Department of Revenue, State of Mont. v. Estate of Dwyer, 88-373

• Court: United States State Supreme Court of Montana
• Citation: 236 Mont. 405,771 P.2d 93
• Docket Number: No. 88-373,88-373
• Parties: DEPARTMENT OF REVENUE, STATE OF MONTANA, Appellant, v. ESTATE OF Michael D. DWYER, Respondent.
• Decision Date: 13 March 1989

Page 93

771 P.2d 93 236 Mont. 405 DEPARTMENT OF REVENUE, STATE OF MONTANA, Appellant,
v.
ESTATE OF Michael D. DWYER, Respondent. No. 88-373. Supreme Court of Montana. Submitted Feb. 9, 1989.
Decided March 13, 1989.

[236 Mont. 405] R. Bruce McGinnis, Dept. of Revenue, Legal Affairs, Helena, for appellant.

Robert T. O'Leary, Butte, for respondent.

SHEEHY, Justice.

We decide in this case that when the owner of real or personal property in Montana creates a joint tenancy in such property between himself and another or others, more than three years before [236 Mont. 406] his death, the tax levied by our state on the transfer of his joint tenancy interest upon his death is measured by his interest in the joint tenancy, one-half or other proper fraction under the written instrument creating the same. Section 72-16-303(2), MCA.

Thus, in this appeal, we affirm a like holding of the District Court of the Second Judicial District, Silver Bow County.

Page 94

The facts are agreed to by the parties. Michael D. Dwyer was a resident of Butte, Montana, at the time of his death on February 5, 1985. His death terminated certain joint tenancies in real and personal property with David F. Cunningham, who is the deceased's nephew, and of course, not a surviving spouse nor issue of the deceased.

The deceased was the sole owner of real property which he conveyed into joint tenancy with Cunningham and himself by a grant deed on November 25, 1981, which was recorded December 29, 1981. The deed created a joint tenancy between the deceased and Cunningham with the right of survivorship. Cunningham neither paid consideration in monies nor money's worth for his interest in the property, nor made any contribution toward the acquisition of the property.

On October 30, 1979, out of funds completely and solely owned by the deceased, two joint bank accounts with the right of survivorship were created at Prudential Savings and Loan Association of Butte, Montana. The deceased and Cunningham were both authorized signators on the accounts. Cunningham did not deposit or withdraw any of the funds in the accounts prior to the time of Mr. Dwyer's death.

Out of funds completely and solely owned by the deceased, on October 31, 1979, two joint bank accounts with right of survivorship were created at the Miner's Bank of Montana, Butte, Montana. The deceased and Cunningham were both signators on the accounts. Cunningham did not deposit or withdraw any funds on the accounts prior to the time of Mr. Dwyer's death.

David Cunningham, as personal representative of the Dwyer estate, filed a request for determination of state inheritance tax on September 16, 1985. The application showed a tax due in the amount of $1,917.20. The amount was calculated upon 50% of the value of the joint tenancy estate. The Department of Revenue issued a certificate showing a tax due in the amount of $6,458.04 based on the whole value of the estate. The personal representative paid the tax to prevent the accrual of interest, and to receive the 5% discount.

[236 Mont. 407] Cunningham sued in the District Court, Second Judicial District, Silver Bow County, for a proper determination of the inheritance tax due and payable upon the joint tenancy estate. The District Court ordered the Department of Revenue to recompute the amount of inheritance tax due from the surviving joint tenant, David F. Cunningham, based upon one-half of the value of the property passing on the deceased's death. The Department appealed to this Court.

On appeal, the Department contends that the District Court erred as a matter of law in holding that Sec. 72-16-303, MCA, does not provide for the taxation of the total value of the property passing to the surviving joint tenant when the joint tenancy property was not originally owned by the surviving joint tenant.

The legislature amended Sec. 72-16-303, MCA, in 1977, and in 1979. The Department contends that prior to 1977, the inheritance tax on a joint tenancy interest passing to a surviving joint owner was one-half or other proper fraction of the joint property, unless the surviving joint tenant could show contribution. However, in 1977, the legislature limited the contribution rule to the circumstance when a surviving joint tenant was the spouse of a deceased, and in 1979, when the joint tenancy included issue of the decedent. Because the legislature added the following language to Sec. 72-16-303, the Department contends the legislature changed the tax treatment for non-spouses and non-issue of the deceased from being taxed on one-half of the property to being taxed on the full value of the property unless it can be shown that the surviving joint tenant originally owned the property:

... In all other cases, the full value of the property shall be taxable, except the portion thereof that originally belonged to the survivor and as to which the decedent had...