The People v. Metropolitan Trust Co. , 369 Ill. 84 ( 1938 )

As I understand it, the following language in the majority's decision means that, as amended, sub-section 4 of section 1 remains an exception to section 25: "It will be noted that section 25 as it existed in 1935, required the imposition of a tax upon the transfer at the highest rate possible `under the provisions of this act,' and unless sub-section 4, providing that the exercise of the power shall be deemed a taxable transfer by the donee of the power, the same as though bequeathed by him by will, is to be considered no longer a part of the act, then, under the holding of the Linn and Cavenee cases, sub-section 4, as it now stands, must, to the extent of its terms, be taken as a limitation upon the power conferred by section 25."

In the Linn case, the reason assigned was that since the exercise of the power by the donee and its non-exercise were both covered by sub-section 4 of section 1, section 25 was not applicable. The 1933 amendment repealed that part of sub-section 4 dealing with the non-exercise of the power. This change removed the entire basis for the holding in the Linn case, and the majority opinion recognizes the fact in holding that in the case before us, the subject matter of the power is presently taxable. How then can sub-section 4, as amended, be an exception to section 25?

It is stated that "as sub-section 4 provides for an entirely different transfer tax to be assessed in the estate of the donee of the power, where the power is exercised, to assume that it would be exercised, is to assume a situation wherein the State would have no power whatever to assess a tax in the estate of the donor of the power. People v. Linn, supra, andPeople v. Cavenee, supra."

The same reasons exist in support of an assumption that the donee of the power will exercise it in favor of a stranger, in this case, that exist in any other case involving some future contingent event which, if it happens, as it may well do, will make the highest rate of inheritance tax applicable.

The provision in sub-section 4 of section 1 that the transfer shall be taxable in the estate of the donee of the power in case of an exercise of the power, merely makes applicable the rates determined by the degree of relationship between the donee of the power and his appointees. The tax is on the transfer and this provision does not make it a new transfer. It remains as it has always been in law, a transfer from the donor to the appointee.Northern Trust Co. v. Porter, 368 Ill. 256.

The holding in People v. Cavenee, 368 Ill. 391, does not support the majority decision. The effect of that decision was to remove from taxation the gifts or property covered by powers of appointment created prior to the amendment of sub-section 4 of section 1, which repealed the latter part of that sub-section, where such powers were not exercised.

Sub-section 4 cannot remain an exception to section 25 and at the same time allow section 25 to require present taxation of the property which is the subject of the power of appointment. This holding, like People v. Linn, 357 Ill. 220, and People v.Cavenee, supra, results in loss to the State.

The logical result of the majority opinion would be to require another transfer tax in case the power is exercised, but this result is not admitted by the majority.

The objections urged here apply also to the majority opinion inPeople v. First Nat. Bank, post, p. 212.

Mr. JUSTICE ORR, also dissenting.