Evans' Estate, In re, 48662

• Decision Date: 08 February 1955
• Docket Number: No. 48662,48662
• Citation: 246 Iowa 893,68 N.W.2d 289
• Parties: In the Matter of the ESTATE of David W. EVANS, Deceased. STATE TAX COMMISSION OF IOWA, Appellee, v. Arlene RITCHIE, Executor, and Glenn O. Nichols, Administrator, c/t/a of the Estate of David W. Evans, Deceased, Appellants.
• Court: Iowa Supreme Court

Page 289

68 N.W.2d 289

246 Iowa 893

In the Matter of the ESTATE of David W. EVANS, Deceased.

STATE TAX COMMISSION OF IOWA, Appellee, v. Arlene RITCHIE, Executor, and Glenn O. Nichols, Administrator, c/t/a of the Estate of David W. Evans, Deceased, Appellants.

No. 48662.

Supreme Court of Iowa.

Feb. 8, 1955.

Rehearing Denied April 8, 1955.

Glenn O. Nichols, Sidney, for appellants.

Leo A. Hoegh, Atty. Gen., and Henry W. Wormley, Spec. Asst. Atty. Gen., Des Moines, for appellee.

SMITH, Justice.

David W. Evans of Nemaha County, Nebraska, died testate owning property in Nebraska, Iowa, Missouri and Wyoming. His will was probated in Nebraska and ancillary proceedings instituted in Iowa. The facts are not in dispute. A proper certificate was filed showing the market value of the entire property, and the indebtedness of the estate in states other than Iowa, the Federal Estate and Income Tax liability, inheritance taxes paid in Nebraska, and various administration expenses and fees in the three states other than Iowa.

The controversy involves the interpretation of our inheritance tax statutes prescribing the method of computing the amount subject to Iowa inheritance taxes, specifically, the method of determining what deductions are allowable in arriving at the value of the taxable estate for that purpose.

The representatives of the estate (appellants) computed the ratio the value of the Iowa estate ($33,508) bears to the value of the entire estate ($569,403.29) to be .05884. They applied that percentage to the total liabilities outside Iowa ($207,613.12) reaching a result of $12,215.99, as the proportionate 'liability deductible' in Iowa. They added this to the sum of the liabilities in Iowa ($2,189.64) reaching a claimed 'total liabilities deductible' in Iowa of $14,405.63. Deducting this from the value of the property of the estate in Iowa ($33,508) they arrive at $19,102.37 as the value of the taxable estate in Iowa.

The Tax Commission does not question these basic figures and the trial court adopts them except a $200 claim of Rawlins Construction Co., listed among appellant's figures constituting the 'liabilities deductible' in Iowa. The trial court disallows this Rawlins claim pending final determination of its status. If finally admitted, allowed and paid the court would then include it as a deductible item. Without that item the court allows the total amount deductible in Iowa $1,989.64, instead of $2,189.64, deducted by appellants.

However, the trial court refused to consider anything among the 'total liabilities outside Iowa,' except Federal Income Tax, 'claims filed and paid,' and Federal Estate Tax, these items totalling $143,907.76. Applying the ratio percentage above referred to, .05884, to this total the court reaches the result of $8,467.53, instead of $12,215.99 the amount claimed by appellants as the proportionate 'liabilities deductible' in Iowa.

This reduction is attained by excluding or disallowing all outside executor, administrator and attorney fees, court costs, tombstone cost, burial expenses, state inheritance taxes, appraiser's fees and a fee for recording will in Missouri, and all medical, hospital and nursing expense of last illness.

The rate of inheritance tax is 10% as the Iowa property passes to two nieces of testator named in the residuary clause of his will. The final report showed a total Iowa inheritance tax paid in the sum of $1,910.24. The trial court adjudges $394.84 still due, subject to adjustment to $374.84 if the Rawlins Construction claim of $200 is allowed and paid. The executor and ancillary administrator c. t. a. appeal.

I. Determination of the question involved depends finally on the definition of the word 'debt' or 'indebtedness' in Code sections 450.12(2) and 450.89, Iowa Code 1950 (now 1954), I.C.A. and whether the definition should be broadened to include expenses of administration as appellants claim. Section 450.12(2) provides, so far as material here: 'From the estate of such decedent who at the time of his death is domiciled outside of this state, the state commission shall deduct such debts and expenses as are chargeable * * * under the laws of this state, provided that in the event that the executor * * * files with the clerk of the court having ancillary jurisdiction * * * a duly certified statement exhibiting the true market value of the entire estate * * *, and the indebtedness for which the said estate has been adjudged liable, * * * the beneficiaries * * * shall then be entitled to have deducted such proportion of the said indebtedness * * * from the value of the property as the value of the property within this state bears to the value of the entire estate.' (Emphasis supplied.)

The reference at the beginning of the first sentence, preceding the word 'provided' is to 'debts and expenses.' We think that clearly means those debts filed and approved and expenses incurred in the Iowa ancillary proceedings. They are deductible in full, just as if the proceedings were original in a resident decedent's estate. That much is in effect a complete sentence.

The proviso following that sentence is really the commencement of a new sentence referring to 'indebtedness for which the said estate has been adjudged liable.' We think this refers to indebtedness of decedent allowing in the original administration proceedings, a proportion of which (represented by the agreed percentage of .05884) may be deductible in the...