Central Trust Co. v. James

• Court: West Virginia Supreme Court
• Citation: Central Trust Co. v. James, 120 W.Va. 611, 199 S.E. 881 (W. Va. 1938)
• Decision Date: 22 November 1938
• Docket Number: C. C. 596.
• Parties: CENTRAL TRUST CO. v. JAMES, State Tax Com'r.

199 S.E. 881

120 W.Va. 611

CENTRAL TRUST CO. v. JAMES, State Tax Com'r.

C. C. No. 596.

Supreme Court of Appeals of West Virginia.

November 22, 1938

Submitted October 19, 1938.

Syllabus by the Court.

In determining the base for the application of the inheritance tax rates under Article 11 of Chapter 11 of the Code of West Virginia there should be deducted, inter alia, from the value of the property involved, the amount of the transmission tax sometimes called estate tax, levied and collected by the federal government.

Case certified from Circuit Court, Kanawha County.

Proceeding on the petition of the Central Trust Company, executor of the estate of Anna Perry Caperton, deceased, against Ernest K James, State Tax Commissioner, to review an order of the Tax Commission assessing an estate tax, wherein the Circuit Court overruled the Tax Commissioner's demurrer to the petition and certified its action to the Supreme Court of Appeals for review.

Affirmed.

Charles W. Moxley, of Charleston, for plaintiff.

Clarence W. Meadows, Atty. Gen., and Forrest B. Poling, Asst. Atty Gen., for defendant.

MAXWELL President.

This case involves the question whether, in determining the amount of inheritance tax under the applicable statute of this state, there may be deduction of the amount of the federal estate tax which has been paid on the same property.

The estate involved is that of Anna Perry Caperton and was appraised at $217,407.25. The federal estate tax laid under Act of Congress of 1926, U.S.C.A., Title 26, Section 410, was $14,720.65. This was paid by the executor.

The inheritance tax due from the Caperton estate to the State of West Virginia under its statute has been paid, except the sum of $441.65. This item constitutes the amount of tax under the applicable rates on a sum equal to that paid to the federal government as above stated. The Tax Commissioner takes the position that the amount paid to the federal government may not be deducted from the gross estate before laying the inheritance tax. The executor claims right to the deduction.

From an order of the Tax Commissioner assessing the Caperton estate with the claimed balance of $441.65, the executor appealed to the circuit court of Kanawha County under Code, 11-11-21, and filed in that court a petition fully disclosing the situation as hereinabove recited. The circuit court overruled the Tax Commissioner's demurrer to the petition, and certified its action to this court for review.

The federal estate tax is a tax upon the right to transmit property by will or under intestacy laws, and is gauged by the value of the whole estate, less deductions authorized by the federal statute. New York Trust Co. v. Eisner, 256 U.S. 345, 41 S.Ct. 506, 65 L.Ed. 963, 16 A.L.R. 660; In re Inman's Estate, 101 Or. 182, 199 P. 615, 16 A.L.R. 675.

The West Virginia inheritance tax is "an excise upon the right or privilege of acquiring property by inheritance or succession from deceased persons or by transfers made by living persons in contemplation of death * * *." Central Trust Co. v. State Tax Commissioner, 116 W.Va. 37, 178 S.E. 520, 521.

The difference between these taxes, federal and state, respectively, is clear and emphatic; the one is on the right to transmit and the other on the right to receive.

The rate of the West Virginia inheritance tax varies in respect of both the relationship of the recipient and the market value of the property involved. Code, 11-11-2 and 11-11-3. In Section 5 of the same article there is this provision: "The market value of property is its actual market value after deducting debts and encumbrances for which the same is liable, and to the payment of which it shall actually be subjected."

The Tax Commissioner urges that the quoted deduction is not inclusive of the federal estate tax because (1) the federal tax is not specifically mentioned as an item of deduction, and (2) the federal estate tax was not passed until many years after the enactment of the stated deduction provision, and therefore it could not have been within legislative contemplation that federal estate taxes were included in the deductions authorized in general terms by the Act. We are unable to approve the Tax Commissioner's position.

The quoted statute respecting deductions of "debts and encumbrances" is broad and inclusive. The language is of ample breadth to include claims and liens of whatever character and whenever arising, whether under existent law or future enactments. Where an authorization of deduction, such as the one before us, is of sufficient breadth to include all proper charges it would be vain to require particularization.

In a few of the states it has been held that the federal estate tax may not be deducted in determining the base for the application of the inheritance tax imposed by state law. Consult: In re Harkness' Estate, 134 Misc. 203, 234 N.Y.S. 297; In re Sanford's Estate, 188 Iowa 833, 175 N.W. 506; Succession of Gheens, 148 La. 1017, 88 So. 253, 16 A.L.R. 685; In re Fish's Estate, 219 Mich. 369, 189 N.W. 177; Hazard v. Bliss, 43 R.I. 431, 113 A. 469, 23 A.L.R. 826; In re Week's Estate, 169 Wis. 316, 172 N.W. 732.

In a much larger group of states the courts have held that the deduction may be made. Consider: In re Rosing's...