By her last will and testament, Frances B. Le Fevre of the city of Buffalo after giving a number of specified legacies, devised and bequeathed the residue and remainder of her estate to her executors and trustees in trust for the support and maintenance of her brother and daughter. By the tenth clause of her will, she disposed of her estate, after the death of these living beneficiaries, as follows:
"Tenth. After the decease of both my said brother and my said daughter, I direct my said trustees to cause to be incorporated under the Laws of the State of New York, a corporation for the care of needy children. And I authorize, empower and direct my said trustees to convey to said corporation the farm owned by me in the county of Cattaraugus, known as the Barse farm, consisting of about seven hundred (700) acres, near the city of Olean, New York. And I authorize and direct my said trustees to cause the grounds to be suitably laid out and to cause to be erected upon said farm suitable buildings, for the carrying on of the objects of the corporation, and to cause the same to be properly furnished and equipped, at a cost not to exceed seventy-five thousand dollars ($75,000). And I direct that the discretion of my trustees in these matters shall be final and not subject to review. And I further authorize and direct my said trustees to pay and transfer to said corporation one-third of the residue of my property and estate, to be held by said corporation in trust to invest and reinvest the same, and to receive the rents, issues and profits thereof, and apply the net income therefrom to the carrying on of the objects of said corporation."
In the order fixing the transfer tax upon the various *Page 141 gifts and legacies, this devise and bequest to the children's home to be incorporated was valued at $104,711.42, and taxed in the sum of $6,079.80.
The appellants claim that the transfer to a corporation to be formed to take care of needy children, directed by the above paragraph, is within the exemption of section 221 of the Tax Law (Cons. Laws, chap. 60), and should not have been taxed. We held in Matter of Graves (171 N.Y. 40) that a similar gift to a charitable corporation to be formed entitled the corporation to the exemption under the then Tax Law (Laws of 1896, chapter 908, section 4, subd. 7). The will in that case read: "I give, bequeath and devise all the rest and residue of my property of every kind, personal or real, wherever situate, to my trustees hereinafter named, for the purpose of founding, erecting and maintaining the Graves Home for the Aged, to be located in the city of Syracuse in the state of New York." Section 4, subdivision 7, of the law referred to, provided that there should be exempted from taxation the real property of a corporation or association organized exclusively for charitable purposes. It was there claimed on behalf of the comptroller of the state that as a corporation was not in existence to act as beneficiary and as the trust was in the hands of the trustees and not of the Supreme Court, the taxing of the residuary estate should be sustained, and the exempting statute held not to apply. This court said: "We are of opinion that in view of our previous construction of the law of 1893, to the effect that the doctrine of charitable uses is now established, it is proper to consider this residuary estate as if it were in the possession of a corporation already formed under the testator's will, or as in the control of the Supreme Court, for the purpose of carrying out the testator's charitable scheme, although at present actually in the hands of the individual trustees. It would be a narrow and unreasonable construction of the act of 1893 which would permit the imposition of general taxes and the *Page 142 transfer tax upon the residuary estate of this testator wholly devoted to the purposes of charity." (p. 46.)
The state tax commission makes the same claim here regarding the exemption under section 221 of the Tax Law. The only exemption which is applicable is now to be found in that section, as the law under which the Graves case was decided is no longer applicable to the transfer tax. (See Tax Law, § 244.)
Section 221 provides: "Any property devised or bequeathed * * * to a charitable corporation, wherever incorporated * * * shall be exempted from and not subject to the provisions of this article." "This article" means article 10, applying to taxable transfers. As we said in the Graves case, so we repeat here, it is an unreasonable construction to give this act, to confine it simply to a transfer to a charitable corporation in existence. The exemption likewise applies to a transfer of real or personal property made to a charitable corporation to be created for the purpose of receiving it under the will of a testator.
The executors and trustees in this case have no discretion and may be compelled at the death of the testatrix's brother and daughter to incorporate the Home for Needy Children or else the trust may be executed by the Supreme Court in accordance with the directions. The reason for the exemption in the Graves case is equally applicable here. We can see no forceful distinction.
While we hold with the appellants that the transfer to the Home for Needy Children is exempt from the transfer tax, we cannot agree with their contention that it is also subject to the exemption contained in section 221-b of the Tax Law. The appraisers found and so reported to the surrogate that the deceased had paid no personal property tax on bonds amounting to $202,911.79. The order of the surrogate thereupon taxed this amount, less a certain deduction, at $1,976.71, pursuant to section 221-b. The Home for Needy Children does not take *Page 143 this devise or bequest free from its proportionate part of this tax. The testatrix did not pay her personal property tax upon these bonds in her lifetime and in consequence her estate is called upon to pay the amount fixed by the above section at her death.
The estate which the testatrix left, and which passes under her will to her devisees and legatees including this charitable corporation, consists of that portion which remains after the payment of this tax and all debts and expenses. (Matter ofWatson, 226 N.Y. 384.)
For reasons here stated, the order appealed from must be reversed and the matter remitted to the Surrogate's Court for readjustment of the tax according to the rulings made herein, with costs to appellant in all courts.
HISCOCK, Ch. J., HOGAN, POUND, McLAUGHLIN and ANDREWS, JJ., concur; CARDOZO, J., absent.
Order reversed, etc.