Isaacs v. Clayton, 766

• Decision Date: 24 May 1967
• Docket Number: No. 766,766
• Citation: 270 N.C. 424,154 S.E.2d 532
• Parties: Libby ISAACS, Executrix of the Estate of Bertram Isaacs, Deceased v. I. L. CLAYTON, Commissioner of Revenue of North Carolina.
• Court: North Carolina Supreme Court

Page 532

154 S.E.2d 532

270 N.C. 424

Libby ISAACS, Executrix of the Estate of Bertram Isaacs, Deceased v. I. L. CLAYTON, Commissioner of Revenue of North Carolina.

No. 766.

Supreme Court of North Carolina.

May 24, 1967.

Atty. Gen. T. W. Bruton, and Asst. Atty. Gen. B. A. Harrell, for defendant appellant.

Hofler, Mount & White, Durham, for appellee.

LAKE, Justice.

G.S. § 105--4(b) provides:

'The persons mentioned in this class (Class A beneficiaries of decedent's estate) shall be entitled to the following exemptions: Widows, ten thousand dollars ($10,000.00); each child under twenty-one years of age, five thousand dollars ($5,000.00); * * * Provided, that when any person shall die leaving a widow and child or children under twenty-one years of age, and leaving all or substantially all of his property by will to his wife, the wife shall be allowed at her option an additional exemption of five thousand dollars ($5,000.00) for each child under twenty-one years of age; provided further, that whenever the wife elects to claim such additional exemption, the child or children shall not be allowed the exemption of five thousand dollars ($5,000.00) for each child * * * hereinabove provided for.'

Since the adoption of this statute, the Commissioner of Revenue has uniformly interpreted it as allowing such additional exemption to the widow only as to that portion of the widow's taxable interest which passes to her under the provisions of the will of the deceased husband. Thus, where, as here, the debts and expenses of administration of the husband's estate exceed the value of the property owned by him at his death, so that the total value of the taxable interests to which the widow succeeds is not greater than the sum of one-half the value of real property owned prior to death by the husband and wife as tenants by the entireties plus the proceeds of life insurance payable to the widow as beneficiary, the additional exemption is not allowed, notwithstanding the language of the will.

The correctness of this administrative interpretation of the statute has not been considered by this Court heretofore. An administrative interpretation of a tax statute which has continued over a long period of time with the silent acquiescence of the Legislature should be given consideration in the construction of the statute. Hatteras Yacht Co. v. High. Commissioner of Revenue, 265 N.C. 653, 658, 144 S.E.2d 821. This well established principle of statutory construction loses much of its significance, however, where, as here, there are practical reasons which have made it unlikely that the administrative interpretation would be attacked in the courts or before the Legislature. Even in the largest possible estate, the rate of tax on the widow's inheritance does not exceed 12%. Consequently, even in such an estate the effect of the exemption upon the tax to be paid could not be more than $600 per child and, obviously, in the vast majority of cases the amount of tax turning upon the acceptance or rejection of this interpretation of the statute would not be sufficient to make it feasible for the widow to contest the matter in the courts. Under these circumstances, the long continued application of the administrative interpretation is not, of itself, persuasive.

It is also a well established rule that statutory exemptions from tax...