Freund, Proctor and Rogers. The opinion of the court was delivered by Proctor, J.s.c.
This is an appeal by the executors of the estate of Jack Minoff, deceased, from a transfer inheritance tax assessment by respondent. The appeal is from respondent's determination that on Jack Minoff's death his 1/30th interest in a partnership, known as Fountainhill Underwear Mills, passed under the terms of the partnership agreement, dated November 30, 1943, to the surviving partners at a price less than its market value and that such difference, therefore, was taxable at 8%.
Jack Minoff had died testate on October 21, 1947, a resident of this State. By his will he made a number of specific bequests without mentioning his partnership interest and then left his residuary estate in trust for his widow and two children.
Appellants contend that the value of decedent's interest, which included his proportionate share in the good will of the partnership, passed to the residuary trusts created under the will, a transfer to which the 1% rate is applicable.
Under the partnership agreement there were five general and six limited partners. The general partners were divided into two units: Harry Thoens and Albert R. Thoens, comprising one unit; Jack Minoff, Harry Liberman and Paul Meislin, comprising the other. The pertinent provisions of the agreement are paragraphs seven and seventeen. The seventh paragraph states:
"Seventh: (a) In the event of the death of any general partner during the time fixed for the continuance of this partnership, this partnership shall not be thereby dissolved, but shall be continued by the survivors. The interest of such deceased general partner shall terminate as of the first day of the calendar month next succeeding his death, and the value of the interest of such deceased partner in the partnership shall be determined as of such date, and such interest, as so determined, shall be liquidated and the amount thereof paid or disposed of as is provided in paragraph 'Seventeenth' hereof."
Paragraph seventeen contains five sub-paragraphs designated alphabetically. Sub-paragraph (a) deals with the
eventuality of the death of either of the general partners making up the first unit, namely, Harry Thoens and Albert R. Thoens, "parties of the first and second parts." Sub-paragraph (b) deals with the eventuality of the death of one of the three general partners comprising the second unit, namely, Jack Minoff, the present decedent, Harry Liberman and Paul Meislin, "parties of the third, fourth and fifth parts." Sub-paragraphs (b) to (d), omitting parts unimportant to the present problem, are as follows:
"(b) In the event of the death of either of the parties of the third, fourth and fifth parts, the fact of such death shall be deemed to be an offer by such decedent and his personal representative to the survivors of the said parties of the third, fourth and fifth parts to sell the interest of the decedent in said co-partnership in equal proportions, * * *.
The survivors of the parties of the third, fourth and fifth parts * * * shall have thirty days from the date of the appointment of a personal representative * * * within which to determine whether or not they will accept such offer * * *. * * * The purchase price thereof shall be the book value of the interest of the decedent determined as set forth in this agreement. In the event that the said survivors of the parties of the third, fourth and fifth parts shall not desire to purchase the interest of such deceased party, then the said interest shall be deemed to be offered to the parties of the first and second parts * * *. * * * The purchase price thereof shall be the book value of the interest of the decedent determined as set forth in this agreement, and in the event that the said first and second parties shall elect not to purchase or acquire the interest of such deceased party, then such interest shall be liquidated by the co-partnership, and the interest of the deceased party retired, and the surviving partners shall thereafter continue the co-partnership for the remainder of the unexpired term of this agreement.
(c) The book value, for the purpose of this agreement, shall be the proportionate share of the decedent in the net worth of the co-partnership as of the end of the month next following the death of such decedent, prepared in accordance with the general accounting practice of the company, * * *, and without any valuation or allowance for good will, trademarks, tradenames, or other intangible assets, all of which are specifically excluded in the determination of the net worth, * * *.
(d) The purchase price to be paid for the interest of such deceased partners, as herein provided, shall be paid to the personal representative of the deceased party by the purchasers within thirty days after the ...