Commonwealth v. Paynter's Adm'r

• Decision Date: 02 December 1927
• Citation: 2 S.W.2d 664,222 Ky. 766
• Parties: COMMONWEALTH, by BOARD, Revenue Agent for the State at Large, v. PAYNTER'S ADM'R.
• Court: Kentucky Court of Appeals

2 S.W.2d 664

222 Ky. 766

COMMONWEALTH, by BOARD, Revenue Agent for the State at Large, v. PAYNTER'S ADM'R.

Court of Appeals of Kentucky

December 2, 1927

Rehearing Denied, with Modification, March 2, 1928.

Appeal from Circuit Court, Franklin County.

Action by the Commonwealth, by Milton Board, Revenue Agent of the State at Large, against Elizabeth K. Paynter's Administrator. A demurrer to the answer was overruled, and from judgment dismissing the petition plaintiff appeals. Reversed, with directions.

Harry D. Kremer, of Lexington, for appellant.

Morton K. Yonts and Eli H. Brown, Jr., both of Louisville, for appellee.

REES J.

Judge Thos. H. Paynter died testate on March 8, 1921, and by his will devised and bequeathed his property to his wife Elizabeth K. Paynter, who died intestate on December 19 1921, leaving surviving her two children. On September 8 1922, the inheritance tax due on the estate of Judge Paynter was paid to the state, and on July 17, 1924, this action was instituted to recover state inheritance taxes, interest, and penalty upon the net value of the estate of Elizabeth K Paynter.

The appellee, who was the defendant below, filed an answer, in which he alleged that a large portion of the property owned by Elizabeth K. Paynter at the time of her death was the same property that had been bequeathed to her as the sole legatee of her husband, and that no inheritance tax could be imposed upon that property, since to impose an inheritance tax on it would amount to imposing a tax twice on the same property within two years which is prohibited by subsection (j) § 2, c. 111, of the Acts of 1924, now subsection 5 of section 4281a2 of the 1926 Supplement to Carroll's Kentucky Statutes. It was further alleged in the answer that, when Elizabeth K. Paynter died, no settlement or distribution of the estate of Judge Paynter had been made by her as executrix, and that she was never vested and possessed of the beneficial interest in the estate, and therefore her children inherited the property from their father, and not from Elizabeth K. Paynter. The defendant in his defense to the action also relied on the Act of Congress of November 23, 1921, c. 136, § 403, 42 Stat. 279 (U. S. Comp. St. § 6336 3/4d), which provides that, where an estate has paid an estate tax, no such additional tax shall be levied or paid on such estate within a period of five years thereafter. A demurrer to the answer was overruled, and, the plaintiff declining to plead further, judgment was entered dismissing the petition, and from that judgment this appeal is prosecuted.

Section 2, c. 111, of the Acts of 1924, provides in part:

"A deduction shall be allowed to persons of class A of section 2 for all property transferred by a decedent of class A of section 2 to any person of that class, provided the same property was transferred within two years to such decedent and a tax paid thereon in this state. This deduction shall not exceed the appraised value on which such tax was paid; providing, however, such property previously taxed can be identified as having been received by the decedent from such prior decedent by gift, bequest, devise, or inheritance, or which can be identified as having been acquired in exchange for property so received. Provided, further, that this deduction shall not apply in favor of one who becomes a member of class A by marriage contracted within said period of two years."

Section 4281a, Kentucky Statutes, 1918 edition, which was in effect during the year 1921, provided in part:

"All property which shall pass, by will or by intestate laws of this state, from any person who may die seized or possessed of the same while a resident of this state, or if such decedent was not a resident of this state at the time of death, which property, or any part thereof, shall be within this state, or any interest therein, or income therefrom, which shall be transferred by deed, grant, sale or gift, made in contemplation of the death of the grantor or bargainor, or intended to take effect in possession or enjoyment after such death, to any person or persons or to any body-politic or corporate, in trust or otherwise, or by reason whereof any person or body-politic or corporate shall become beneficially entitled in possession or expectancy, to any property, or to the income thereof, shall be and is subject to a tax for the general use of the Commonwealth, upon the fair cash value of such property in excess of the exemptions hereinafter granted and at the rates hereinafter prescribed."

Section 4281d (4), Kentucky Statutes, 1915 edition, provided in part:

"All taxes imposed by this chapter, unless otherwise herein provided for, shall be due and payable at the death of the decedent."

Appellee insists that, because the law in effect during 1921 was altered by the act of 1924 so that an inheritance tax on estates passing to the widow or...