been adopted in Minnesota. To quote from a recent decision by the supreme court of that state: "By the express provisions of the provisos to sections 3 and 15, respectively, a tax upon any devise, bequest, legacy, or gift, which is limited, conditional, dependent, or determinable upon the happening of any contingency or future event, so that the true value thereof cannot be presently ascertained, accrues and becomes payable only when the beneficiary is entitled to the possession or enjoyment thereof. The language of the statute is so specific that its meaning cannot be made clearer by any extended discussion of its terms. In the case of Estate of Hoffman," similar provisions of the inheritance tax law of the state of New York were so construed, and it was held that legacies which vested only upon the happening of some uncertain future event, or, if vested, were liable to be devested, were not taxable until the contingencies had passed or been fulfilled and the right to succeed to the property became absolute." 28 In that case M by his will gave the residue of his estate to trustees to be invested, and directed them to pay semi-annually the net income therefrom to B during the time the estate should remain in their hands, and to pay and deliver the corpus of the estate to him in four equal installments, the first one to be turned over to him when he attained the age of twentyfive years, and the others, in their order, when he reached the age of thirty, thirty-five, and forty years respectively. The will, in the event of B's death before he received the whole or any part of the estate, gave the balance remaining in the hands of the trustees to other legatees. It was held that a tax on a legacy which vests only upon the happening of some 27 Estate of Hoffman, 143 N. Y. 327, 38 N. E. 311. uncertain event, so that the true value thereof cannot be presently ascertained, accrues and becomes payable only when the beneficiary is entitled to the possession or enjoyment thereof; and that the transfer of the residue of the estate to the trustees was not taxable, but a tax would accrue and become payable from time to time on the income and on the corpus as B might become entitled to them or any part thereof.29 In a later decision the Minnesota court holds that the tax becomes due and payable when the beneficiary enters into actual possession and enjoyment of any portion of the bequest which exceeds in value the statutory exemption; and that the tax so accruing must be computed upon the value, at the time of the decedent's death, of the right to receive the amount actually paid upon the date of its payment. Says the court, "while we do not find this particular question, namely, the right to assess and collect the tax upon installments, discussed in the decisions of other states to which we have been referred, we think our holding is in harmony with the reasons upon which those decisions are based. . . . . . . . Generally speaking, the cases have been with reference to the possibility of valuing an estate to commence in the future and upon the happening of some contingency. We fully agree with the proposition that it is impossible to value an estate so long as it is impossible to say when it will begin or who will be its beneficiary. Thus, in the present case, it would be impossible to say now the value of the entire inheritance which may ultimately go to the sons of the deceased or their heirs; but, upon the other hand, there is no difficulty in arriving at the value of what any one of the beneficiaries has already received.'' 29a 29 State v. Probate Court, 100 Minn. 192, 110 N. W. 865. 29a State v. Probate Court, 112 Minn. 279, 128 N. W. 18. § 96. Future Contingent Estates-Pennsylvania Rule. The former New York rule has also been approved in Pennsylvania. The supreme court of the latter state adopts this language from the court of appeals of the former state: "It is not to be assumed that the legislature intended to compel the citizen to pay a tax upon an interest he may never receive, and the reasonable construction of this statute leads to no such unjust result. It does not follow because the legislature taxes persons beneficially entitled to property or income, in possession or in expectancy, that a tax was thereby imposed upon an interest that may never vest; until that time arrives the power to tax does not exist." The Pennsylvania court then decides that where a testator leaves his whole estate, including mining leases, to trustees to pay the income to his wife and after her death to various nephews and nieces, and from the terms of the will it cannot be presently ascertained what persons will actually come into possession of the estate upon the death of the widow, nor can the value of the estate at that time be determined, the commonwealth cannot compel any person to enter security to pay the tax, but must wait until the death of the widow, when the tax will be deducted from the shares of the persons then entitled to the estate.30 Under the Pennsylvania statute of 1887, the tax on estates in remainders "shall not be payable until the person liable for the same shall come into actual possession of such estate by the termination of the estate for life or years; and the tax shall be assessed 80 Estate of Coxe, 193 Pa. 100, 44 Atl. 256. See, also, Appeal of James, 2 Del. Co. Rep. 164; Estate of Willing, 11 Phila. 119; Estate of Wharton, 14 Phila. 279; Estate of Bispham, 6 Pa. Co. Rep. 459; Estate of Van Storch, 7 Pa. Dist. Rep. 204. The early statutes of Pennsylvania on this question are interpreted in Appeal of Mellon, 114 Pa. 564, 8 Atl. 183; Commonwealth v. Eckert, 53 Pa. 102; Commonwealth v. Smith, 20 Pa. 100. upon the value of the estate at the time the right of possession accrues to the owner as aforesaid. But the words 'shall not be payable' mean only ‘shall not be demandable' by the estate, as the right of the remaindermen to pay sooner is expressly given in the proviso.... that the owner shall have the right to pay the tax at any time prior to his coming into possession, and in such cases the tax shall be assessed upon the value of the estate at the time of the payment of the tax, after deducting the value of the life estate or estates for years." And it has been held that where a testator directs his executors to pay "all the collateral inheritance tax on all the devises, bequests and legacies contained in this will as soon after my decease as the same can be conveniently done," and the executors pay the tax on the entire estate at its then value, the commonwealth cannot, after the death of the life tenant and after the estate has increased in value, impose any tax upon the remaindermen; and that where the executor has paid the tax on the whole estate passing in possession or remainder, no appraisement need be made of the value of the life estate and the remainders.31 It has also been affirmed in Pennsylvania that where the real estate of a decedent passes under the intestate laws to his parents for life, who are exempt from inheritance taxation, and at their death goes to collateral heirs, the commonwealth is entitled to the collateral inheritance tax upon the appraised value of the realty less the amount of the decedent's debts unpaid by his personal estate. It is apparent, the court remarks, that in estates liable to the collateral tax the state is entitled to a tax on the entire estate; that when the tenant for life or for years, being parent or lineal descendant, is exempt from liability, the whole 81 Estate of De Borbon, 211 Pa. 623, 61 Atl. 244. tax on the entire estate must be paid by the tenants in remainder; that in such cases the time of payment is postponed until the estate comes into actual possession of the tenant liable; that nevertheless if such tenant elect in anticipation to pay at the death of the decedent, the tax is assessable on the then valuation of the entire estate, less the value of the estate for life or years; that is, when the tenant of the intermediate estate is not liable, the tenant in remainder has the election either to pay the tax on the entire estate with interest, when he comes into actual possession, or to pay at the death of the decedent the tax on the then net valuation of the estate in remainder; and in consideration of such anticipated payment, her right to a tax on the intermediate estate is waived by the commonwealth.32 § 97. Future Contingent Estates-Wisconsin Rule. In Wisconsin, where the fair market value of estates or interests therein which are limited, conditioned, dependent, or determinable upon the happening of any contingency or future event, and cannot by reason thereof be ascertained at the time of the transfer, the tax becomes due and payable when the beneficiary shall come into the actual possession and enjoyment thereof. This does not operate to postpone the imposition of the tax on the transfer beyond the time of the death of the transferrer, for the tax comes into existence at the time of his death and remains a lien on the property until paid; but since the fair market value thereof is not then ascertainable, it operates to postpone payment to the time when such value is ascertainable, namely, when the contingency happens which gives the beneficiary the actual possession or enjoyment of the property. An objection to this rule has been raised on the ground 32 Commonwealth's Appeal, 127 Pa. 438, 17 Atl. 1094. |