rather than under the power need not be in any particular form, and it is sufficient if it appears by opposition to the imposition of a transfer tax.2 Where the will of the donee directs distribution according to the provisions of the original will, this is a refusal or renunciation of the power by the donee. Where the original will is to such children as the donee may appoint, there is a necessity for the exercise of the power, and the children appointed must make their title through the donee; but where the appointment names a portion only of the beneficiaries named in the will, they take under the will, as the appointment was an injury rather than a benefit to them.5 The same result was reached where the power was exercised to four of the beneficiaries named in the will.

1 In re Lewis, 194 N. Y. 550, affirming 129 N. Y. App. Div. 905, reversing 60 Misc. 643, on authority of In re Lansing, 182 N. Y. 238, and In re Haggerty, 194 N. Y. 550, 87 N. E. 1120, affirming 128 N. Y. App. Div. 479, 112 N. Y. Suppl. 1017. In re Spencer, 119 N. Y. App. Div. 883, 107 N. Y. Suppl. 543.

In an earlier case, however, the court says that as the power of appointment was exercised by the life tenant and as it was only in case of a failure to exercise the power that the remainder vested in the children of the donee, they derived their title to the property through the exercise of the power of appointment and not directly under the will of the testator. In re Lowndes, 60 Misc. 506, 113 N. Y. Suppl. 1114.

2 In re Chapman, 133 N. Y. App. Div. 337, 117 N. Y. Suppl. 679, affirming 61 Misc. 593, 115 N. Y. Suppl. 981.

3 In re Langdon, 153 N. Y. 6, 9, 46 N. E. 1034, affirming 11 N. Y. App. Div. 220, 43 N. Y. Suppl. 419. i

In re Cooksey, 182 N. Y. 92, 98, 74 N. E. 880, affirming 100 N. Y. App. D v. 516, 91 N. Y. Suppl. 1091.

In re Ripley, 192 N. Y. 536, 84 N. E. 574, affirming 122 N. Y. App. Div. 419, 106 N. Y. Suppl. 844. See, however, In re Warren, 62 Misc. 444, 116 N. Y. Suppl. 1034.

6 People v. Williams, 127 N. Y. Suppl. 749.

CHAPTER XXII.

METHODS OF AVOIDING TAX.

144. Any Collusive Arrangement Illegal.

145. No Duty to Point out Property to Tax Officials. § 146. Advancement.

§ 147. Assignments by Beneficiaries.

$148. Brokers Holding Stock in their own Name.

$149. Compromise of Interests under Will.

§ 151. Transfers in Contemplation of Death.

$152. Creation of Corporation Leaving Life Estate in Decedents. 153. Disclaimer by Beneficiary.

154. Disclaimer by Executor.

§ 155. Executor Paying Legacy with his own Money.

156.

Homestead Set Off.

§ 157. Insurance or Beneficial Societies.

158. Property Held Jointly.

§ 159. Marshaling Local Assets and Debts.

160. Various Gifts to Same Person.

§ 161. Quick Transfer of Stock in Foreign Corporation.

§ 162. Premature Distribution after Taking Assets out of Jurisdiction.

Sec. 144. Any Collusive Arrangement Illegal.

"No mere device intended to evade the payment of tax due the commonwealth can be effective. Courts look beyond the form of any arrangement by which the commonwealth is deprived of a tax to its substance to ascertain its real purpose. An agreement to set aside a will and to make distribution in accordance with its provisions will not relieve legacies passing to collaterals from tax. Such an agreement is evidently collusive. But money paid in good faith in compromise of threatened litigation is not subject Pepper's Estate, 159 Pa. St. 508; Kerr's Estate, 159 Pa.

to tax.
St. 512."

Per Fell, J., in In re Hawley, 214 Pa. St. 525, 527, 63 A. 1021.

Sec. 145. No Duty to Point out Property to Tax Officials. Unless clearly set forth in the taxing statute the executor is under no duty to aid the tax collectors in locating the property of the estate1 outside the estate of a non-resident decendent.'

1 Under the statute of 1885, chapter 483, the administrator was under no duty or obligation to voluntarily aid the appraiser in any manner whatever in making the appraisal; and the court holds therefore that the administrator was not guilty of any fraudulent acts in failing to apprise the appraiser of certain claims belonging to the estate. In re Smith, 14 Misc. Rep. 169, 35 N. Y. Suppl. 701. 2 In re Bishop, 82 N. Y. App. Div. 112, 81 N. Y. S. 474. [What inventory should contain, see post, ss. 323, 324.]

Sec. 146. Advancements.

Advancements as a means to avoid the inheritance tax are considered above, in section 136.

Sec. 147. Assignments by Beneficiaries.

An assignment by a beneficiary to another can have no effect on the inheritance tax.

See further, post, s. 224.

Sec. 148.

Brokers Holding Stock in their own Name.

It is clear that the common practice of carrying stock in the name of stockbrokers will not of itself suffice to avoid taxation, although it may in some cases render it a little more difficult for the tax collectors to discover the property. The practice has the advantage of giving the executors more freedom in a quick sale of securities in those states which require payment of the tax before transfer. Where the decedent does business in one state and resides in another, this arrangement might enable the executors to remove securities from the state where the decedent had his place of business, when the actual location of the securities is made a basis for taxation.

The futility of the practice was well explained in a New York case where the decedent, a resident of Louisiana, had ordered the purchase through her stockbrokers in New York of certain stock, and the certificates were taken in the name of the brokers, but paid for by her, and the stock was transferred on the books of the corporation, which was a New York corporation, to the brokers, who thereupon endorsed their name upon the blank transfer printed upon the certificates, so that the same could be transferred to the testatrix, and the certificates so endorsed were then delivered by the brokers to the testatrix. The court holds that although she did not have the legal title to the stock at the time of her death, she did have an equitable title which at any time she could have transferred into a legal title by simply presenting the certificates

to the officers of the corporation, and that this was an interest in the property which passed by her will and which was taxable. She was entitled at any time to become vested with the legal title, and certainly this equitable title was something more than a mere chose in action. It was in effect a property interest in the domestic corporation.1

However, if an investor carries stock in a foreign corporation in the name of a broker in his own state he practically may avoid taxation at the hands of states which assume to tax stock of their corporations owned by non-residents.

It has been suggested that stock might be placed in the hands of brokers or others under a trust agreement, that notes be then issued to the beneficiaries, thus rendering their claims debts to be allowed like other debts.

1 In re Newcomb, 172 N. Y. 608, 64 N. E. 1123, affirming 71 N. Y. App. Div. 606, 76 N. Y. Suppl. 222.

Sec. 149. Compromise of Interests under Will.

A compromise may be so framed that no tax can be collected, in some circumstances.

In re Hawley, 214 Pa. St. 525, 63 A. 1021. See further, ante, s. 106.

Sec. 150. Consideration.

The effect of the existence of consideration in avoiding the inheritance tax is considered in a separate chapter (Chapter XX).

Sec. 151. Transfers in Contemplation of Death.

The most common attempt to evade the tax is by means of transfers of one kind or another during the life of the decedent, in contemplation of death, to the objects of his bounty, and such transfers are so common that we require a separate chapter for their consideration (Chapter XIX).

Sec. 152. Creation of Corporation Leaving Life Estate in Decedent.

Where an owner of large property created a corporation to which he conveyed all his property, and then had the corporation issue the stock in such a way that he held a life estate only in it, the court was precluded by the stipulation under which the case came before it that there was no verbal or outside agreement not before the court from considering the question whether the agreement was

made so that the heirs would not be required to pay an inheritance tax, and the court holds that no inheritance tax is due.

State v. Probate Court, Washington County, 102 Minn. 268, 294, 113 N. W. 888.

Sec. 153. Disclaimer by Beneficiary.

In some cases a renunciation by the legatee may be effective in avoiding the transfer tax. The most effective method for evading the collateral inheritance tax yet devised appears to have been sanctioned by the court in In re Stone, 132 Iowa 136, 109 N. W. 465. In this case the collateral legatees and others interested under the will all united in renouncing the provisions of the will and agreeing that the property might be distributed as in case of intestacy, and the court holds that the parties have a right to do this and that the result is that the state has no interest in the collection of any collateral inheritance tax, as the property then passed entirely to lineal descendants not subject to the tax. The question whether the parties had any collateral agreement among themselves as to the distribution, so that the collateral legatee really obtained some benefit, was not suggested to the court, and the effect of any such agreement was not involved in the decision.

In a New York case the legatees renounced the legacy, and the property bequeathed therefore went to the residuary legatees. The court therefore holds that the tax should be laid at the rate as if the legacy had been originally given to the residuary legatees. The tax is laid solely upon the transfer and not upon the property transferred, nor upon the estate of the legatee. If the legatee renounces a gift, refuses to receive it, no tax can be collected with respect to him because there has been no transfer to him. His right to renounce the privilege of accepting the donation is not denied or forbidden by the statute, and on his effective renunciation the title or ownership of the property remains in the estate to be disposed of under the terms of the will, and the succession is taxable in accordance with the nature of the ultimate devolution.1

Where it appeared that the beneficiaries under a residuary clause conceded its invalidity as a perpetuity, and abandoned all claim to the property to the heirs, who sold it and received the consideration therefor, and that it did not pass under the will, the surrogate had jurisdiction to find that the property did not pass under the will, and that no tax was assessable against the residuary beneficiaries named.2 In Pennsylvania, however, it has been held in the lower