77. Conveyances Not Taxable. would not require any stamp tax:

The following typical cases of conveyances

. (1.) Quit Claim deed for the purpose of clearing up defects in title, when not given for a substantial consideration and not conveying any substantial title. (2.) Deed from husband to wife, as a gift or merely to change the nominal ownership.

(3.) Deed to a "straw man" to hold title without any actual ownership or to make an immediate conveyance to a third person.

(4.) Deed of trust, whether to secure a debt or to pay rents and profits to named beneficiaries, not purchasers.

(5.)

Trustee's deed to beneficiaries.

(6.) So-called deeds which convey no title to real estate, as deeds to burial sites which merely give a right to bury persons, erect monuments, etc.

(7.) Partition deeds, dividing land among owners of undivided interests, and deeds correcting or locating boundary lines.

78. Conveyance by State or by Officer of Court. Where a state is the grantor in a conveyance, no tax is required. Where a court appoints a master or referee to sell property as under a foreclosure decree, the deed to the purchaser must be stamped. The conveyance is not part of the court process, but is for the benefit of the parties. As the obligation to pay the tax is primarily upon the grnator, the purchaser should not furnish the stamps, but the court officer should do so and should charge the amount to the expense of the sale.

IX. STEAMSHIP TICKETS.

Tickets

79. The duty to affix and cancel the stamp is upon the person selling and issuing the ticket, but the purchaser may be required to pay the tax. issued to employees of the United States and paid for by the government, and tickets issued to foreign diplomats and consuls are exempt from this tax.

X. PROXY FOR CORPORATION MEETING.

80. There is a tax of 10c upon each proxy actually issued and accepted, whether used or not. Religious, educational, charitable, and fraternal corporations, incorporated literary societies, and public cemeteries, are exempt from this tax. The stamp may be affixed and cancelled by the person executing the proxy, or by an officer or employee of the corporation, or by the person named in the It is held that the instrument is not operative until accepted, so that if proxy. signed in a foreign country and sent into the United States, it is issued in this country and is taxable. The 10c stamp is required for each signature, except in

the case of joint owners.

XI. POWER OF ATTORNEY.

81. Any written appointment of an agent, to perform any act on behalf of the grantor is a power of attorney and is subject to a 25c tax. Exceptions are here

noted:

82. Power of Attorney to Transfer Stock. The power of attorney to have stock or bonds transferred on the books of a corporation, whether on the back of the certificate or on a detached paper, and whether appointing the secretary of the company or any other person, does not confer any real authority not vested in the transferee by the transfer itself, and therefore such a power of attorney is not subject to the 25c tax.

83. Judgment Notes. The power to confess judgment, contained in notes and leases and similar instruments, is held not to constitute a power of attorney, but is a warrant of attorney, and as such is not subject to any stamp tax.

84. Power of Sale in Mortgages. Real estate and chattel mortgages and deeds of trust frequently authorize the mortgagee to make public or private sale of the mortgaged property in case of default, foreclosing without court proceedings. Such a power of sale is not taxable because it differs in many ways from a power of attorney, chiefly in that the mortgagee acts for his own benefit and on his own behalf and does not represent the grantor.

85. Powers in Connection with Assignments. When debts, mortgages, wages, or other rights are assigned, the instrument of assignment frequently confers upon the assignee power and authority to perform in the name of the assignor whatever acts may be necessary to enforce the debts, collect the wages, or otherwise make effective the assignment. But an assignment for a valuable consideration would of itself confer upon the assignee all the rights of the assignor, without express grant, and therefore such a power of attorney is not taxable.

86. Powers to Act for Corporations. As corporations can act only by agents, some one must be authorized to perform every corporate act. Frequently such authority is given in the form of a power of attorney by the Board of Directors. Where an officer of the corporation is appointed, there is no tax whether the appointment be general or for a special act. But where a person other than an officer is appointed, either by power of attorney or resolution of the Board of Directors, to represent the corporation generally or to perform certain acts, such appointment confers authority "not otherwise vested in the grantee," and is subject to the tax.

1. The Federal Estate Tax is levied upon the transfer of estates at the death of the owner. It applies to the whole net estate of decedents who were residents of the United States, and to that part of net estate of a non-resident of the United States which is situated in this country. The tax is in addition to any inheritance tax which may be levied by the state government. Unlike most inheritance taxes, the rate is not varied according to the disposition which is made of the property, but the tax is levied upon the estate as a unit, without regard to the amount of the distributive shares, or the relationship of the beneficiaries.

2. Gross and Net Estate. All the property which belonged to the decedent and is transferred to others at his death (or which was transferred in contemplation of or to take effect at his death), constitutes the gross estate. From this, certain described deductions are made, and the remainder is the net estate upon which the tax is levied.

3. Exemption. From the gross estate of a resident decedent, there is deducted an exemption of $50,000 which is not applied to the estate of a non-resident.

4. Rate of Tax. The tax applies only to the estates of persons who die on or after September 9, 1916, and is at a higher rate upon the estates of persons dying on or after March 3, 1917, and at a still higher rate upon the estates of persons dying on or after October 3, 1917. The whole estate is not taxed at a single rate, but upon each part or block of the estate a different rate is imposed, so that the first $50,000 is taxed at a lower rate than the next $100,000, and the next $100,000 is taxed at a still higher rate, and thus progressively. The following schedule shows the rates applying to each part of the net estate of a resident or non-resident:

5. The higher rates applied to the estate of a decedent dying after October 3, 1917, do not apply to the estate of a person dying while serving in the military or naval forces of the United State during the continuance

of the present war, or if death results from injuries received or disease contracted in such service, within one year after the termination of such war, as fixed by proclamation of the President. The estates of such persons will be taxed at the rates shown above in the second column.

6. The Return. The tax is assessed upon the basis of a Return (Form 706) to be made by the executor or administrator of the estate, within one year after the death of the decedent and before the distribution of the estate.

7. The Notice. Within thirty days after letters testamentary, or letters of administration are issued, or within thirty days after coming into possession of any property of the decedent, whichever event first occurs, the executor or administrator must file with the collector of internal revenue of the district in which the decedent resided at the time of his death, a notice (on Form 704) advising the collector of his appointment, and of the approximate value of the gross estate and net estate, and of the names of persons who have received gifts or advances made by the decedent in contemplation of death, or to take effect at his death. Any other person coming into possession of property belonging to the estate before the issuance of letters of administration, and fiduciaries holding property of a decedent for whom no executor has been appointed must file a similar notice (on Form 705) within thirty days of taking possession, or after the death.

8. The following persons are required to file the notice (Form 705) even where there has been an executor or administrator appointed: (1) the surviving husband or wife, taking any community property; (2) the first taker of any real estate which passes directly to the beneficiary and not through the administration of the estate; (3) the trustee or the donee of any gift of material value from the decedent within two years prior to his death, or of any gifts of any value whatever made by the decedent at any time in contemplation of, or to take effect at, or after his death; (4) fiduciaries holding property of any kind jointly, or in entirety, for the decedent and any other person or persons; (5) persons holding at decedent's death, or taking at any time thereafter, any property included in the gross estate which may not be taken in charge by the executors or administrators.

9. The notice and the Return are not required in the case of resident decedents where neither the net estate exceeds $50,000 or the gross estate exceeds $60,000, but it must be filed in all other cases; it must be filed in the case of a non-resident decedent having property situated in this country, whatever the value of the gross estate or of such property. If the Return is not made by the executors, it must be made by the persons required to file the thirty day notice. Only one notice is required with respect to any particular property, but where the person originally liable has failed to file the notice, the duty devolves upon each person successively taking possession of the property.

10. If no executor is appointed in this country for the estate of a non-resident decedent, or if the executor may not have filed the notice, the notice and Return must be filed by every agent, representative, or fiduciary having possession or control of the property. Such agent or representative is then responsible for the payment of the tax, and should not release such property, except to an executor appointed in this country,

without reserving enough to pay the tax which may be found to be due upon the entire estate. This applies to safe deposit companies, warehouses, banks, and debtors of the decedent.

11. Transfer Agents. Stock owned by a resident decedent may be transferred to, or upon the order of, an executor or administrator, without imposing on the transfer agent any liability for filing the thirty day notice, or seeing that it has been filed. However, the transfer agent should not transfer such stock directly to a beneficiary, or succeeding owner, or to an executor appointed in a foreign country, without ascertaining that the estate is being administered in this country, and that the executor has knowledge of the ownership of the decedent in the stock in question. Where there is no executor in this country the transfer agent may give notice (upon Form 714) of property held subject to transfer, and may then make the transfer.

12. Penalties. Whoever knowingly makes any false statement in the notice or Return shall be liable to a penalty of not to exceed $5,000, or imprisonment for not more than one year, or both. Any person in possession of property of the decedent, under circumstances imposing a duty to file the notice or make a Return, who fails to perform such duty, is subject to a penalty of not more than $500, and costs of suit, to be recovered by civil action. The same penalty is imposed upon any one who has in his possession any record, file, or paper containing information as to the estate of the decedent, and who fails to exhibit the same upon the request of any Internal Revenue officer, for examination in connection with this tax.

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13. The Gross Estate. The gross estate includes the value of all property at time of death. The value of the gross estate must be determined by taking the value of all the property, real or personal, of the decedent at the time of his death, wherever situated, which is subject to charges against his estate, or in the case of a non-resident, the value of all the property situated in the United States. Income earned or accrued at the time of the death must be included, but income earned or accrued after the death is not to be included, nor does the estate include additions to, or increases in, values occurring after the death, although, as will be seen, losses incurred after the death may be deducted. Where the ownership of the deceased was not complete, the value to be included in the estate is the value of the property to the extent of the interest therein of the decedent at the time of his death, which after his death is subject to the payment of the charges against his estate and the expenses of its administration and is subject to distribution as part of his estate." apparent contradiction of these express words of the law, the regulations require the full value of real or personal property owned subject to a mortgage to be included in the gross estate, because the law provides that unpaid mortgages are to be deducted from the gross estate. Of course, there could be no deduction of a mortgage if the gross estate included only the value of the property over the mortgage, or the value of the so-called "equity" belonging to the decedent. The gross estate includes property which is the subject of dower, curtesy, or other estate vested in the surviving spouse, and any other interest in property passing direct to the beneficiary, but not property in which the ownership of the decedent was only a life interest. Insurance payable to the estate is included in the

In

G

gross estate, but insurance payable to named beneficiaries is not part of the gross estate.

14. Property over which the decedent had a general power of appointment which was exercised by will, or in contemplation of death, or to take effect at death, must be included in the gross estate. A general power is a right to name the person who is to be the owner of property which the decedent himself did not own, which right is not limited nor restricted. If the decedent had a special or limited power of appointment, so that he could merely designate which person or persons in a limited class should take the property, such property is not to be included in the gross estate. In such case, full information should be given as to the terms of the instrument under which the power was exercised.

15. Bonds of the United States and other securities which are exempt under other taxing laws are taxable as part of the gross estate under the estate tax law.

16. Accrued Interest and Dividends. Dividends must be regarded as accrued when declared, regardless of when payable or received. Therefore, all dividends declared prior to the day of the death must be included, but those declared afterward are not to be included, without regard to the period in which they were earned or for which they were paid. Dividends on preferred stock, when fixed and certain, and interest on bonds, notes, mortgages, certificates, and similar assets having fixed earnings, must be apportioned, and the amounts actually due with respect to the period prior to the day of the death are to be returned as actually accrued at that time and incorporated in the estate.

17. Property Transferred in Contemplation of Death. Persons frequently make dispositions of property during their lifetime which are in the nature of dispositions of their estate. For example, a man may settle most of his property upon his wife, in a trust for her benefit, with gifts after her death to their children, or to relatives, or to charities. Or a man may give his business to his sons, retiring in their favor. Such dispositions are "in contemplation of death" whenever it appears that the object and purpose of the gift was to provide for the beneficiary because of, or after, the death of the giver. In such a case, the value of the property at the time of the death must be included in the gross estate. A sale or transfer for fair consideration in money would not come within this description.

18. Gifts Presumptively in Contemplation of Death. If any material part of the decedent's property was transferred by the decedent within two years prior to his death, without a fair consideration in money or money's worth, it is deemed to have been made in contemplation of death and must be included in the gross estate as shown on the Return, and is subject to tax unless the representatives of the estate can establish, by evidence and argument to be submitted with the Return, that the transfer was in fact not made in contemplation of death. Although this presumption arises only in the case of transfers made within two years prior to the death, and only as to transfers of a material part of the estate, the gross estate must include all transfers actually made in contemplation of, or to take effect at, or after death, whenever made, even those made before the law was in effect, and whether of a material or insignificant part of the estate.

19. Transfers of Property, to Take Effect at Death. Any property