McGeehan, Colie and Eastwood. The opinion of the court was delivered by Eastwood, J.A.D.
Appellants, Charles E. McManus, Jr., et al., executors, estate of Charles E. McManus, deceased, seek a reversal of an assessment made by the Department of Taxation and Finance, Transfer Inheritance Bureau, on transfers made by decedent between December 29, 1941, and his death on June 3, 1946, at the age of sixty-five.
The sole question for determination is whether or not the transfers under review were made in contemplation of death or intended to take effect in possession or enjoyment after his death.
In an effort to facilitate a clearer insight into the intent of the grantor at the time he made the transfers, we deem it essential to recount the development of the decedent's business ventures and the circumstances surrounding the transfers.
Between the years 1912-1920, the decedent and his wife, Eva McManus, became interested in and worked together experimenting and developing new methods for processing of cork, as the result of which they received approximately twenty to twenty-five patents, and established a small factory in New York called the New Process Cork Company. In view of their joint labors, Mr. McManus insisted that his wife share in the business to the extent of one-third of the royalties. In 1921, Mr. McManus organized the CEM Securities Corporation to take title to the royalty contracts and patents which he owned. Mrs. McManus received approximately one-third of the stock and bonds of this corporation. By 1926 the business had become very successful; decedent had acquired the controlling interest in the Crown Cork and Seal Company and became its president.
With his increasing business success, Mr. McManus enjoyed proportionate increases in his income until it reached a point where he was faced with the problem of high income taxes, and retained Mr. Marvin Haynes, a tax expert, to advise and counsel him in devising a solution thereof. Mr. Haynes recommended the creation of a trust and prepared a proposed trust agreement whereby Mr. McManus' property would be divided into five parts: one part for Mrs. McManus, one for each of their children and one for the decedent. Under that plan Mr. McManus was to retain a life estate in his property, which on his death was to go to his children, each of whom was to receive the income from his share until he reached the age of thirty-five, when he would receive the principal. Mrs. McManus was to receive the income from her share for life and upon her death her share would go to her children. Mr. McManus rejected this plan. So that he might observe the development of their business interests and capabilities and the effect of such transfers upon them, on December 29, 1930, he executed three trust agreements, providing for periodic transfers of stock of the CEM Securities Corporation to his sons. In making these transfers, Mr. McManus took full cognizance of the prevailing income tax rates and adjusted the size of his transfers accordingly. The CEM Securities
Corporation declared dividends which were distributed to the record owners of stock after transfers thereof had been made under the terms of the trust agreements.
In furtherance of his long range plan of transfers and reduction of his taxable income, the CEM Securities Corporation was reorganized in 1931, and new preferred non-voting stock was issued for the old shares of common stock and a new issue of common stock of the reorganized corporation was taken by Mr. McManus. No dividends were to be paid on this common stock. Thus Mr. McManus retained control of the business, but reduced his taxable income.
In the years that followed, Mr. McManus made further equal and absolute transfers of his property to his wife and children, giving a portion thereof to his business associates and members of their families who had been with him through those years in which he ascended the ladder of success. Consequently, by December 29, 1941, a large proportion of his property had been given away. It is enlightening to review decedent's transfers over the years, as they emphasize the execution of decedent's plan or program for the transfers. They may be summarized as follows. In 1921, at the age of forty, he made transfers of $800,000. By 1930, at the age of forty-nine, he had transferred $1,250,000. In 1932, his transfers had amounted to $1,685,000, and by 1934, at the age of fifty-three, they had reached $1,705,000. Just prior to December 29, 1941, decedent's transfers amounted to $2,328,367.50 and on December 29, 1941, decedent made transfers amounting to $341,773. Between that date and the date of decedent's death, he made transfers amounting to $394,814.50. Of the $1,705,000 total transfers made by decedent between the ages of forty and fifty-three, all but $5,000 went to members of his family. Of the $1,359,955 total transfers made between the age of fifty-four and his death at sixty-five, $693,730 went to members of his family and $666,265 went to persons outside his family.
In 1938, because of an eye condition, Mr. McManus sought medical advice. The doctor in his examination found that decedent had high blood ...