In re Ellis' Estate, 23730.

• Decision Date: 20 September 1932
• Docket Number: 23730.
• Citation: 169 Wash. 581,14 P.2d 37
• Court: Washington Supreme Court
• Parties: In re ELLIS' ESTATE. v. SUZZALLO et al. STATE et al.

14 P.2d 37

169 Wash. 581

In re ELLIS' ESTATE.

STATE et al. v. SUZZALLO et al.

No. 23730.

Supreme Court of Washington

September 20, 1932

Department 2.

Appeal from Superior Court, King County; Everett Smith, Judge.

In the matter of the estate of Addie M. Hall Ellis, deceased. On final accounting and petition for distribution by Edith Moore Suzzallo and others, as executors of the estate. From a judgment fixing the inheritance tax due from the estate, the State of Washington and G. W. H. Davis, as Supervisor of the Inheritance Tax and Escheat Division of the State, appeal.

Reversed with directions.

G. W H. Davis and W. F. Van Ruff, both of Olympia, for appellants.

Wright & Catlett, of Seattle, for respondents.

BEALS J.

This appeal involves the question of the liability of the estate of Addie M. Hall Ellis for the payment of an inheritance tax in excess of the amount of the tax which the superior court adjudged to be due. Mrs. Ellis, being a resident of the state of Washington, died testate in the city of Seattle, November 11, 1928, leaving estate subject to administration under the direction of the superior court for King county. A few days after Mrs. Ellis' death, her will was admitted to probate, and the appointment of Edith Moore Suzzalo, Allen F. Moore, and William B. Bebb, who were named in the will as executors thereof, was confirmed by the court. The executors inventoried certain intangible personal property within the state of Washington of the appraised value of over $53,000, which, it was conceded, was subject to the payment of inheritance taxes, and other intangible personal property within the state of Washington of the value of $5,000, which, under date May 17, 1921, Mrs. Ellis had transferred in trust, the beneficiaries of the trust to come into possession of the property upon Mrs. Ellis' death it being also conceded that an inheritance tax was payable upon the property covered by this trust.

April 5, 1915, Mrs. Ellis established a trust consisting of $40,000 in intangible personal property located within the state of Illinois, the beneficiaries of the trust to come into complete enjoyment thereof upon Mrs. Ellis' death. May 23, 1921, Mrs. Ellis established another trust consisting of intangible personal property located in the state of Illinois of the value of $18,000, the beneficiaries of this trust also to come into full possession thereof upon the decease of Mrs. Ellis.

June 30, 1929, the executors made their final account and petition for distribution, excluding therefrom the property covered by the $5,000 trust located within the state of Washington (although conceding that the beneficiaries of this trust should pay an inheritance tax thereon), and also excluding the $58,000 covered by the two trusts, the property pertaining to which was in the state of Illinois. The supervisor of the inheritance tax and escheat division of the state of Washington appeared in the proceeding, contending that the state was entitled to receive an inheritance tax computed not only upon the property of the estate within the state of Washington, but also based on the value of the intangible personal property within the state of Illinois covered by the two trusts above referred to, one consisting of $40,000 worth of intangibles, and the other of $18,000 worth of similar property. The trial court ruled that, in computing the inheritance tax due drom the estate, the $58,000 worth of property within the state of Illinois should be excluded, and, from an order fixing the inheritance tax due upon the basis of the exclusion of this property, the supervisor appeals.

Appellant contends that, because Mrs. Ellis was at the time of her death a resident of the state of Washington, the situs for inheritance tax purposes of the intangible property belonging to her and located in the state of Illinois, comprised within the two trusts above referred to, was in the state of Washington, and, the terms of the two trust agreements not taking the property thereof without the terms of the statute, an inheritance tax is due the state of Washington upon the vesting of the absolute title to the trust property on the death of Mrs. Ellis. The executors of the will, respondents herein, contend that, as the intangible personal property held in Illinois by trustees under the two trust agreements above referred to was not within the state of Washington and was not transferred to take effect in possession and enjoyment at the death of Mrs. Ellis, no inheritance tax is due the state of Washington based upon the transfer of this property.

Section 11203, Rem. Comp. Stat., reads as follows: 'Except as to the limitations prescribed in section 11202 from the inheritance tax and real property located outside the state passing in fee from the decedent owner, the tax imposed under section 11202, shall hereafter be assessed against and be collected from property of every kind, which, at the death of the decedent owner is subject to, or thereafter, for the purpose of distribution, is brought into this state and becomes subject to the jurisdiction of the courts of this state for distribution purposes, or which was owned by any decedent domiciled within the state at the time of the death of such decedent, even though the property of said decedent so domiciled was situated outside of the state.'

In Re Sherwood's Estate, 122 Wash. 648, 211 P. 734, 740, this court, construing the above section, said: 'A further objection is that, even if the statute contemplates the levy of an inheritance tax on property in a foreign state, the Legislature was without power to so provide, because of want of jurisdiction over the property. On this question also the courts seem to be divided in opinion. There is no question that, in so far as the power to levy a direct tax upon tangible property is concerned, the state is limited to property within its jurisdiction, but an inheritance tax is not a tax upon property as such. It is an impost or excise levied as a condition precedent to the transmission or transfer of property from the dead to the living, and the great majority of the courts hold, on the principle that the succession takes place in virtue of the laws of the place of domicile, that personal property is subject to an inheritance tax by the state in which its owner was domiciled at the time of his death, regardless of the actual location of the property or of the location of the evidence of its ownership.'

The decisions of the courts upon questions analogous to that here presented are not altogether harmonious. Respondents rely upon certain decisions of the Supreme Court of the United States construing the federal statute establishing an estate tax. The federal tax is of a nature different from that imposed by the statutes of this state. In the case of Y. M. C. A. v. Davis, 264 U.S. 47, 44 S.Ct. 291, 292, 68 L.Ed. 558, the Supreme Court, speaking through Chief Justice Taft, used the following language: 'What was being imposed here was an excise upon the transfer of an estate upon death of the owner. It was not a tax upon succession and receipt of benefits under the law or the will. It was death duties, as distinguished from a legacy or succession tax. What this law taxes is not the interest to which the legatees and devisees succeeded on death, but the interest which ceased by reason of the death.'

In discussing the question of the basis of the federal tax, Gleason & Otis, in their work on Inheritance Taxation (4th Ed.) page 2 et seq., laid down the following doctrine:

'The Federal Estate Tax differs primarily and fundamentally from all the inheritance and transfer taxes imposed by the several states jurisdictions for the reason that the right to transfer property at death as well as the right to receive benefits from the estate of a decedent are conferred by state law. The Federal Government does not bestow either privilege nor has it the right to take either privilege away. This was not one of the powers delegated to Congress by the Federal Constitution. * * *

'With few exceptions the state inheritance tax statutes levy a duty or excise upon the beneficiary for the privilege or right of receiving property from the dead either by will or the intestate law. Even where the transfer is taxed because it was made in contemplation of death or to take effect at death these statutes tax the beneficiary and not the estate of the decedent. On the other hand it is the theory of the Federal Estate Tax that such transfers are to be regarded as part of the estate and the tax thereon must be paid by the executor without recourse to the beneficiary. Farmers' Loan & Trust Co. v. Winthrop, 238 N.Y. 488 .'

The distinction between state inheritance tax laws and the federal act is discussed in the case of Estate of Rising v. State ex rel. Benson (Minn.) 242 N.W. 459.

This court, in the case of State v. Clark, 30 Wash. 439, 71 P. 20, 22, in considering the validity of the inheritance tax law of this state, used the following language: 'The objections urged here, that the statute is in conflict with section 1, 2, and 5 of article 7 of the state constitution, relating to taxation, is not tenable, because the charge made upon the passing of the estate is not a tax on property. It is an impost or excise on the right to pass the estate and the privilege of the devisee to take. That it is not within the provision relating to the tax on property is well settled by practically unanimous authority.'

The relationship borne by our inheritance tax laws to the statutes providing for general taxation of property was again considered in Re Sherwood's Estate, supra.

It is evident that different rules apply in construing laws such as ours for the taxation of inheritances and statutes...