Hazard v. Bliss

• Decision Date: 04 May 1921
• Docket Number: Nos. 489, 490.,s. 489, 490.
• Citation: 113 A. 469
• Parties: HAZARD et al. v. BLISS et al., Board of Tax Com'rs. HAZARD v. SAME.
• Court: Rhode Island Supreme Court

113 A. 469

HAZARD et al.

v. BLISS et al., Board of Tax Com'rs.

HAZARD

v. SAME.

Nos. 489, 490.

Supreme Court of Rhode Island.

May 4, 1921.

Appeal from Superior Court, Providence and Bristol Counties; Chester W. Barrows, Judge.

Petitions by Mary P. B. Hazard and others, as executors of the estate of Rowland G. Hazard, deceased, and the first named as residuary legatee, to have income tax reduced. From a decree adjudging that a part of taxes was illegally assessed and ordering the abatement of such portion, Zenas W. Bliss and others, composing the Board of Tax Commissioners, appeal. Decrees reversed and each cause remanded, with directions to enter decrees denying and dismissing the petitions.

Green, Hinckley & Allen, of Providence (Frank L. Hinckley, Rush Sturges, and Clifford A. Kingsley, all of Providence, of counsel), for appellants.

Herbert A. Rice, Atty. Gen., for respondent Board.

Edwards & Angell, of Providence (Robert B. Dresser and Walter A. Edwards, both of Providence, of counsel), amici curiæ.

SWEETLAND, C. J. The above-entitled causes are appeals taken by the board of tax commissioners from decrees of the superior court entered upon petitions filed in accordance with the provisions of the inheritance tax act of 1916 (Laws 1916, c. 1339). In each of these petitions it is alleged that the petitioner is aggrieved by the determination of said board as to the amount of the inheritance taxes imposed upon the estate of Rowland G. Hazard, late of the town of South Kingstown, deceased, and asks for the abatement of a part of said taxes.

After hearing, the superior court, by its decree entered upon each petition, adjudged that a part of said taxes was illegally assessed and ordered the abatement of such portion, from which decrees the respondent board has appealed to this court.

It appears that said Rowland G. Hazard died January 23, 1918, testate, leaving a gross estate appraised at $3,573,402.72. The testator, after a certain bequest, left all the rest and residue of his estate to his widow, Mary P. B. Hazard. The will was duly probated, letters testamentary were issued, and the petitioners Mary P. B. Hazard and Rowland Hazard qualified as executors. In accordance with the provisions of the "federal estate tax law of September 8, 1916" (U. S. Comp. St. §§ 6336 1/2 a-6336 1/2 m), a federal estate tax was assessed against the estate of Rowland G. Hazard, amounting to $343,228.48, which tax was paid by the executors. In a statement filed with the respondent board of tax commissioners said executors claimed that in assessing the taxes under the provisions of the Rhode Island "inheritance tax act of 1916" said board should deduct the amount of the federal estate tax of $343,228.48 from the net estate prior to the computation of the state inheritance taxes. The respondent board disregarded this claim and computed the taxes under the provisions of section 1 of said inheritance tax act of 1916 at $15,955.49 and the tax under section 5 of said act at $82,229.28; thereupon, in accordance with the provisions of said act, the executors filed their petition in the superior court, and Mary P. B. Hazard, as residuary legatee of said estate, also filed her petition in the superior court. Each petition applied for an abatement of said taxes. After hearing upon said petitions the superior court ordered such an abatement of the taxes assessed by said respondent as would result from a deduction of the amount of the federal estate tax from the net estate prior to the computation of the state inheritance taxes. The appeals now before us were duly taken by the respondent board from said adjudications and orders of the superior court.

Before hearing upon these appeals Walter A. Edwards, Esq., a member of this bar, stated to the court that he represented the executors and legatees in a number of other large estates, who would be affected by the determination of the questions involved in these appeals, and asked permission to file a brief in support of the contentions of these petitioners. All the adversary parties consented thereto and the request of Mr. Edwards was granted. As amicus curiae he has filed a voluminous brief and also a supplemental brief which has been of assistance to the court.

The "federal estate tax law of September 8, 1916," has, among others, the following provisions:

Section 201: "A tax (hereinafter in this title referred to as the tax), equal to the following percentages of the value of the net estate to be determined as provided in section two hundred and three, is hereby imposed upon the transfer of the net estate of every decedent dying after the passage of this act, whether a resident or nonresident of the United States." Then follows a table of percentages varying in accordance with the amount of the net estate.

Section 202: "The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated."

Section 203: "For the purpose of the tax the value of the net estate shall be determined (a) in the case of a resident, by deducting from the value of the gross estate (1) such amounts for funeral expenses, administration expenses, claims against the estate, unpaid mortgages, losses incurred during the settlement of the estate arising from tires, storms, shipwreck, or other casualty, and from theft, when such losses are not compensated for by insurance or otherwise, support during the settlement of the estate of those dependent upon the decedent, and such other charges against the estate, as are allowed by the laws of the jurisdiction, whether within or without the United States, under which the estate is being administered; and (2) an exemption of $50,000."

Section 207 provides that the executor shall pay the tax to the collector or deputy collector of internal revenue. Section 208 states that—

It is "the purpose and intent of this title that so far as is practicable and unless otherwise directed by the will of the decedent the tax shall be paid out of the estate before its distribution."

Section 209 provides that—

"Unless the tax is sooner paid in full, it shall be a lien for ten years upon the gross estate of the decedent, except that such part of the gross estate as is used for the payment of charges against the estate and expenses of its administration, allowed by any court having jurisdiction thereof, shall be divested of such lien."

The Rhode Island "inheritance tax act of 1916" (chapter 1339, Public Laws 1916) provides, among other things, as follows:

"Section 1. A tax shall be and is hereby imposed upon the net estate of every resident decedent, * * * as a tax upon the right to transfer. Such tax shall be imposed at the rate of one-half of one per centum upon the excess value of each said estate over $5,000."

"Sec. 2. The value of the net estate of a resident decedent for the assessment of the tax imposed by section 1 of this act shall be ascertained by taking the full and fair cash value of the real property located within this state and of any interest therein, and of the tangible and intangible personal property of the decedent at the date of his decease, * * * and adding thereto all gains made during the settlement of the estate in reducing the intangible personal property thereof to possession, except so much of such intangible personal property as is represented by bonds and stock in any corporation. * * * From the value thus obtained there shall be deducted the amount of all claims allowed against the estate, all funeral expenses and expenses of administration, the amount of the allowance made for the support of the widow and family of the decedent by the probate court in accordance with law, and the amount at the death of the decedent of all unpaid mortgages, except mortgages on real property not located within this state, not deducted in the appraisal of the property mortgaged; and there shall be also deducted all losses incurred during the settlement of the estate in the reduction of the intangible personal property to possession, except so much of such intangible personal property as is represented by bonds and stock in any corporation."

"See. 3. The tax imposed by section 1 of this act shall be assessed upon the full and fair cash value of the net estate determined by the board of tax commissioners as hereinbefore provided and notice of the amount of said tax shall be mailed to the executor, administrator, or trustee by said board. * * * Such tax shall be due and payable by the executor, administrator, or trustee of the estate immediately upon notification of the amount thereof. * * * Said tax shall be paid direct to the general treasurer of the state for the use of the state, and shall be and remain a lien upon the estate until the same shall be paid, and the executors, administrators, or trustees shall be personally liable for such tax until the same is paid."

"Sec. 5. A tax shall be and is hereby imposed upon any transfer by a resident of this state of any real property within the state, or any tangible or intangible personal property, or interest therein or income therefrom * * * to any person or persons, in trust or otherwise, as a tax upon the right to receive."

"Sec. 6. All taxes imposed by section 5 of this act shall be assessed by the board of tax commissioners upon the full and fair cash value of the property transferred at the rate hereinafter described and only upon the excess of the exemption hereinafter granted, to be paid direct to the general treasurer of the state, for the use of the state, and all executors, administrators, or trustees shall be personally liable for any and all such taxes until the same are paid."

"Sec. 30. Except as otherwise provided in this act, every net estate, inheritance, devise, bequest, legacy or gift upon which a tax is imposed under this act shall be appraised at its full and fair cash value as of...