Appeal, No. 187, Jan. T., 1950, from decree of Orphans' Court of Philadelphia County, 1947, No. 2219, in Estate of Harry J. Dorsey, Deceased. Decree affirmed.
Joseph F. McVeigh, with him Cornelius C. O'Brien, for appellant.
Francis J. Gafford, Deputy Attorney General, with him Charles J. Margiotti, Attorney General, and Irving N. Kieff, for appellee.
Before Drew, C.j., Stern, Stearne, Jones and Bell, JJ.
OPINION BY MR. JUSTICE HORACE STERN
Where the share of an employe in a Savings and Porfit Sharing Pension Fund composed of contributions from the wages or salaries of employes and contributions from the profits of the employer was paid at the time of his death to a beneficiary he had designated, was the portion of it which represented the employer's contributions subject to transfer inheritance tax under the Act of June 20, 1919, P.L. 521, as amended? That is the question presented on this appeal.
The pension fund here involved is a trust established by Sears, Roebuck & Company for its employes. Decedent, Harry J. Dorsey, an employe, became a member of it in 1924 and subsequently named his sister, Eleanor A. Dorsey, as the person who was to receive the proceeds payable therefrom in the event of his death. Under the rules and regulations governing its administration and operation an employe is required to deposit 5% of his compensation up to a maximum per annum of $250; the Company contributes
annually a certain graded percentage of its consolidated net income. The fund is administered by trustees with whom all the contributions are deposited. The Company's contributions are credited to the accounts of the depositors in accordance with age and length of service, the largest proportionate share being allotted to those in the so-called "Group D", which consists of employes over 50 years of age and having 15 or more years' continuous service. At the time of his death in 1945 decedent was in "Group D". The total credits to his account in the fund at the time of his death included 932 shares of stock of the Company of a value of $35,183, all of which shares had been contributed by the Company, and the sum of $3,939.29 representing contributions made by decedent from his salary. Transfer inheritance tax was paid on the latter amount at the rate of 10%. The Register of Wills assessed also a 10% tax on the value of the shares of stock, or $3,518.30, from which assessment Eleanor A. Dorsey appealed. The court below decided that the tax was properly imposed, and from that decision she now appeals to this Court.
Section 1(c) of the Act provides that the tax shall be imposed upon the transfer of any property made by a resident by deed, grant or gift intended to take effect in possession or enjoyment at or after the death of the grantor or donor. Section 1(d) provides that where property is transferred pursuant to a power of appointment it shall be taxed as of the estate of the donor, notwithstanding any blending of such property with the property of the donee. It is the contention of appellant that in designating her as beneficiary decedent was merely exercising a power of appointment over that portion of the share of the fund credited to him which represented contributions by the Company. Such a contention would be valid only if the Company's
contributions continued to be owned by the Company and not by decedent, because obviously a power of appointment can exist only with reference to another's property and not one's own. But it seems quite clear that decedent's share of the fund belonged to him in its entirety during his lifetime and without any distinction as to the part thereof contributed out of his salary and the part contributed by the Company. The rules and regulations governing the fund state its purposes to be, inter alia, to permit the employes to share in the Company's profits and to provide a plan through which each employe may accumulate his own savings and his portion of the Company's contributions as a means of providing an income for himself on retirement. These declarations fairly indicate that the Company regarded its contributions as the property of the depositors during the period of their accumulation in the fund. It was evidently so understood by decedent himself, for in his will he stated: "I an presently the owner of certain shares of the Profit Sharing Plan of Sears, Roebuck & Co., a corporation, as well as a certain cash balance held by said Sears, Roebuck & Co. in connection with the operation of said Profit Sharing Plan." The rules and regulations provide that, so far as practicable and advisable, the fund should be invested in the capital stock of the Company, to the end that the depositors may, in the largest measure possible, share in the earnings of the Company. There stood to the credit of each ...