Estate of Eberbach v. State of Ind., Dept. of Revenue
| Decision Date | 24 April 1987 |
| Docket Number | No. 02T05-8607-TA-00005,02T05-8607-TA-00005 |
| Parties | In re ESTATE OF Andrea B. EBERBACH, Petitioner, v. STATE OF INDIANA, DEPARTMENT OF REVENUE, Respondent. |
| Court | Indiana Tax Court |
James Koday, Barrett & McNagny, Fort Wayne, for petitioner.
Linley E. Pearson, Atty. Gen., by James R. Green, Deputy Atty. Gen., Indianapolis, for respondent.
STATEMENT OF THE CASE
This is an appeal from a determination of the Indiana Department of Revenue (Department) denying the claim for refund filed by Petitioner, Estate of Andrea B. Eberbach (Estate). The facts as stated below are undisputed and each party has filed a motion for summary judgment asserting that based on the facts each is entitled to judgment as a matter of law.
The facts are as follows:
1. That Andrea B. Eberbach was a resident of Indiana and a citizen of the United States.
2. That on June 6, 1984, Andrea B. Eberbach died. An Estate was opened in the Allen County Superior Court as Cause No. E-84-303. The Estate was entitled in The Matter of the Estate of Andrea B. Eberbach, deceased. The Fort Wayne National Bank was appointed as Personal Representative of the Estate.
3. That on February 28, 1985, the Estate filed a Federal Form 706 (federal estate tax return) and reported a taxable Estate of $347,322.12. On line 6 of the return the estate showed a tentative federal estate tax of $103,889.52. On line 11, the Estate showed a unified credit of $96,300. Upon subtracting this amount from the tentative tax, the Estate showed on line 12 a federal estate tax of $7,589.52.
4. That on March 1, 1985, an Indiana Inheritance Tax Return was filed with the Court by the Estate.
5. That on May 20, 1985, the Court entered an order determining inheritance tax due, finding that inheritance tax due from the Estate to be $2,085.68. That the Estate was given a 5% reduction in the inheritance tax due because it paid the tax within one year after the death of the decedent. Therefore, in accordance with IC 6-4.1-9-2, the actual amount of inheritance tax paid by the Estate was $1,981.40.
6. That on July 11, 1985, the Department issued an order determining Indiana estate tax against the Estate. In accordance with that order, the Department found that the Estate owed $3,132.91 in Indiana estate tax.
7. That on November 25, 1985, the Estate paid to the Department $3,132.91 in Indiana estate tax.
8. That on March 17, 1986, the Estate filed a claim for refund with the Department for the entire amount of Indiana estate tax it paid to the Department.
9. That on April 26, 1986, the Department issued an order denying the Estate's claim for refund.
10. That on July 16, 1986, the Estate initiated this action by filing a petition appealing the Department's order denying the Estate its refund of Indiana estate tax it claimed of $3,132.91, plus interest.
11. That on November 24, 1986, the Estate filed a motion for summary judgment along with a memorandum of law. That the Estate contended in its motion for summary judgment that no genuine issue as to any material fact existed, and that it was entitled to summary judgment as a matter of law.
12. That on December 16, 1986, the Department filed a cross-motion for summary judgment along with a memorandum in support and a memorandum opposing the Estate's motion for summary judgment. That the Department also contended in its cross-motion for summary judgment that there existed no genuine issue as to any material fact and that it was entitled to summary judgment as a matter of law.
13. That on February 4, 1987, the Court held a hearing and heard argument on each party's motion for summary judgment.
14. Andrea B. Eberbach's marital bequest utilized the commonly used "reduce to zero" marital deduction formula, as set out in Paragraph B of Subsection DTE.03.1 of her Revocable Trust Agreement, as follows:
(1) The numerator is the minimum amount (if any) which is required (after having given effect for marital deduction purposes to the value of all other property interests, however passing, which qualify for the marital deduction in Settlor's estate) in order that there will be no federal estate tax in Settlor's estate or, if Settlor's federal estate tax cannot be reduced to zero, then in order that Settlor's federal estate tax will be reduced to the smallest amount possible, when there have been taken into account all deductions (including the marital deduction), the unified credit, and the state death tax credit (but only that amount of the state death tax credit which does not require an increase in state death taxes paid) and all other
credits which are allowed to Settlor's estate for federal estate tax purposes. (Emphasis added).
The issue to be decided is whether the Indiana estate tax, IND.CODE 6-4.1-11 (1982), applies to all of the credit available under I.R.C. Sec. 2011(b) or only to such amount as may be used by the Estate. 1
The relevant statutes are as follows:
I.R.C. Sec. 2011 provides in pertinent part:
(a) IN GENERAL--The tax imposed by section 2001 shall be credited with the amount of any estate, inheritance, legacy, or succession taxes actually paid to any State or the District of Columbia, in respect of any property included in the gross estate (not including any such taxes paid with respect to the estate of a person other than the decedent).
(b) AMOUNT OF CREDIT--The credit allowed by this section shall not exceed the appropriate amount stated in the following table:
If the adjusted taxable The maximum tax credit
estate is: 2 shall be
. .
Over $240,000 but not $3,600 plus 3.2% of the
over $440,000 excess over $240,000
(Emphasis added).
IC 6-4.1-1-4 (1986 Supp.). Federal death tax credit defined:
Sec. 4. 'Federal death tax credit' means the maximum federal estate tax credit provided, with respect to estate, inheritance, legacy, or succession taxes, under Section 2011 or Section 2102 of the Internal Revenue Code of 1954, as amended and in effect on January 1, 1983.
IC 6-4.1-11-1 (1982). Imposition of estate tax:
Sec. 1. A tax to be known as the 'Indiana Estate Tax' is imposed upon a decedent's estate if the federal death tax credit allowed against the federal estate tax imposed as a result of his death exceeds the total state death taxes actually paid as a result of his death.
IC 6-4.1-11-2(a) (1982). Computation for residents and non-residents; determination of value of Indiana gross estate:
Sec. 2. (a) In the case of a resident decedent, the Indiana estate tax equals the remainder of (1) the federal death tax credit allowed against the federal estate tax, minus (2) the total state death taxes actually paid.
In this case, the Estate was able through the use of an available credit for tax on prior transfers, I.R.C. Sec. 2013, to reduce the federal estate tax to zero by using the credit provided by I.R.C. Sec. 2011 only to the extent of the Indiana Inheritance Tax. This result was directed by the governing document (see findings of fact # 14) and if the I.R.C. Sec. 2013 credit had not been available, the amount passed to the surviving spouse, would have increased so as to increase the amount of the marital deduction which likewise would have resulted in a zero federal estate tax and would not have increased the Sec. 2011 credit.
While several text writers allude to the problem here presented, 3 it does not appear to have been previously decided by any court.
Counsel for the Petitioner argues...
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