In re Kohrs' Estate

• Decision Date: 10 November 1948
• Docket Number: 8759.
• Parties: In re KOHRS' ESTATE. v. BOARDMAN. STATE BOARD OF EQUALIZATION
• Court: Montana Supreme Court

199 P.2d 856

122 Mont. 145

In re KOHRS' ESTATE.

STATE BOARD OF EQUALIZATION v. BOARDMAN.

No. 8759.

Supreme Court of Montana

November 10, 1948

Rehearing Denied Nov. 29, 1948.

Appeal from District Court, First Judicial District, Lewis & Clark County; A. J. Horsky, Judge.

Proceeding by Anna Boardman, as executrix, and Frank Bogart, as executor, of the last will of Augusta Kohrs, deceased, for determination of an inheritance tax, opposed by the State Board of Equalization of the State of Montana. From an order determining the tax, the State Board of Equalization appeals.

Order set aside, and cause remanded with directions.

GIBSON J., dissenting.

R. V. Bottomly, Atty. Gen., M. Baxter Larson Asst. Atty. Gen., and H. O. Vralsted, Counsel State Board of Equalization, of Helena, for appellant.

Gunn Rasch & Gunn, and Thomas P. Patterson, all of Helena, for respondent.

METCALF Justice.

On July 20, 1915 Augusta Kohrs transferred to the Union Bank and Trust Company of Helena, Montana, 1,500 shares of capital stock of Conrad Kohrs Company, a Montana corporation, in trust for the purposes and under the conditions outlined and declared in the instrument of transfer thereof.

The Union Bank & Trust Company accepted the transfer of the stock and the trust imposed upon it in the trust agreement.

The trust agreement provided that the shares of stock were transferred to the trustee in trust for the following uses, trusts and purposes:

'In trust, to hold the legal title to said shares of stock and to collect and receive all dividends, receipts, proceeds or other money arising therefrom, and to pay over all net receipts and profits arising therefrom to my husband, Conrad Kohrs, so long as he shall live, and in trust, upon the death of my said husband, to continue to hold said shares of stock in trust and thereafter during my lifetime to pay me all receipts and profits arising therefrom, and in trust, upon my death, to hold said shares of stock in trust and to pay over one-half of all net receipts and profits arising therefrom to my daughter, Anna M. Boardman, her heirs, executors, administrators or assigns, until the youngest of my grandchildren, then living, shall attain the age of twenty-five years, and then to turn over said one-half of said shares and all receipts, proceeds and profits thereof, not theretofore accounted for under the terms of this trust, to my said daughter, Anna M. Boardman, her heirs, executors, administrators, or assigns, and in trust to pay over the other half of all net receipts and profits arising therefrom to my daughter, Katherine K. Warren, or in the event of her death, to her child or children, until the youngest of my grandchildren, then living, shall attain the age of twenty-five years, and then to turn over said other half of said shares and all receipts, proceeds and profits thereof, not theretofore accounted for under the terms of this trust, to my said daughter, Katherine K. Warren, or, in the event of her death, to her children in equal parts, share and share alike.'

Then follow provisions for the protection of the grandchildren of the trustor and of their contingent interest in the trust estate.

On August 15, 1915 and May 17, 1918 supplemental agreements were made by Augusta Kohrs and accepted by the trustee clarifying the original agreement. These agreements are not involved in the instant case.

On April 12, 1934 a further agreement was executed by Augusta Kohrs reciting the execution of the aforesaid trust agreement of July 20, 1915 and stating, that 'since the creation of said trust my husband, Conrad Kohrs, has died, and my youngest grandchild has arrived at the age of 25 years;

'Now, Therefore, in view of such changed conditions, it is my wish and desire, and I hereby direct that upon my death there be paid to my daughter, Anna M. Boardman, one-half of the profits, income, and dividends from said shares of stock during her lifetime, and to my daughter, Katherine K. Bogart, formerly Katherine K. Warren, one-half of said income, profits, and dividends during her lifetime. Upon the death of my daughter, Anna M. Boardman, one-half of said shares and the income, profits and dividends therefrom which have not been paid to her to belong to and become the property of my grand-children now living share and share alike, and in the event of the death of any said grand-children prior to the death of Anna M. Boardman, the share of such grandchild to vest in, belong to, and became the property of the heirs of such grand-child. Upon the death of my daughter, Katherine K. Bogart, the other half of said shares and the income, profits and dividends therefrom which have not been paid to her to belong to and become the property of my grand-children now living share and share alike, and in the event of the death of any of said grand-children prior to the death of Katherine K. Bogart, the share of such grand-child to vest in, belong to, and become the property of the heirs of such grand-child.

'I hereby direct my said Trustee to distribute, transfer, and deliver over said shares of stock in accordance with my intention and purpose as above stated. Said trust to finally terminate upon the death of the survivor of my two daughters.

'The said trust heretofore created to be modified and the said instruments creating and defining said trust to be amended accordingly.'

Augusta Kohrs died October 29, 1945. The respondents were appointed as executors of her will dated January 6, 1944. A special appraiser was appointed to appraise and fix the value of the estate for inheritance tax purposes. He appraised the fair market value of the estate, other than the 1,500 shares of the capital stock of the Conrad Kohrs Company, at the sum of $85,706.08 and appraised the value of the 1,500 shares of stock of the Conrad Kohrs Company at $640,451.36 as of the date of death of Augusta Kohrs, decedent.

At the hearing of the executor's final report and petition for determination of inheritance tax the court assessed the tax on the transfer of the 1,500 shares of stock in Conrad Kohrs Company at the rate fixed by the statute in force on July 20, 1915, the date of the creation of the trust. This appeal is from the order of the district court determining the inheritance tax due.

It was mutually stipulated and agreed by and between the parties at the time of the hearing that the only question was the question of law as to whether the rate of tax imposed by section 7724, Revised Codes of Montana 1907, in effect at the time of transfer of July 20, 1915, should apply or whether the trust estate should be taxed at the rate provided by Chapter 145, Code of Civil Procedure, Revised Codes of Montana 1935, in effect at the date of the death of Mrs. Kohrs. That is the question presented by this appeal.

In 1915 when Mrs. Kohrs transferred the stock of the Conrad Kohrs Company to the trustee the statute provided: '* * * all property which shall pass by will or by the intestate laws of this State, from any person who may die, seized or possessed of the same, while a resident of this State, * * * or any interest therein or income therefrom, which shall be transferred by deed, grant, sale or gift made in contemplation of the death of the grantor or bargainor, or intended to take effect in possession or enjoyment after such death to any person or persons, or to anybody politic corporate, in trust or otherwise, * * * shall be and is subject to a tax * * *.' Section 7724, Revised Codes of Montana 1907. The rate fixed by the statute was $1 on each $100 of the clear market value when beneficial interests passed to enumerated relatives of the class applicable to the instant case.

The present statute imposes a tax at a higher rate 'upon any transfer of property * * * or income therefrom in trust or otherwise * * * in the following cases, * * *

'(3) When the transfer is of property made by a resident or by a nonresident when such nonresident's property is within the state, or within its jurisdiction, by deed, grant, bargain, sale or gift, made in contemplation of the death of the grantor, vendor, or donor, or intended to take effect in possession or enjoyment at or after such death. * * *' Section 10400.1, Revised Codes of Montana 1935.

Thus except for the increased rate, for all practical purposes the portions quoted from section 7724, R.C.M. 1907 and from section 10400.1, R.C.M. 1935 are alike.

From the beginning this court has declared the tax imposed by the statute to be an inheritance tax, i. e. a tax not on the property of decedent but upon the right and privilege of receiving property by will or succession or by any inter vivos transfer operating as substitutes for testamentary dispositions. State ex rel. Davis v. State Board of Equalization, 104 Mont. 52, 64 P.2d 1057, 108 A.L.R. 1397, and cases therein cited. In re Wadsworth's Estate, 92 Mont. 135, 11 P.2d 788.

Such a tax must be distinguished from an 'estate tax' which has been defined as a tax imposed 'upon the privilege of transfer at death.' 28 Am.Jur., 'Inheritance Estate & Gift Taxes,' section 10, p. 12. The federal government and some of the states impose estate taxes. A majority of the states impose inheritance taxes.

For a judicial explanation of the difference between the two systems see the dissenting opinion of Justice Roberts in Coolidge v. Long, 282 U.S. 582, 608, 51 S.Ct. 306, 75 L.Ed. 562.

It is not here contended that the transfer to the trust was a transfer in contemplation of death. We are concerned with the taxibility of the trust created as a transfer intended to take effect in possession or enjoyment at or after death.

A transfer intended to take effect in possession or enjoyment at or after death is when the legal title is...