Guaranty Nat. Bank v. Mitchell, 11011

• Decision Date: 08 December 1959
• Docket Number: No. 11011,11011
• Citation: 111 S.E.2d 494,144 W.Va. 828
• Court: West Virginia Supreme Court
• Parties: GUARANTY NATIONAL BANK, etc., Committee for Pearl Barrick Steele, v. W. T. MITCHELL et al., Executors, etc.

Page 494

111 S.E.2d 494

144 W.Va. 828

GUARANTY NATIONAL BANK, etc., Committee for Pearl Barrick Steele, v. W. T. MITCHELL et al., Executors, etc.

No. 11011.

Supreme Court of Appeals of West Virginia.

Submitted Sept. 22, 1959.

Decided Dec. 8, 1959.

Syllabus by the Court.

1. The federal estate tax is a tax imposed on the transfer of ane state, not on a right to receive a definite or particular distributive share thereof.

2. The devolution of an estate against which a federal estate tax has been imposed is governed by the laws of the individual state, not by federal statutes.

3. The widow of a decedent who has renounced a will pursuant to provisions of Code, 42-3-1, is entitled to one third of the net personal estate, computed after deducting any federal estate tax and other deductions authorized by law.

Parsons, Baker & Tyson, W. E. Parsons, E. V. Parsons, Huntington, for appellant.

F. Paul Chambers, Jackson, Kelly, Holt & O'Farrell, Charleston, Claude A. Joyce, W. Guy Wilson, Logan, J. C. Calhoun, Charleston, for appellees.

GIVEN, President.

There is involved on this appeal, from the Circuit Court of Logan County, a single issue, whether a widow who has renounced a will, pursuant to provisions of Code, 42-3-1, is entitled to receive her distributive share of the personal estate of the decedent free of the assessment or burden of the federal estate tax imposed by Section 2001, Title 26 U.S.C., which, insofar as material, reads: 'A tax computed in accordance with the following table is hereby imposed on the transfer of the taxable estate, determined as provided in section 2051, of every decedent, citizen or resident of the United States dying after the date of enactment of this title'. The circuit court decreed that the widow 'is entitled to receive, upon distribution of said estate, one-third (1/3) of the surplus assets thereof after payment of all debts, taxes, administrative expenses, funeral expenses and Federal Estate Taxes and less the State Inheritance Taxes due on or respecting said distributive share of Pearl Barrick Steele in the Estate of L. E. Steele, deceased'. We are of the opinion that the issue was correctly resolved by the circuit court.

Plaintiff, committee of the widow, contends that applicable sections of the federal statute, Title 26 U.S.C. § 2056 et seq., relating to deductions from the gross estate, establish an intention of the Congress to relieve a widow of the impact or thrust of the tax, in an effort to equalize the burden of the tax as between citizens of a state wherein the 'community property' principle is applied, and citizens of those states not recognizing that principle, and that the circuit court erred in holding that the widow's distributive share in the personal estate should be determined after deducting from the gross estate the federal estate tax, in holding that the statutes of the State of West Virginia governed the distribution of the estate, and in not applying the rule of equitable apportionment.

In Riggs v. Del Drago, 317 U.S. 95, 63 S.Ct. 109, 110, 87 L.Ed. 106, the Court said: 'We are of opinion that Congress intended that the federal estate tax should be paid out of the estate as a whole and that the applicable state law as to the devolution of property at death should govern the distribution of the remainder and the ultimate impact of the federal tax * * * In the Act of 1916 Congress turned from the previous century's inheritance tax upon the receipt of property by survivors (see Knowlton v. Moore, 178 U.S. 41, 20 S.Ct. 747, 44 L.Ed. 969; Scholey v. Rew, 23 Wall. 331, 23 L.Ed. 99) to an estate tax upon the transmission of a statutory 'net estate' by a decedent. That act directed payment by the executor in the first instance, § 207, but provided also for payment in the event that he failed to pay, § 208. It did not undertake in any manner to specify who was to bear the burden of the tax. Its legislative history indicates clearly that Congress did not contemplate that the Government would be interested in the distribution of the estate after the tax was paid, and that Congress intended that state law should determine the ultimate thrust of the tax'. See Harrison v. Northern Trust Co., 317 U.S. 476, 63 S.Ct. 361, 87 L.Ed. 407; Young Men's Christian Association of Columbus, Ohio v. Davis, 264 U.S. 47, 44 S.Ct. 291, 68 L.Ed. 558; Morgan v. Commissioner of Internal Revenue, 309 U.S. 78, 626, 60 S.Ct. 424, 84 L.Ed. 585, 1035. These and many other cases make it clear that the federal estate tax imposed is a tax on the right to transfer property, not a tax on the right to receive property, and that the question of the thrust or impact of the tax is a question of state law, and is computed according to the law of the individual state.

In Central Trust Company v. James, 120 W.Va. 611, 199 S.E. 881, we held: 'In determining the base for the application of the inheritance tax rates under Article 11 of Chapter 11 of the Code of West Virginia there should be deducted, inter alia, from the value of the property involved, the amount of the transmission tax, sometimes called estate tax, levied and collected by the federal government.' In the opinion the Court points out that the federal estate tax 'is on the right to transmit' property, not the right to receive property, and states that 'In a few of the states it has been held that the federal tax estate may not be deducted in determining the base for the application of the inheritance tax imposed by state law * * * [citing cases]. In a much larger group of states the courts have held that the deduction may be made * * * [citing cases]. Our conclusion of the matter is in conformity with the holdings of the latter group.'

In Cuppett v. Neilly, W.Va., 105 S.E.2d 548, 552 we held: '14. The general rule is that in the absence of a state statute or a testamentary direction to the contrary, the ultimate burden of an estate tax falls on the residuary estate if ther esiduary estate is sufficient for the payment of the tax.' In the opinion the Court said: 'The federal estate tax is a tax on the right to transmit property by will or under intestacy laws and is gauged by the value of the whole estate, less deductions authorized by federal statute. Kanawha Banking and Trust Company v. Alderson, 129 W.Va. 510, 40 S.E.2d 881; Central Trust Company v....