For the prosecutor, Lehlback & Ormond.
For the defendant, David T. Wilentz and William A. Moore.
Before Justices Case, Donges and Heher.
The opinion of the court was delivered by
DONGES, J. This writ of certiorari brings up a decree of the Prerogative Court affirming the assessment by the State Tax Commissioner of an inheritance tax upon an inter vivos transfer of certain bonds by decedent to his son as in contemplation of death.
The transfer of government bonds, about $53,000 in value, was made on July 31st, 1935. Decedent was 77 years old at the time and died on September 17th, 1938, at the age of 80. The causes of death stated in the death certificate were "Respiratory failure. Cardiac failure. Date of onset -- 9/17/38." Contributory causes were "Hypertension. Prostatic hypertrophy." The testimony shows that up until the commencement of the fatal illness decedent had been in good health except for an attack of uremic poisoning in 1934 by reason of which he was confined to bed for eight or nine days and to his home for about three weeks. Several witnesses testified that he appeared to have made a complete recovery
from this attack. His physician's affidavit is to the effect that he made complete recovery and that upon periodic examinations thereafter he was in good health.
By his will, executed in June, 1930, decedent gave his son all his stock in a corporation which they had conducted and also the residue of the estate after the expiration of life estates therein for the benefit of his wife and daughter.
Decedent and his son had been engaged together in business since 1903, with the son taking a more active and important part as the years passed. In the later years the father was still active but decreasingly so and from 1933 drew no salary from the corporation.
The contention of the prosecutor is that the gift was not made in contemplation of death but was made as compensation to the son for his failure during the number of years preceding to receive from the business the salary to which he was entitled because of the failure of the corporation to prosper. In 1929 and 1930 the salary of the son was $20,000 per year. Prior to that it had been $15,000 and his father's had been larger, although the exact amount is not stated. The son was at that time carrying the greater burden of the work and he states that at that time his father stated that the salaries were inequitable and spoke of equalizing matters. Then the business depression came and the corporation from 1932 to 1938, inclusive, sustained heavy losses. The salary of the son was reduced to $6,000 for 1931 and 1932. For 1933 his salary was fixed at $5,000 and for the subsequent years at $6,000. For the six years from 1933 to 1938, inclusive, he was entitled to a total salary of $35,000 but received only $16,000. The balance is carried upon the books of the corporation as due him, but he testified the cash position of the company has not been such as to permit payment. In this situation, the claim is that the father made the gift to the son in ...