physician certified that a contributing cause was "chronic arthritis -- 1934." The physician testified, however, that this latter statement was a "typographical error," and that, as regards the onset of the chronic arthritic condition, the word "indefinitely" should be substituted for "1934."
While the gift was large, it was the last of a series of substantial gifts by the father to his son over a period of years: 1918 -- $15,000; 1924 -- $25,000; 1926 -- $10,000; 1927 -- $20,000; 1928-31 -- $16,437; and 1932 -- $5,700.
All these gifts, except the one made in 1918, were effected, as was the gift under consideration, by transfers of credit on the books of the firm. The gifts of $25,000 (in 1924) and $5,700 (in 1932) were made to enable the son to buy memberships in the New ...