David Dows, Sr., died March 30th, 1880, leaving as a part of his estate a valuable piece of real property, which he devised to his trustees in trust to pay the income to his son David Dows, Jr., during life, "And upon the death of my said son the said property, with all accumulations of interest, income and profits shall vest absolutely, and at once, in such of his children him surviving, and the issue of his deceased children as he may by his last will and testament designate and appoint, and in such manner, and upon such terms as he may legally impose. But in case my said son, David Dows, Jr., die intestate, then said property, with all accumulations of interest, income and profits shall vest absolutely and at once in his children him surviving, share and share alike, and the issue of his deceased children (such issue to take share and share alike the portion which the parent would have received if living) to be paid to them at the times and in the proportion following, to wit." A similar devise was made of a share of the testator's residuary estate. The will gave the trustees a power of sale over the real property, which was exercised during the life of David Dows, Jr., and a large portion of the proceeds invested in the stocks of corporations. David Dows, Jr., died January 13th, 1899, leaving a last will and testament, by which he exercised the power of appointment given him by the will of his father, in favor of his three sons. By his will he gave to each of his sons the income of three undivided forty-eighths till his son Robert attained the age of twenty-one years or sooner died, of four forty-eighths until Robert attained twenty-five years or sooner died, and nine forty-eighths until Robert attained thirty years or sooner died. Thus each son was given the income of *Page 230 sixteen forty-eighths or one-third of the property. At the termination of these life estates the principal was given to another son. That is to say, to B was given the principal of the share, the income of which A had been receiving; to C the principal of what had been B's share, and to A the principal of C's share. In result each son receives one-third of the property absolutely, for the will provides "that each interest for life or remainder shall vest absolutely and at once upon my death, in legal and not equitable ownership, and without contingency." But each son instead of being given the remainder in his own share after Robert arrives at the age of thirty years is given the remainder in another son's share, though the shares are exactly equal. The learned surrogate imposed a tax on the property passing under this power of appointment both on the life estates and on the remainders. His order was affirmed by the Appellate Division and an appeal has been taken to this court.
The first objection raised to the order of the Surrogate's Court is that the tax imposed under the amendment of April 16th, '97 (Chap. 284), to the Taxable Transfer Act of 1896, upon transfers made under a power of appointment, is a tax on property and not on the right of succession, and that, therefore, so much of the fund as was invested in incorporated companies liable to taxation on their own capital and in certain bonds of the state of New York and bonds of the city of New York exempt from taxation by statute, was not subject to the tax. On this question we are concluded by the previous decisions of this court (Matterof Vanderbilt, 163 N.Y. 597; affirmed on opinion of Justice PATTERSON below in 50 App. Div. at p. 246; same case decided without opinion, 166 N.Y. 640), and little need be now said thereon. The theory on which taxation on the devolution of estates at the death of their owners is based and its validity upheld even in cases where the state seeks to reach United States securities is clearly established, not only by our own decisions (Matter of Swift, 137 N.Y. 77; Matter of Sherman, 153 N.Y. 1), but by those of the Supreme Court of the United States. (Magoun *Page 231 v. Illinois Trust Sav. Bank, 170 U.S. 283; Plummer v.Coler, 178 U.S. 115; Murdock v. Ward, 178 U.S. 139.) InMagoun v. Trust Company it is said of such taxes: "They are based on two principles: 1. An inheritance tax is not one on property, but one on the succession. 2. The right to take property by devise or descent is the creature of the law, and not a natural right — a privilege, and, therefore, the authority which confers it may impose conditions upon it. From these principles it is deduced that the states may tax the privilege, discriminate between relatives and between these and strangers, and grant exemptions, and are not precluded from this power by the provisions of the respective state constitutions requiring uniformity and equality of taxation." The same doctrine was again asserted in Knowlton v. Moore (178 U.S. 41). It is insisted, however, that the title of the present owners is deduced from the will of David Dows, Sr., and not from that of his son David Dows, Jr., and in support of this claim are cited the cases of Genet v. Hunt (113 N.Y. 158) and Matter of Harbeck (161 N.Y. 211). The proposition is doubtless true to a certain extent. For the purpose of determining whether the execution of a power is in contravention of the Statute of Perpetuities, the estate created under such power must be referred back to the instrument granting the power. This is settled law and was so held in Genet v.Hunt (supra). Any other rule would permit the evasion of the statute against perpetuities by the grant of powers. The decision in Matter of Harbeck (supra) proceeded on the ground that at the time of the exercise of the power of appointment in that case the legislature had not provided for the taxation of transfers under such powers. But whatever be the technical source of title of a grantee under a power of appointment, it cannot be denied that in reality and substance it is the execution of the power that gives to the grantee the property passing under it. The will of Dows, Sr., gave his son a power of appointment to be exercised only in a particular manner, to wit, by last will and testament. If, as said by the Supreme Court of the United States, the right to take property by devise is not an inherent or *Page 232 natural right, but a privilege accorded by the state which it may tax or charge for, it follows that the right of a testator to make a will or testamentary instrument is equally a privilege and equally subject to the taxing power of the state. When David Dows, Sr., devised this property to the appointees under the will of his son, he necessarily subjected it to the charge that the state might impose on the privilege accorded to the son of making a will. That charge is the same in character as if it had been laid on the inheritance of the estate of the son himself, that is, for the privilege of succeeding to property under a will. Had the fund passed in default of an exercise of the power of appointment a very different proposition would be presented. We express no opinion on the question whether, under such circumstances, the tax imposed by the amendment of 1897 could be deemed other than a tax on the property itself.
The second objection urged against the order appealed from is, that at the death of David Dows, Sr., the property was real estate on which there was at that time no transfer tax as against lineal descendants of the testator. In Matter of Sutton (3 App. Div. 208; affirmed by this court on opinion below, 149 N.Y. 618) the will directed an equitable conversion of the realty into personalty. It was held that the actual form in which the property existed at the time of the testator's death determined its liability to a transfer tax, and that being real estate, it was exempt. The same rule governs the present case. At the time of the execution of the power of appointment under the will of David Dows, Sr., the property was personal. As we have held that it is the execution of that power which subjects grantees under it to the transfer tax, it follows that the condition or form of the property at the time of such execution must control.
The third objection is, that the legatees or devisees of the remainders are not subject to taxation until the precedent estates terminate and the remainders vest in possession. Practically each son of David Dows, Jr., is bequeathed one-third of the fund absolutely, with the time of enjoyment in possession postponed. What motive dictated the curious *Page 233 shifting of remainders found in the will of David Dows, Jr., we do not know, nor is it necessary that we speculate thereon. We shall treat these remainders as they are given in the will, that is, each at the termination of a life estate in another party. Still, under the statute, it is plain that they are presently taxable. Subdivision 4, section 220 of the Tax Act (amended by chap. 284, Laws of '97) directs that the tax shall be imposed "when any such person or corporation becomes beneficially entitled, in possession or expectancy, to any property or the income thereof by any such transfer, whether made before or after the passage of this act." Section 222 of the same law provides that all taxes shall be due and payable at the time of the transfer, except that "taxes upon the transfer of any estate, property or interest therein limited, conditioned, dependent or determinable upon the happening of any contingency or future event by reason of which the fair market value thereof cannot be ascertained at the time of the transfer as herein provided, shall accrue and become due and payable when the persons or corporations beneficially entitled thereto shall come into actual possession or enjoyment thereof." Under a statute substantially the same in phraseology, this court held, by FINCH, J., inMatter of Hoffman (143 N.Y. 327), that mere possibilities or chances of the acquisition of property, including not only contingent estates, but also estates technically vested, but liable to be divested, were not liable to taxation until the contingencies had passed or been fulfilled, and the right to succeed to property become certain and absolute. This doctrine has no application to the remainders given to the sons of David Dows, Jr. They are absolute and not subject to be divested or to fail in any contingency whatever. By statute they are alienable, devisable, descendible, and if the property were real estate, it could be sold on execution against their owners. (Sheridan v.House, 4 Keyes, 569; Moore v. Littel, 41 N.Y. 66.) By the aid of the table of annuities, upon the faith of which large sums are constantly distributed by the courts, the present value of these remainders is capable of ready computation. Therefore, *Page 234 they do not fall within the exception of the statute, and are subject to present taxation. Matter of Roosevelt (143 N.Y. 120) is not in conflict with this view. In that case it was held that certain vested remainders should not be taxed until the termination of the preceding life estate. The will then before the court bequeathed, after the death of the life tenant, seven life annuities contingent upon the survival of the life tenant by the annuitants, with cross remainders among the annuitants themselves. These annuities being contingent were not, under the rule declared by Judge FINCH in the Hoffman case, taxable or their value ascertainable until they came into actual existence. The remainders given by the will were subject to these annuities. As the value of the annuities was not capable of ascertainment, the value of the remainders subject to those annuities was necessarily equally incapable of computation. It was on this ground the decision proceeded. There is no such difficuly in the present case, and the decision of the Roosevelt case is, therefore, not in point.
The order appealed from should be affirmed, with costs.
PARKER, Ch. J., O'BRIEN, BARTLETT, MARTIN, VANN and LANDON, JJ., concur.
Order affirmed.