Conford, Kilkenny and Leonard. The opinion of the court was delivered by Kilkenny, J.A.D. Conford, S.j.a.d., (dissenting in part).
[105 NJSuper Page 244] This is an appeal from a final determination of the New Jersey Transfer Inheritance Tax Bureau fixing the amount of inheritance taxes payable by the Shivers Estate. The executor first challenges the propriety of including as part of the taxable estate, as gifts made in contemplation of death, certain substantial 1964 transfers made by decedent to his two daughters about one year before his death in 1965. The second issue involves the State's disallowance, as a deductible item, of the sum paid by the executor to the Federal Government on those transfers as a purported "debt" due under the Federal Gift Tax Act.
Decedent, a New Jersey domiciliary, died on June 21, 1965. On April 20, 1964 and June 25, 1964 he transferred, without consideration, to his two daughters Katherine S. Hallock and Mary Ann S. Ziegler income tax-exempt municipal bonds having a market value of $298,606.50 as of the date of his death.
On April 20, 1964 approximately $14,200 was given in bonds to each daughter; on June 25, 1964 each daughter received about $134,500 in bonds. At the time of the transfers the bonds were worth $299,087.16.
The United States Internal Revenue Service and the New Jersey Inheritance Tax Bureau found that those transfers were made in contemplation of death. Both agencies treated the items as part of decedent's estate in calculating the amount of the federal estate tax and the New Jersey inheritance tax due from this estate.
There was substantial evidence supporting the administrative findings, in addition to the provision under our law that any transfer made as a gift within three years prior to decedent's death is deemed, in the absence of proof to the contrary, to have been made in contemplation of death and includible in decedent's estate, in calculating the amount of inheritance taxes payable to the State. N.J.S.A. 54:34-1(c). The transfers in issue were concededly gifts.
Were they made "in contemplation of death"? The applicable criteria and standards to resolve this issue have been set forth recently in In re Lichtenstein, 52 N.J. 553, 569 (1968). The presumption that the gift within three years of death was made in contemplation of death places an obligation on the taxpayer to establish by a preponderance of the evidence that it was not in contemplation of death. It is sufficient for taxability to find an "impelling" motive to make the gift in lieu of testamentary disposition.
The executor claims that the transfers do not come within the "three years prior to death" rule because the decedent
intended the gifts to be effective in 1957 when he first placed the initial group in a safe deposit box in a bank. The box was registered in the names of his two daughters, but it was also registered in his name as "Deputy." He was the only one to enter the box from June 7, 1957 to June 23, 1964. He kept the safe deposit box key. He clipped the coupons and retained the income which was deposited in his account. The box was surrendered on June 25, 1964. Significantly, it was on the last-mentioned date that actual delivery of the bonds was made to the daughters.
The deposit of bonds in the safe deposit box in 1957 did not legally effect a gift thereof at that time. Decedent retained control of them. See In re Posey, 89 N.J. Super. 293, 304 (Cty. Ct. 1965), affirmed 92 N.J. Super. 259 (App. Div. 1966). He negated any donative intent by clipping the coupons and retaining the income which he placed in his own account. There was, under the circumstances, no delivery to the donees in 1957. Hence, the estate's contention that the gift was made in 1957, rather than in 1964, lacks merit. The mere intent to make a gift inter vivos to be consummated in the future is legally insufficient. In re Dodge, 50 N.J. 192, 216 (1967).
There was substantial evidence to support the findings that those substantial transfers made by decedent to his two daughters only about a year before he died were gifts made in contemplation of death. Decedent's gifts to his two daughters in the prior years of his lifetime were relatively meager, considering his considerable possessions. Concededly, there was no consideration paid for these bonds, which approximated $300,000 in value. They represented a material part of decedent's estate -- about 25% of a gross estate of $1,146,005.62. The net estate, including these transfers, was $1,052,910.34.
Decedent was 86 years old at the time of the transfers. He was 87 when he died a year later. The cause of his death was myocardial infarction due to arteriosclerotic heart disease. On April 20, ...