Cook v. Dove
| Citation | 203 N.E.2d 892,32 Ill.2d 109 |
| Decision Date | 21 January 1965 |
| Docket Number | No. 38628,38628 |
| Parties | Howard H. COOK et al., Appellants, v. Robert I. DOVE et al., Appellees. |
| Court | Illinois Supreme Court |
Gosnell & Benecki, Lawrenceville (Maurice E. Gosnell, Lawrenceville, of counsel), for appellants.
William G. Clark, Atty. Gen., Springfield , for appellees.
This is an appeal from a judgment of the circuit court of Shelby County assessing inheritance taxes in the estate of Ione H. Cook, deceased, and it presents for our consideration the construction of paragraph 4 of section 1 of the Inheritance Tax Act. (Ill.Rev.Stat.1961, chap. 120, par. 375(4).) Since the revenue is involved, we have jurisdiction to entertain a direct appeal.
Factual background, about which there is no dispute, shows that under the provisions of the last will and testament of Harry E. Cook, who died February 27, 1960, an undivided one-half of his adjusted gross estate was bequeathed in trust with directions that the trustees should pay to the testator's widow, Ione H. Cook, the sum of $500 per month from the corpus of the trust. Additionally, Ione H. Cook was authorized to withdraw income accruing to the trust during her lifetime, and was given the power to dispose of the trust corpus remaining at her death by testamentary appointment. In the event she failed to exercise such power, it was directed that the remainder of the corpus should be divided equally between the testator's children, Howard H. Cook and Virginia C. Dressler, or their descendants in the event of their prior deaths.
The will of Harry E. Cook was duly admitted to probate in Shelby County and, on August 21, 1961, an order was entered assessing inheritance taxes against Howard H. Cook and Virginia C. Dressler in identical amounts of $13,513.20. These taxes were assessed under authority of section 25 of the Inheritance Tax Act (Ill.Rev.Stat.1961, chap. 120, par. 398), having to do with the taxation of contingent interests, and were computed on the basis of the value of the trust corpus after deducting the value of the widow's life estate, plus an assumption that the power of appointment would not be exercised and that the remainder would be transferred to Howard and Virginia in equal shares under and by virtue of their father's will. These taxes were paid in due course of administration.
Ione H. Cook died July 29, 1962, leaving a last will and testament wherein she exercised the power and appointed the remainder to Howard H. Cook and Virginia C. Dressler, the same two individuals who were to take under the donor-husband's will in default of appointment. This will was also admitted to probate and, thereafter, in the inheritance tax return filed by the executor the remainder of the trust corpus, valued at $352,943.48, was listed as part of the taxable estate, being noted as property over which the decedent had exercised a power of appointment. Howard and Virginia filed objections to the return, and also an election to have the transfers taxed in the estate of their father. However, they were denied the right to make such an election, their objections were overruled, and inheritance taxes were assessed against them in the donee's estate in amounts of $21,896.16 and $21,909.56, respectively. These assessments were confirmed upon intermediate appeal, and the direct appeal to this court has followed. The adversaries here are the appellants, Howard H. Cook and Virginia C. Dressler, and the State of Illinois, represented by the Attorney General.
Paragraph 4 of section 1 of the Inheritance Tax Act provides as follows: 'Whenever any person, institution or corporation shall exercise a power of appointment derived from any disposition of property made either before or after the passage of this Act, such appointment, when made, shall be deemed a taxable transfer under the provisions of this Act, in the same manner as though the property to which such appointment relates belonged absolutely to the donee of such power and had been bequeathed or devised by such donee by will.' (Ill.Rev.Stat.1961, chap. 120, par. 375(4).) While the briefs of the parties seem to raise a secondary issue as to whether appellants could be liable for the full amount of taxes assessed in both estates, the primary and controlling question is whether paragraph 4 of section 1 arbitrarily applies where the donee exercises the power by appointing in the same manner as provided in default of the exercise of the power or whether, in such a case, the appointees may elect to take the property directly from the estate of the donor. If they may so elect, it is clear that the taxes tentatively assessed against appellants in the donor's estate under section 25 have become final, and that they are not liable for those assessed in the donee's estate.
Although a case of first impression in this jurisdiction, the problem has been treated upon in New York decisions, a source to which we may look under the circumstance that our Inheritance Tax Act was modeled after the New York act (People v. Beckers, 413 Ill. 102, 108 N.E.2d 5; People v. Snyder, 353 Ill. 184, 187 N.E. 158, 88 A.L.R. 1012; see also: Dicus, 'Taxation of Powers of Appointment Under The Illinois Inheritance Tax Law,' 14 Chicago Kent L.Rev. 14; Dicus and Zartman, 'Inheritance Taxation in Illinois of * * * Powers of Appointment Upon Donee's Death,' 44 Illinois Bar Journal, No. 4, pp. 271-274,) and, more specifically, since paragraph 4 of section 1 and section 25 of our act have their prototypes in the New York Act. (See People v. Linn, 357 Ill. 220, 226, 191 N.E. 450.) Generally speaking, the New York courts have evolved under their statute a doctrine of election, the gist of which is that if the appointee takes by the donee's exercise of the power precisely what he would have taken in default of appointment, he may elect to take by...
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