CASES DECIDED IN THE COURT OF APPEALS OF THE STATE OF NEW YORK, COMMENCING MAY 4, 1897. In the Matter of the Appraisal of the Property of GEORGE B. SHERMAN, Deceased, under the Act in Relation to Taxable Transfers of Property. 1. INHERITANCE AND TRANSFER TAX LAWS-UNITED STATES BONDS. The inclusion of United States bonds in the valuation under laws for the taxation of the right of transfer of property by inheritance or by will, for the purpose of ascertaining the tax, is a valid exercise of legislative power by a state, and does not constitute a taxation of Federal securities. 2. TRANSFER TAX ACT OF 1892-EXEMPTION OF UNITED STATES BONDS. United States bonds, owned by a resident decedent, which would otherwise be subject to valuation for the purpose of fixing the tax under the Transfer Tax Act of 1892 (Ch. 399), are exempt from such valuation, by force of the provision (22) which limits the meaning of the words "estate" and "property," as used in that act, to property over which the state has jurisdiction for the purposes of taxation. Matter of Sherman, 15 App. Div. 628, affirmed. (Argued April 19, 1897; decided May 4, 1897.) APPEAL from an order of the Appellate Division of the Supreme Court in the fourth judicial department, made March 29, 1897, which affirmed an order of the surrogate of the county of Erie. The nature of the proceeding and the facts, so far as material, are stated in the opinion. Emmet R. Olcott for the county treasurer of Erie county, appellant. The tax imposed by chapter 399 of the Laws of 1892 on taxable transfers of property is not upon the property itself, but upon the transfer of the clear market value of such property. (In re Hoffman, 143 N. Y. 329; In re Merriam, 141 N. Y. 484; In re Swift, 137 N. Y. 77; In re Cullum, 5 Misc. Rep. 174; 145 N. Y. 593; In re Seaman, 147 N. Y. 74; In re Hamilton, 148 N. Y. 313; In re Davis, 149 N. Y. 546; In re Bronson, 150 N. Y. 6; In re Enston, 113 N. Y. 181; In re Westurn, 152 N. Y. 93.) The clear market value of property subjected to taxation by chapter 399, Laws of 1892, means the cash value of the property at the time of transfer. (Code Civ. Pro. $ 2711, 2712, 2743, 2744; Redf. on Surr. Prac. [5th ed.] 387, 505; Sherman v. Willett, 42 N. Y. 150; Willard on Executors, 268; Solomons v. Kursheedt, 3 Dem. 312; In re Jones, 1 Redf. 266; Willcox v. Smith, 26 Barb. 346; Dayton on Surrogates, 248, 267, 268, 269; 2 Kent's Com. [8th ed.] 515, 516; 2 Bradf. on Surr. Prac. 221.) Since the tax is not imposed on the transfer of the property of the decedent, and only on its clear market value, that is, cash value, the law affects all transfers of property of residents of this state, whatever the property may be, whether United States bonds or other chattels or personal property generally, because the same are only transferred and taken at their appraised and inventoried cash value. (Wallace v. Myers, 38 Fed. Rep. 184; Strode v. Comm., 52 Penn. St. 183; United States v. Perkins, 163 U. S. 625; In re Cullum, 145 N. Y. 593; In re Whiting, 150 N. Y. 27; In re Knoedler, 140 N. Y. 377; L. 1892, ch. 399, §1; In re Swift, 137 N. Y. 88; People ex rel. v. Comrs. of Taxes, 23 N. Y. 224; In re Prime, 136 N. Y. 347; In re Hamilton, 148 N. Y. 313.) Harry D. Williams for executrix, respondent. The order of the court below was right and should be affirmed. (In re Whiting, 150 N. Y. 31; In re Romaine, 127 N. Y. 86.) The bonds or obligations of the United States for the payment N. Y. Rep.] Opinion of the Court, per ANDREWS, Ch. J. of money cannot be the subject of taxation by a state. (H. Ins. Co. v. New York, 134 U. S. 598; McCulloch v. Maryland, 4 Wheat. 436; Weston v. Charleston, 2 Pet. 449; U. S. R. S. [2d ed.] § 3701; U. S. Const. art. 4, § 2.) ANDREWS, Ch. J. This appeal is from an order which affirmed the decision of the surrogate, which excluded from appraisal under the act, chapter 399 of the Laws of 1892, in relation to the taxable transfers of property, United States bonds amounting to $10,000, owned by the testator, a resident of the state, who died in 1896. The question presented depends upon the provisions of the act of 1892. The power of a state to tax the right of transfer of property by will or the right of succession under the intestate laws of the state is not an open question. It results from the acknowledged principle that the right to dispose of property by will and of succession thereto in cases of intestacy is derived from and under the municipal law. The state which confers the right and prescribes the rule of descent or distribution, may, therefore, annex to the privilege which it confers such reasonable conditions to its enjoyment as it may deem expedient. There is no doubt that the laws for the taxing of inheritances or of the right of transfer by will are within the general scope of legislative power. The special question here is whether the act of 1892 exempts from valuation for the purpose of fixing the tax imposed by the act that part of the estate of the testator represented by United States bonds. The form of the question above stated assumes that the bonds would be the proper subject of valuation unless excluded by the true construction of the act. If the tax imposed by the law of 1892 is a property tax in the ordinary sense, levied upon the property of a testator or an intestate, it could not be sustained as a lawful exercise by the state of the power of taxation, so far as it affected securities of the Federal government. The principle that a state cannot, in the exercise of the power of taxation, tax obligations of the United States, was established at an early day. But the tendency |