Com. v. Switow

• Decision Date: 14 May 1948
• Citation: 211 S.W.2d 406,307 Ky. 432
• Parties: COMMONWEALTH et al. v. SWITOW.
• Court: Kentucky Court of Appeals

211 S.W.2d 406

307 Ky. 432

COMMONWEALTH et al. v. SWITOW.

Court of Appeals of Kentucky

May 14, 1948

Appeal from Circuit Court, Franklin County; W. B. Ardery, Judge.

Action by Annie Switow against the Commonwealth of Kentucky Department of Finance, etc., for a refund of inheritance tax paid under protest. Judgment for plaintiff, and defendants appeal.

Affirmed.

Eldon S. Dummit, Atty. Gen., and Roy W. House, Asst Atty. Gen., for appellants.

E. J Wells and Charles W. Morris, both of Louisville, for appellee.

LATIMER Justice.

By this action appellee, Annie Switow, seeks a refund of Inheritance Tax paid under protest.

Michael Switow died testate October 19, 1940, at the age of 76. His widow, Annie Switow, and his son, Samuel J. Switow, were named as executors and duly qualified as such. They filed inheritance tax report with the Department of Revenue of the Commonwealth. The Department of Revenue increased the value of the estate from $38,314.93 as shown by the report of the executors, to $74,184.97. Of this increase $30,000 is represented by 400 shares of preferred stock in the Switow Theatrical Company, which was transferred by the deceased, Michael Switow, to his wife on April 27, 1938, approximately 2 1/2 years prior to his death.

Appellee alleged in her petition that the Commissioner of Revenue illegally and erroneously included as part of her inheritance this 400 shares of stock, and that the transfer was not made in contemplation of death but as an outright gift in consideration of the many business duties performed by her on his account. Appellee took the deposition of 4 witnesses, to which the Commonwealth filed exceptions.

By agreement of the parties the case was submitted to the chancellor without the intervention of a jury upon the pleadings, the depositions upon behalf of the plaintiff and the defendants' exceptions thereto. The court adjudged that plaintiff recover of the defendants by way of refund the sum of $1916.50 with interest thereon at 6% per annum from November 13, 1941, until paid. From that judgment appellants prosecute this appeal.

Appellants take the position that other than a consideration of the exceptions taken to the plaintiff's depositions the sole question is whether or not the transfer of stock was a gift made in contemplation of death.

Appellee takes the position that the sole question is whether or not there was any evidence to support the finding and judgment of the lower court.

Although they admit failure to obtain action of the lower court on the exceptions filed, appellants inject into their, brief comment on those exceptions. Due to that admitted failure on part of appellants, we cannot consider the exceptions as here presented. See Proctor v. Proctor, 282 Ky. 20, 137 S.W.2d 354. The question then remains: Is there any evidence to support the findings of the lower court? If so, we must affirm its judgment. See Fitzpatrick Adm'r v. Citizens Bank & Trust Company, 231 Ky. 202, 21 S.W.2d 254.

Appellants contend that pursuant to KRS 140.020 it was incumbent upon the plaintiff by pleading and proof to overcome the presumption that the gift was made in contemplation of death. They insist that both the petition and proof failed to overcome this prima facie presumption created by the statute above.

Taxation of gifts made in contemplation of death has been the subject of considerable litigation. Two well considered opinions construing our present tax provisions on such gifts and establishing the guiding principles for the disposition of such cases are to be found in Chase's Executor v. Commonwealth, 284 Ky. 471, 145 S.W.2d 58, and Sellinger's Adm'r v. Reeves, 292 Ky. 114, 166 S.W.2d 54. That we might get these principles established in our mind we quote from each of them. In the first above we said [284 Ky. 471, 145 S.W.2d 59]:

'Gifts made in contemplation of death within the meaning of the Inheritance Tax Act are gifts motivated by the thought of death. This does not mean that the donor must believe that death is imminent. The purpose of inserting in inheritance Tax laws provisions for taxing gifts made in contemplation of death is to prevent evasion of the tax by transfers which are merely substitutes for testamentary dispositions, and the determination of the nature of the gifts turns on the motive of the donor. United States v. Wells, 283 U.S. 102, 51 S.Ct. 446, 75 L.Ed. 867; Milliken v. United States, 283 U.S. 15, 51 S.Ct. 324, 75 L.Ed. 809; Perry v. Martin, 125 N.J.L. 46, 14 A.2d 266; Mossberg v. McLaughlin, 125 Conn. 680, 7 A.2d 910. The value of the gift, age of the donor, and condition of his health are some of the circumstances to be considered in determining the question of motive. Under our statute a gift made within three years prior to the death of the donor is subject to the tax unless it is shown that it was not made in contemplation of death, and the burden of overcoming the presumption created by the statute is upon those who claim the estate.'

In the second we said [292 Ky. 114, 166 S.W.2d 57]:

'The object of the Inheritance Tax Statute is to tax not only testamentary and intestate transfers but also inter vivos transfers which are, in fact, substitutes for testamentary dispositions. To bring a gift inter vivos within the purview of our Inheritance Tax Statutes and render it taxable, it is not necessary that the donor be motivated alone by the thought of death. If contemplation of death is one of the motives, the transfer may be taxable though other motives are present. A desire to see a donee have a present enjoyment of the property and to see him established with a separate competency are not necessarily inconsistent with the transfer of the property in contemplation of death within the meaning of the statute. In ascertaining the motive or motives actuating the donor, facts may be considered such as his age and state of health at the time the gift was made, the amount of the gift, the relationship of the donees, his habits and propensities, and other pertinent circumstances. Chase's Ex'x v. Commonwealth, supra; Dommerich v. Kelly, 132 N.J.Eq. 220, 27 A.2d 871; Kavanagh v. Kelly, 131 N.J.Eq. 398, 25 A.2d 547; Purvin v. Commissioner of Internal Revenue, 7 Cir., 96 F.2d 929, 120 A.L.R. 166.'

Keeping in mind the guiding principles of the above cases we must first...