On appeal from Department of the Treasury, Division of Taxation, Transfer Inheritance Tax Bureau.
For reversal -- Chief Justice Vanderbilt, and Justices Oliphant, Wachenfeld, Burling, Jacobs and Brennan. For modification -- Justice Heher. The opinion of the court was delivered by Burling, J. Heher, J. (dissenting in part).
[12 NJ Page 399] This appeal was addressed to the Superior Court, Appellate Division, as an action in lieu of the former prerogative writ of certiorari under Rule 3:81, by Joseph J. Hooton and Robert W. Hill, executors of the last will and testament of Hu Woodward, deceased (hereinafter termed the appellants) against Aaron K. Neeld, Deputy Director, Division of Taxation, Department of the Treasury, State of New Jersey (hereinafter referred to as the respondent), to review
an assessment and levy of New Jersey transfer inheritance tax upon inter vivos transfers of stock of the South-Western Publishing Company, a Tennessee corporation (hereinafter referred to as South-Western). Prior to final hearing before the Superior Court, Appellate Division, the appeal was certified here upon our own motion.
The appeal is presented by the parties upon a stipulation of facts together with the record of remand proceedings in the New Jersey Transfer Inheritance Tax Bureau (hereinafter called the Bureau) ordered by the Superior Court, Appellate Division, pending this appeal.
The decedent, Hu Woodward, died testate on April 9, 1950, a resident of Montclair, Essex County, New Jersey. A tentative state inheritance tax was paid on March 21, 1951. Subsequently the Bureau following audit of the state inheritance tax return, on May 21, 1952 made an assessment of transfer inheritance taxes, based upon a redetermination of the quantum of the estate of Hu Woodward, deceased, increasing the reported value of corporate stocks and changing allowances of administration expenses. The assessment included "direct" taxes of $9,282.65 upon taxable interests or property in the amount of $438,179 (out of a net taxable estate of $662,746.73), and in addition a "compromise" tax of $7,334.86 upon that portion ($209,567.54) of the net taxable estate which represented contingent remainder interests created under and by virtue of the terms of the decedent's will. The balance of the "direct" tax assessed was paid on June 2, 1952; the balance of the "compromise" tax due on contingent remainder interests under the will was paid on June 10, 1952.
The executors' appeal is stated to be: "from the assessment and levy of taxes upon the transfers of stock of South-Western Publishing Company by the decedent, Hu Woodward, in his lifetime to his two daughters, Pauline Woodward, now Pauline W. Hill, and Cecil Woodward, now Cecil W. Hooton, which assessment and levy were made on May 21, 1952."
The subject transfer of stock involved a total of 104 shares of stock of South-Western, which had not been included in
the return filed, but was determined by the Bureau to be within the contemplation of the New Jersey transfer inheritance tax statute and was valued at $333,727.68. This stock transfer was the sole basis of that portion of the "direct" tax allocated to property passing to each of the decedent's daughters, Cecil W. Hooton and Pauline W. Hill, namely a tax assessed at $3,624.55 as to the interest of each daughter.
The assessment and stipulation show that the tax was assessed upon the premise that the stock was taxable as a gift "in contemplation of and (intended) to take effect at or after death." This appeal does not involve the valuation of the stock but merely contests the taxability of the transaction in and by virtue of which the transfer occurred. The incidents of this transaction will be hereinafter detailed.
Pending hearing of the appeal the Superior Court, Appellate Division, by order of October 14, 1952, while retaining the appeal remanded the cause for the purpose of enabling the appellants to supplement the record. This order provided that the Bureau should make a determination on the record as supplemented and that in the event the new determination should be adverse to the appellants, the parties should file a supplemental appendix and supplemental briefs and bring the whole matter on for argument of the appeal. This course was pursued, the respondent apparently making no effort to take an interlocutory appeal to this court from said order. The Bureau made a supplemental determination of facts adverse to the appellants, and the supplemental appendix and briefs were filed in the Superior Court, Appellate Division. Prior to hearing there, as hereinbefore noted, the appeal, as supplemented, was certified upon our own motion.
It is contended by the respondent that the Superior Court, Appellate Division, had no jurisdiction to enter the order of October 14, 1952, ante, to allow the appellants to supplement the record. There appears to have been no motion
by the respondent addressed to either the Superior Court, Appellate Division, or to this court to vacate the order of October 14, 1952. The entry thereof does not appear to have been resisted and no attempt to appeal therefrom is called to our attention. Without determining whether such an order is appealable, or whether the respondent's course of failure to move to vacate the order or to expunge that portion of the record attributable to proceedings under that order constitutes a waiver of the point, we hold that under the circumstances of this case the order was within the discretion of the Superior Court, Appellate Division, under Rules 3:81-9 and 4:1-10. The order of remandment permitted the introduction of evidence and the assertion of a question involved which otherwise must have been relegated to a proceeding in the Division of Taxation for tax refund under R.S. 54:35-10 as amended by L. 1944, c. 74, p. 150, sec. 1, N.J.S.A. 54:35-10. Incorporation of the supplemental evidence, and inclusion of the supplemental question of law involved, in the present appeal under the circumstances of this case permitted early determination of these matters in one proceeding, thus facilitating business of the State and advancing justice. See Rule 4:1-10, supra, which on this basis permits relaxation of the conditions expressed in Rule 3:81-9 as a limitation upon application for leave to supplement the record.
The questions involved on this appeal may be summarized as follows:
(a) Is the assessment of New Jersey transfer inheritance tax valid in this case where made in connection with the irrevocable inter vivos transfer of intangible personal property encompassing a reservation of income to the transferor?
(b) Is the State of New Jersey, as the domiciliary State of the decedent in this case, deprived of jurisdiction to tax the irrevocable inter vivos transfer of intangible personal property made by him and intended to take effect in possession
or enjoyment at or after the death of the transferor by virtue of the fact that such transfer is effectuated pursuant to the terms of a transaction or deed of gift allegedly made in another state while the transferor was there domiciled? The controversy hinges around the alleged applicability of the case of MacClurkan v. Bugbee, 106 N.J.L. 192 (E. & A. 1930). The appellants adhere to the position that such application is dispositive. The respondent advances the proposition that the MacClurkan case, supra, should be overruled.
The MacClurkan case, supra, held that the Legislature did not provide in the Transfer Inheritance Tax Act for the taxation of a transfer of intangible personal property in trust under an irrevocable trust deed executed and delivered by the transferor while a non-resident where the sole right retained by the transferor was the right to receive the income from the property transferred, even though the transferor subsequently moved to this State and died a resident hereof.
The Legislature has seen fit to acquiesce in the interpretation accorded the MacClurkan case, supra. Although the statute has been amended during the 23 years that have elapsed since the MacClurkan decision, no change in the statutory language affected thereby has been enacted. We find no merit in the respondent's contention that an amendment was effected by change in verbiage of the pertinent ...