Dieleman's Estate v. Department of Revenue

• Citation: 222 N.W.2d 459
• Decision Date: 16 October 1974
• Docket Number: No. 2--57046,2--57046
• Parties: In the Matter of the ESTATE of Gerald Eugene DIELEMAN v. DEPARTMENT OF REVENUE, State of Iowa, Appellant.
• Court: Iowa Supreme Court

Page 459

222 N.W.2d 459

In the Matter of the ESTATE of Gerald Eugene DIELEMAN v. DEPARTMENT OF REVENUE, State of Iowa, Appellant.

No. 2--57046.

Supreme Court of Iowa.

Oct. 16, 1974.

Richard C. Turner, Atty. Gen., George W. Murray, Special Asst. Atty. Gen., and Harry M. Griger, Asst. Atty. Gen., for appellant.

Hammer, Matthias, Tyler & Levin, of Newton, for appellee.

Heard by MOORE, C.J., and MASON, RAWLINGS, LeGRAND and REYNOLDSON, JJ.

REYNOLDSON, Justice.

This decedent was killed in a two-truck collision on February 3, 1972. He was survived by a wife and two minor children. An action for his wrongful death was compromised and settled for $117,166. The administrator brought this application in the probate proceeding, seeking an adjudication these proceeds were not subject to Iowa inheritance tax. The application was resisted by the Department of Revenue. Trial court held the wrongful death proceeds were not subject to such tax, and the department has appealed. We affirm.

I. The sole issue is not one of fact, but rather one of statutory interpretation and application. We are not bound by trial court's determinations of law. Farmers Insurance Group v. Merryweather, 214 N.W.2d 184, 187 (Iowa 1974). In any event, the proceeding below was in equity and our review is de novo. Section 633.33, The Code; In re Estate of Cory, 184 N.W.2d 693, 696 (Iowa 1971).

II. Trial court held the wrongful death proceeds non-taxable on two grounds: 1) they were not property subject to tax under the provisions of chapter 450, The Code, and 2) they were exempt from taxation under § 633.336, The Code. Our finding the court was right on the first ground makes it unnecessary for us to consider the second.

The administrator's position, adopted by trial court, is that § 450.2 imposes a tax only upon property in which the decedent, prior to death, held some interest. She argues wrongful death proceeds are never owned by the decedent, citing as support Lang v. United States, 356 F.Supp. 546 (S.D.Iowa 1973). The federal statute involved in Lang provided:

'The value of the gross estate shall include the value of all property to the extent of the interest therein of the decedent at the time of his death.'--26 U.S.C. § 2033.

The federal district court in Lang reasoned a cause of action for wrongful death does not arise until after decedent's death; therefore the proceeds are not property in which decedent had an interest at the time of his death.

Although applied in a different situation, this rationale from Lang was adopted by our court in In re Estate of Johnson, 213 N.W.2d 536 (Iowa 1973).

From this premise trial court concluded 'such proceeds are not property of the decedent that passes on to those who may be entitled to same and, therefore, such proceeds are not subject to or liable for Iowa Inheritance Taxes.'

The department does not contest the validity of the premise but argues its relevancy. It asserts decedent's interest is irrelevant if, in fact, the proceeds pass to distributees under the will or by intestacy. Unlike the federal estate tax, which is a tax upon decedent's estate, the inheritance tax is a tax upon each right of succession and is chargeable upon the property each beneficiary receives. In re Millard's Estate, 251 Iowa 1282, 1291, 105 N.W.2d 95, 101 (1960). In essence, the department contends the federal estate tax is upon property decedent is passing (thus necessitating he have some interest therein) while the state inheritance tax is upon property the distributees are receiving (with decedent's interest in such property being irrelevant).

The administrator points to § 450.2 as describing the property subject to Iowa inheritance tax:

'The estates of all deceased persons in any property * * * which shall pass in any manner herein described shall be subject to tax as herein provided.'

The full context of this section makes four references to decedent's proprietary interest in property.

The department concentrates its attention on the following portion of § 450.3:

'The tax hereby imposed shall be collected upon the net market value and shall go into the general fund to the state to be determined as herein provided, of any property passing:

1. By will or under the statutes of inheritance of this or any other state or country.'

The two statutes should be construed In pari materia. See Northern Natural Gas Company v. Forst, 205 N.W.2d 692, 695--696 (Iowa 1973). Here the two should be considered as an integrated whole as they were enacted as one statute and only subsequently editorially divided. See Acts of 39 G.A., ch. 38, § 2 (1921).

Also applicable is the rule that ordinarily taxing statutes are to be construed against the taxing authority and in favor of the taxpayer. Northern Natural Gas Company, supra at 697, and citations. It must appear from the language of the statute the tax assessed against the taxpayer was clearly intended. Dodgen Industries, Inc. v. Iowa State Tax Commission, 160 N.W.2d 289, 296 (Iowa 1968).

Reading sections 450.2 and 450.3 together as the one piece of legislation they initially were, the word 'property' was obviously used in the same context in both the above quoted portions. It seems apparent the 'property' passing by will or intestacy referred to in § 450.3(1) must be all or a portion of the same 'property' in which decedent must have had an interest in order for the tax to be imposed under the provisions of § 450.2.

In the final analysis, the broad basic concept of an inheritance (succession) tax is to levy a duty on the shifting of the economic benefits and enjoyment of property from the dead to the living. Knowlton v. Moore, 178 U.S. 41, 56, 20 S.Ct. 747, 753, 44 L.Ed. 969, 976 (1900); In re Estate of Anderson, 166 Iowa 617, 622, 147 N.W. 1098, 1099 (1914), affirmed Petersen v. Iowa ex rel. State Treasurer, 245 U.S. 170, 38 S.Ct. 109, 62 L.Ed. 225 (1917); Gregg v. Commissioner of Corporations and Taxation, 315 Mass. 704, 706, 54 N.E.2d 169, 170 (1944). Our interpretation of § 450.2, that property is taxable only when the decedent had some interest in it at or prior to death, is reinforced by language found in other statutes comprising chapter 450, The Code. See for example § 450.3(2) ('* * * grantor or donor * * *'); § 450.3(5) ('* * * interest of a decedent in property * * *'); § 450.6 ('The tax hereby imposed * * * shall accrue at the death of the decedent owner * * *'); § 450.7(1)(b) ('* * * from the date of death of the...