In re Stephenson's Estate

• Decision Date: 04 May 1920
• Citation: 171 Wis. 452,177 N.W. 579
• Parties: IN RE STEPHENSON'S ESTATE. APPEAL OF VAN CLEVE ET AL.
• Court: Wisconsin Supreme Court

171 Wis. 452

177 N.W. 579

IN RE STEPHENSON'S ESTATE.

APPEAL OF VAN CLEVE ET AL.

Supreme Court of Wisconsin.

May 4, 1920.

Appeal from Marinette County Court; Alvin E. Davis, Judge.

In the matter of the estate of Isaac Stephenson, deceased. From an order determining inheritance taxes, three separate appeals were taken by J. A. Van Cleve and others, but were briefed and argued together. Affirmed.

May 15, 1916, Isaac Stephenson gave his daughter Mrs. Morgan $23,000. For six years previous to March 15, 1918, he had made additional gifts to his wife, children, grandchildren, and others aggregating nearly $200,000 ranging in amount from $7,300 to a few hundred dollars, over $26,000 of which he gave to Mrs. Morgan in addition to the $23,000 gift.

May 12, 1917, he executed and delivered a trust deed of a portion of his property amounting to $4,432,566.28 to certain trustees for the benefit of himself, his wife, children, and grandchildren. The trust provided for trust terms and contingent remainders to some of the cestuis que trustent. March 15, 1918, he died testate leaving an estate of $2,791,675.37. A portion of the estate passing under the trust of May 12, 1917, consisted of certificates representing 27,836 1/2 parts in the Isaac Stephenson Company Trustees, a trust holding lands and personal property in the state of Michigan which parts were of the value of $1,394,325. The widow elected to take under the statute and not under the will.

The county court for the purpose of computing the inheritance tax as to each beneficiary added the value of the property passing under the trust deed of May 12, 1917, including the value of the certificates in the Isaac Stephenson Company Trustees, to the value of the property passing under the will, and assessed each beneficiary the tax in force at the time of the death of the testator, allowing but one exemption to each beneficiary. As to Mrs. Morgan the court also included in her share the gift of $23,000. From an order so determining the inheritance taxes, three appeals were taken by some of the beneficiaries.

Flanders, Fawsett & Smart and Upham, Black, Russell & Richardson, all of Milwaukee, for appellants.

John J. Blaine, Atty. Gen., E. E. Brossard, Asst. Atty. Gen., and John Harrington, Inheritance Tax Counsel, of Madison, for respondent.

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

The three appeals were briefed and argued together, and the assignments of errors covering all are: The court erred: (1) In computing the tax on the transfers under the trust deed at the rate in effect at the time of the death of the testator, instead of at the rate in effect at the time of the execution of the trust deed; (2) in adding the amount received under the will to the amount received under the trust deed and assessing the tax on the sum instead of on each transfer separately at the rate in effect at the time thereof; (3) in the method of assessing the contingent remainders; (4) in including the gift of $23,000 to Mrs. Morgan as taxable; and (5) in assessing a tax on the value of the certificates in the Isaac Stephenson Company Trustees.

The first two assignments of error are so closely related that it is deemed best to treat them together. Answers to the questions, When does the tax accrue? or When does the transfer for tax purposes take place? will largely determine whether the court erred as to either. If the tax accrues and the transfer for tax purposes occurs as of the time of the death of the testator, then the court adopted the correct rate, and was also right in adding the value of the two transfers together and taxing them as one sum. But if the tax accrues and is due and payable when the actual transfer takes places irrespective of the death of the testator or intestate, then the court erred in assessing the tax on the value of the property under the trust deed at the rate in effect when Stephenson died, for chapter 320 of the Laws of 1917, which took effect June 2, 1917, increased the rates in force when the trust was created on May 12, 1917, and it also erred in adding together the value of the two transfers and taxing them as one.

Stephenson was a resident of this state; hence for the purposes of this case reference need be made to only these provisions of our inheritance tax act. It provides for a tax (a) when the transfer is by a will or by the intestate laws of this state, and (b) when a transfer by gift, deed, or otherwise is made in contemplation of the death of the donor or grantor. Section 1087--1(1, 3), Stats. 1919. Subdivision (4) of said section provides that--

“Such tax shall be imposed when any such person or corporation becomes beneficially entitled, in possession or expectancy, to any property or any income thereof, by any such transfer whether made before or after the passage of this act.”

Section 1087--5(1) provides that--

“All taxes imposed by this act shall be due and payable at the time of the transfer, except as hereinafter provided.”

Section 1087--2 reads:

“When the property or any beneficial interest therein passes by any such transfer, * * * the tax * * * imposed shall be.”

These provisions of the statute standing alone certainly give color to the argument that when a transfer occurs the tax becomes due and payable irrespective of the time of the death of the transferor.

[1] But language quite plain and persuasive when viewed merely in the light of its immediate context must yield in meaning to the general scope and purpose of the act of which it forms a part, if such scope and purpose is plain and unambiguous, and if the language used is susceptible of a meaning consonant with such general scope and purpose. The inheritance tax act was passed for the purpose of imposing a tax upon the transfer of the estate of a decedent to another. The tax, of course, is upon the right to the transfer not upon the estate. Nunnemacher v. State, 129 Wis. 190, 108 N. W. 627, 9 L. R. A. (N. S.) 121, 9 Ann. Cas. 711;State v. Pabst, 139 Wis. 561, 121 N. W. 351;Estate of Week, 169 Wis. 316, 318, 172 N. W. 732. The latter is only the measure of the tax. The tax is a graduated one both as to amount of estate transferred and as to the relationship of the receiver to the deceased. The statute contemplates but one estate for each decedent, else there would be but little object in graduating the tax according to amount, for the estate could easily be split up into a number of gifts, trusts, or wills and intestate property, and thus the graduated feature of the statute could be entirely defeated. The law provides for transfer by will, by intestate law, and by gift in contemplation of death. These all connote testamentary or intestate disposition of an estate. Gifts made in contemplation of death for taxing purposes under the statute become a part of the estate of the decedent. A deceased person can leave but one estate. All property owned by him at the time of his death is a part of his estate, and gifts previously made in contemplation of death for taxing purposes merge in the estate. Such is the obvious scope and purpose of the law, such has been the administration under it, and such has been the construction given it by this court. State v. Pabst, 139 Wis. 561, 121 N. W. 351;State v. Bullen, 143 Wis. 512, 128 N. W. 109;State v. Thompson, 154 Wis. 320, 142 N. W. 647, 46 L. R. A. (N. S.) 790, Ann. Cas. 1915B, 1084;Estate of Ebeling, 169 Wis. 432, 172 N. W. 734, 4 A. L. R. 1519;Estate of Week, 169 Wis. 316, 172 N. W. 732. In the Pabst Case it is said:

“The provisions of chapter 44, Laws of 1903, in words are expressive of the intent that the tax shall be imposed at the time of the death of the transferor, in the manner and under the conditions prescribed, upon the interests transferred by him.” 139 Wis. 584, 121 N. W. 357.

“The context of the law expresses as its purpose and object that the tax shall be imposed on the transfer at the time of the death of the decedent and rest as a lien on the property so transferred until paid.” 139 Wis. 585, 121 N. W. 357.

And in the same case, speaking of the provisions of section 1087--5(1), the court says:

“This portion of the law does not operate to postpone the imposition of the tax on the transfer beyond the time of the death of the transferor, for, as we have seen, the tax comes into existence at the time of the death of the decedent.” 139 Wis. 585, 121 N. W. 357.

And again:

“The tax is imposed at the time of the devolution of the property, which is at the time of the transferor's death.” 139 Wis. 586, 587, 121 N. W. 358.

Language could not very well be more clear and explicit to the effect that for taxing purposes the tax accrues and the transfer takes place as of the time of the death of the transferor. In State v. Bullen, 143 Wis. 512, 128 N. W. 109, transfer of property made in contemplation of death was treated as part of the estate. So, also, in State v. Thompson, 154 Wis. 320, 142 N. W. 647, 46 L. R. A. (N. S.) 790, Ann. Cas. 1915B, 1084; in Estate of Ebeling, 169 Wis. 432, 172 N. W. 734, 4 A. L. R. 1519; and in Estate of Week, 169 Wis. 316, 172 N. W. 732. In the latter case it is said, “The transfer contemplated occurs at the instant of death.” 169 Wis. 318, 172 N. W. 733.

Section 1087--5(1) makes every administrator and executor equally liable with a trustee or person to whom transfer of property has been made in contemplation of death, for the whole tax, including that on the portion of the estate transferred in contemplation of death as well as that transferred by will or under intestate laws. If each was to be taxed separately and at the actual time of transfer, it would be unjust to hold an executor or administrator liable for a tax on property that is no part of the estate he is administering.

[2] In view of the evident purpose of the inheritance tax act, in view of the unbroken administration of it since 1903, in view of the consistent and repeated constructions given it by this court, and in view of...