In re Inman's Estate

• Decision Date: 19 July 1921
• Citation: 199 P. 615,101 Or. 182
• Parties: IN RE INMAN'S ESTATE. v. HOFF, STATE TREASURER. POULSEN ET AL.
• Court: Oregon Supreme Court

199 P. 615

101 Or. 182

IN RE INMAN'S ESTATE.

POULSEN ET AL. v. HOFF, STATE TREASURER.

Supreme Court of Oregon

July 19, 1921

In Banc.

Appeal from Circuit Court, Multnomah County; George Tazwell, Judge.

In the matter of the estate of Robert D. Inman, deceased. Johan Poulsen and others, executors, filed a petition against O. P Hoff, Treasurer of the State of Oregon, to determine the amount of inheritance taxes to be paid the state; and from a decree denying a deduction from the assessment, they appeal. Modified.

Robert D. Inman died testate on April 27, 1920. The will was admitted to probate, and Johan Poulsen, George W. Thatcher and H. B. Van Duzer were appointed executors.

Under date of December 16, 1920, the executors filed a petition asking the court to determine the amount of the inheritance tax to be paid to the state of Oregon. The petition showed that the estate was valued at $744,204.16, and that the indebtedness of the estate, including an allowance made to the widow, sickness, and funeral charges, and other claims filed against the estate, court costs, fees of attorneys, and fees of executors, aggregated $82,324.05. The petition also showed that the federal estate tax amounted to $25,067.36.

Among the devisees and legatees named in the will were Clara A Inman, the widow; Minnie Myrtle Inman, a daughter; Ivy Frances Inman, a daughter; and George W. Thatcher. The court fixed "the value of the inheritance" of the widow at $345,890.55; of each daughter at $157,945.27; and of George W. Thatcher at $4,000. The court "ordered that the inheritance tax of Clara A. Inman, widow, is hereby fixed at the sum of $9,819.53"; of each daughter at $3,263.36 and of George W. Thatcher at $250.

In their petition the executors asked that the federal estate tax, amounting to $25,067.36, be deducted, together with debts of the decedent, funeral charges and the like, from the gross value of the estate, before calculating the amount of the state inheritance tax. The court refused to deduct the federal estate tax before computing the state inheritance tax, and the executors appealed.

W. M Cake, of Portland (Cake & Cake, of Portland, on the brief), for appellants.

James W. Crawford, of Salem (I. H. Van Winkle, Atty. Gen., and Walter H. Evans, Dist. Atty., of Portland, on the brief), for respondent.

HARRIS, J. (after stating the facts as above).

The executors are contending that the federal estate tax exacted under the Act of Congress of September 8, 1916, c. 463, tit. 2, § 201 (39 Stat. at L. 756, 777; Comp. St. § 6336 1/2b), and amendatory acts, must be deducted from the gross value of the estate before the state inheritance tax can be calculated. The state treasurer is contending that the federal estate tax should not be deducted. If the position taken by the state treasurer is to be approved, then the order of the court fixing the state inheritance tax is correct, and should be affirmed; but if the view of the executors is the correct one, then the order of the court should be modified. If the federal estate tax should have been deducted before calculating the state inheritance tax, then there was an overcharge of $626.31 against the widow's share, and an overcharge of $187.89 against each of the shares of the two daughters.

A correct solution of the problem presented requires an examination of the act of Congress providing for what is commonly known as the federal estate tax, and also an analysis of the act of our state Legislature providing for inheritance taxes. At the very outset we may premise that the nature and incidence of the respective taxes are the factors which will control the final decision. We must then ascertain the nature of these taxes, and discover the incidence of each tax, before we can determine whether the state tax should be calculated after first deducting the federal tax. Since sometimes, as said by Mr. Justice Holmes in New York Trust Co. v. Eisner, 255 U.S. ---, 41 S.Ct. 506, 65 L.Ed. 963, "a page of history is worth a volume of logic," it will be of material aid in arriving at a correct understanding of the act of Congress and of our state statute if, instead of at once entering into an inquiry concerning the nature and incidence of the two taxes claiming our special attention, we first make a brief statement of the history of legislation providing for different forms of death duties.

Inheritance taxes are of ancient origin. It is said that this form of imposts was adopted in Egypt in the seventh century before Christ, and that in the year 6 A. D. the Romans copied the idea from the Egyptians. Traces of this method of taxation may be found in the history of the Middle Ages; and practically all the nations of Europe have adopted some system of inheritance taxation. Since 1797 the federal government of the United States has at different periods enforced legislation providing for some form of inheritance taxation. In most of the states of the American Union inheritance taxes are now collected. Blakemore & Bancroft on Inheritance Taxes, §§ 15 and 18; Ross on Inheritance Taxation, § 9; Gleason & Otis on Inheritance Taxation (2d Ed.) 3; In re McKennan, 25 S.D. 369, 126 N.W. 611, 33 L. R. A. (N. S.) 606, 612; Id., 27 S.D. 136, 130 N.W. 33, 33 L. R. A. (N. S.) 620, Ann. Cas. 1913D, 745; State ex rel. v. Cline, 91 Kan. 416, 137 P. 932, 50 L. R. A. (N. S.) 991, 994.

One form of death duties was introduced into Great Britain in 1694; and subsequently, from time to time, additional acts were adopted, enlarging not only the species of death duties imposed, but also the area of their operation; and since the distinctions between these acts were well known and invariably observed in Great Britain, a brief history of the different acts adopted in that country, beginning with 1694 and ending with 1894, and also a brief history of legislation enacted in this country by the Congress of the United States, will be pertinent, for it may be that a page of this history will be "worth a volume of logic." A complete account of the acts adopted in Great Britain appears in Hanson's Death Duties (6th Ed.); and a concise analysis of the death duties imposed in Great Britain, as well as a thorough exposition of the statutes adopted by our national government, may be found in Knowlton v. Moore, 178 U.S. 41, 20 S.Ct. 747, 44 L.Ed. 969. See, also, State v. Alston, 94 Tenn. 674, 30 S.W. 750, 28 L. R. A. 178; 26 R. C. L. 195.

A probate duty was established in England in 1694. This probate duty was a fixed tax, which was dependent on the amount of the personal estate within the jurisdiction of the probate court, and was payable on the grant of letters of probate by means of stamp duties; and this duty was treated as an expense of administration. In 1780 a duty known as a legacy tax was imposed; and this duty was collected by affixing a stamp to the receipt given as evidence of the payment of a legacy or share in the personal property of the deceased person. The legacy tax was not deducted as an expense of administration, but it was charged and collected upon the passing of the individual legacies31 and interests upon which it was imposed. In 1853 an act was passed providing for what is known as the succession duty. This law was a supplement to the legacy tax, for the reason that the succession duty was imposed upon land passing by reason of death, and also upon interests in personal property not touched by the legacy tax. This tax known as the succession duty was on the one hand unlike the probate duty, in that the latter was and the former was not treated as an expense of administration; but the succession duty was like the legacy tax, in that both were charged upon and collected out of the particular interests subjected to the tax. In 1894 an act known as the Finance Act was adopted. Section 1 of the Finance Act provides that:

"In the case of every person dying * * * there shall * * * be levied and paid, upon the principal value * * * of all property * * * which passes on the death of such person a duty, called 'estate duty,' at the graduated rates hereinafter mentioned." Hanson's Death Duties (6th Ed.) 75.

The estate duty provided for by the Finance Act superseded the probate duty. The estate duty is imposed upon the estate, and is payable by the executor as an administration expense. In re Roebling's Estate, 89 N. J. Eq. 163, 166, 104 A. 295; Knowlton v. Moore, 178 U.S. 41, 49, 20 S.Ct. 747, 44 L.Ed. 969; Hanson's Death Duties (6th Ed.) p. 138. Although the estate duty covers real and personal property, and therefore the area of its operation is broader than that of the old probate duty, the two duties are alike in nature and essential characteristics. And although the succession duty covers real and personal property, and therefore the field of its operation is broader than that of the legacy duty, these two duties are alike in their nature and essential characteristics. Hanson's Death Duties (6th Ed.) 2. Referring to the difference between estate and succession duties, it is said in Hanson, Death Duties (6th Ed.) p. 76:

"Succession duty looks forward to the interest to which the successor succeeds; estate duty looks back to the property enjoyed immediately prior to the death. In the one case the 'succession' which accrues on a death is taxed; in the other, the interest which the death determines or disturbs."

The probate duty was and the estate duty is the price exacted for obtaining probate. Probate duty was and estate duty is the toll which the state exacts where property left by a decedent, considered as a unit, departs from the dead on its way to the living; and this toll is collected without regard to the destination towards which the property is to be moved. Hanson's Death Duties (6th Ed.) 2; Dobson on...