In re Young's Estate

• Decision Date: 22 September 1925
• Docket Number: 1295
• Citation: 239 P. 286,33 Wyo. 317
• Parties: In re YOUNG'S ESTATE [*] ; v. YOUNG et al LOUCKS Inheritance Tax Com'r
• Court: Wyoming Supreme Court

239 P. 286

33 Wyo. 317

In re YOUNG'S ESTATE ^[*] ;

LOUCKS Inheritance Tax Com'r v. YOUNG et al

No. 1295

Supreme Court of Wyoming

September 22, 1925

ERROR to District Court, Sweetwater County; VOLNEY J. TIDBALL Judge.

Proceedings in the matter of the estate of Albert Edward Young, deceased wherein the court allowed deductions in favor of Carrie Pickering Young and Robert D. Murphy, as executors for amounts paid by them as Federal Estate Tax, and as family allowance during administration, in computing the amount of Inheritance Tax. Harry A. Loucks, as Inheritance Tax Commissioner, brings error.

Affirmed.

David J. Howell, Attorney General and Ray E. Lee, Asst. Attorney General for plaintiff in error.

The family allowance can be paid only by order of court; it is not exempt from Inheritance Tax; People v. Forsyth (Ill.) 112 N.E. 378; in view of the liberal exemptions allowed to the family by the Inheritance Tax Law, the courts should not allow additional deductions; there is a conflict of authority as to deductions of Federal Estate Tax. The following cases hold that such tax should not be deducted in computing Inheritance Tax; Hazard v. Bliss, 113 A. 469; Sanford's Est. (Ia.) 175 N.W. 506; Matter of Bierstadt, 166 N.Y.S. 168; Matter of Sherman, 222 N.Y. 540; Carnegie's Estate, 191 N.Y.S. 753; Canda's Est. 185 N.Y.S. 903; Est. of Weeks (Wis.) 172 N.W. 732; In re Sherwood, 211 P. 734; In re Fish, 189 N.W. 177; In re Wittmann, 182 N.Y.S. 535; In re Sheens (La.) 88 So. 253; People v. Palmer (Colo.) 139 P. 545; People v. Ballans (Ill.) 128 N.W. 542; In re Watkinson, 217 P. 1073; In re Nesbitt, 198 N.Y.S. 451; In re Gihon, 63 N.E. 561; In re Vanderbilt, 64 N.E. 782; Smith v. Browning, 122 N.E. 217; U. S. v. Perkins, 163 U.S. 625; Federal Estate tax is not a debt against the estate nor an expense of administration and should not be deducted; In re Sanford's Est. supra; New York Trust Co. v. Eisner, 256 U.S. 345.

W. A. Muir for defendant.

An allowance for the family is provided for by statute; 6876-78 C. S.; it is fixed by the court and does not pass by intestate succession; Blackburn v. State (Mont.) 152 P. 31; Grenshaw v. Moore (Tenn.) 137 S.W. 924; Smith v. State (Wis.) 155 N.W. 109; In re Kennedy's Estate (Calif.) 108 P. 280; cases cited by plaintiff in error are governed by statutes differing from ours. While there is a conflict of authority as to deductions of Federal Estate Tax, the better reasoning in the interpretation of statutes such as ours, imposing a tax on property passing only, is that the Federal Tax should be deducted; People v. Passfield (Ill.) 120 N.E. 286; People v. Co. (Ill.) 124 N.E. 662; the Federal Tax is a charge against the estate, and not against the legatees or devisees; U.S.C. S. Sec. 1916, page 2061, Vol. 2; it is therefore a proper deduction; State v. Bank (Ind.) 125 N.E. 200; In re: Miller's Est. (Cal.) 195 P. 413; People v. Bemis (Colo.) 189 P. 32; People v. Griffin (Ill.) 92 N.E. 313; In re: Watkinson (Calif.) 217 P. 1073, construed an Act in that State passed in 1917, afterwards amended. The cases of Smith v. Browning (N. Y.) 122 N.E. 217 and U. S. v. Perkins, 163 U.S. 625 cited by plaintiff in error, are clearly not in point.

William E. Mullen Amicus Curia.

The tax is imposed upon property passing by will, intestate succession or conveyances made in contemplation of death; no property can pass until debts and expenses of administration have been paid; 7002 C. S.; a family allowance is preferred over all claims, except funeral charges and expense of administration. Administration is necessary for the protection of all persons interested, including the state; an allowance for the support of the family pending administration is based on sound public policy; People v. Forsyth, 273 Ill. 141; involved a widow's award, something different from a family allowance; in the case of: In re: Miller's Est. (Cal.) 195 P. 413; certain deductions were allowed, but the effect of this decision was changed by a subsequent Act of the California Legislature in 1917 afterward construed in Watkinson's Est. 217 P. 1073; and in view of amendments made in the law considered in re: Steehler's Est. 233 P. 972; it was held that family allowance and Federal Tax should both be deducted before computing Inheritance Tax; the same rule is followed in Washington in re: Ferrel's Estate, 192 P. 10; in re: Weller's Est. (Wash.) 194 P. 541; and also in Oregon in re: Inman's Est. (Ore.) 199 P. 615; counsel for defendant in error cited other cases supporting the rule; some conflict may be found in the cases on the subject of deducting Federal Estate Tax before computing State Inheritance Tax; the recent case of Jones v. Bowman, 234 P. 953; contains a comprehensive review of all of the decisions on the subject and concludes by holding that a statute, such as ours, imposing Inheritance Tax upon distributive shares passing to beneficiaries, intends that all payments operating to reduce the amount of the Inheritance, should be deducted before computing Inheritance Tax; see also People v. Bemis, 189 P. 32; State v. Bank (Ind.) 125 N.E. 200; People v. Trust Co. (Ill.) 124 N.E. 662; Williams v. State, 125 A. 661; where the state law forbids the deduction of Federal Estate Tax no deduction can be made; Frick v. Penn. (U. S.) 69 L. ed. 692; the family allowance does not pass by intestate succession; it varies in amount according to the circumstances of parties to the case.

BLUME, Justice. POTTER, C. J., and KIMBALL, J., concur.

OPINION

BLUME, Justice.

Albert Edward Young died in Sweetwater county, Wyoming, on May 15, 1923. He left a will dated June 1, 1921. By the terms of his will, after paying debts and funeral expenses, the sum of $ 5,000 is left to William Lee Young, a nephew; the sum of $ 10,000 is left in trust, the income thereof to be paid to the brother and sisters of the deceased, share and share alike, and to the survivor or survivors of them during their lives, and upon the death of the last survivor, said principal sum of $ 10,000 to revert to the estate of the deceased. The remainder of the estate is devised to the widow of the deceased.

Inheritance taxes, payable to this state, seem to have been duly computed and paid on the legacy left to William Lee Young and on the $ 10,000 above mentioned, left in trust, and no question in regard to the taxes on these sums is before us. But the trial court held in its order of June 26, 1924, that the sum of $ 661.60, paid as Federal Estate Taxes, and the sum of $ 3600, paid as a family allowance during the administration of the said estate to the widow of said deceased, should be considered as part of the expenses of the estate and should be deducted from the remainder of the estate in computing the amount to be paid as inheritance taxes in this state on such remainder. From this order the Inheritance Tax Commissioner of this state has appealed, and the only question before us is as to whether or not the two items aforesaid were proper deductions.

It is no doubt true that the state has the power to impose a succession tax and to fix the rate of tax for the privilege of succeeding to the property, and also to prescribe the measure by which the amount of the tax shall be ascertained. The legislature might impose the tax either upon the right to transmit the estate of the deceased or upon the beneficiaries, based upon the amount they receive. The inheritance tax laws of this state in force at the time of the death of Albert Edward Young are contained in chapter 126, Session Laws of Wyoming 1921, as amended by chapter 80 Session Laws of 1923. Section 2 of chapter 80 aforesaid provides, so far as is material here, as follows: "All property within the jurisdiction of the state of Wyoming * * * which shall pass by will or by laws regulating intestate succession * * * shall be subject, as to the estate passing to each of the following beneficiaries, to a tax at the percentage rates fixed by the following table." Then follow the rates at which various heirs shall be taxed, together with the exemptions allowed them. Thus in the case of husband and wife an exemption of $ 10,000 is allowed and the rate of taxation is 8 per cent. In the case of a nephew, an exemption of $ 1,000 is allowed and the rate of taxation is 10 per cent. The provisions aforesaid seem to clearly indicate that a tax is to be paid, not upon the estate as a whole or upon the right to transmit the estate of the decedent, but upon the amount of property which passes to the respective beneficiaries; in other words, the share received by an heir, distributee, legatee, or devisee is, in the final analysis, the unit by which to determine the amount of the inheritance tax. This intention is also clearly manifested in other provisions of the law. Thus in section 7 of said chapter 126, an administrator or executor who has any property in charge for distribution, must pay the tax on any devise, bequest or legacy. Section 8 of the same chapter provides that the tax imposed upon "inheritances, devises, bequests or legacies" shall be paid to the Inheritance Tax Commissioner. Section 12 of the same chapter provides: "If any bequest or legacy shall be charged upon or payable out of any property, the heir or devisee shall deduct such tax therefrom and pay such tax to the administrator, executor or trustee." Section 17 of the same chapter provides that if any bequest or devise of property is made to executors or trustees, in lieu of compensation for their services, and the value of such bequest or devise exceeds their reasonable compensation for such services, then an inheritance tax shall be imposed upon such excess. Section 19 of the same chapter provides that the court shall, as soon as practicable after the granting of any letters...