Keating's Estate, In re
| Decision Date | 10 December 1958 |
| Docket Number | No. 9639,9639 |
| Parties | ESTATE of Henry KEATING, deceased. The STATE of Montana, Appellant, v. Ted KEATING, as Administrator of the Estate of Henry Keating, deceased, Respondent. |
| Court | Montana Supreme Court |
Arnold H. Olsen, Atty. Gen., Wm. F. Crowley, Asst. Atty. Gen., H. O. Vralsted, Special Asst. Atty. Gen., H. J. Pinsoneault, Asst. Tax Counsel, Helena, H. O. Vralsted, argued orally, for appellant.
E. A. Blenkner, Columbus, Coleman, Jameson & Lamey, Billings, James M. Haughey, Billings, argued orally, for respondent.
This appeal presents the question as to whether or not certain inter vivos transfers of real and personal property made by the deceased, Henry Keating, were made in contemplation of death and hence were taxable. The district court ruled against the State's contention and held that the transfers were not made in contemplation of death and that they were not taxable. The State has appealed from that order so providing.
The facts giving rise to this controversy are as follows: Henry Keating died intestate on November 12, 1952, at the age of 78 years. On December 10, 1951, he gave an undivided one-seventh interest in his ranch, livestock, and equipment used in its operation to each of his five children and his wife, retaining an undivided one-seventh interest for himself. The seven family members then organized a partnership and continued the farming and ranching operations as partners. The gifts were completed on December 10, 1951, and the donor paid a federal gift tax thereon.
Henry Keating during his lifetime, particularly during the latter part of his lifetime had traveled extensively in foreign counties. He had visited Hawaii, Alaska, Mexico and fourteen European countries. His son, Ted, after returning from Army service was made one of the two foremen on the ranch, the other foreman being the deceased's son-in-law. He trained these foremen to carry on the ranching operations and gave them added responsibilities as time went on. It was his desire that his children should have increased incomes before his death and he desired also to curtail his own income by diverting part of it to the other members of his family so as to reduce the federal income tax. He had made substantial gifts over several years before dividing up his ranch in order that the children might enjoy a part of his estate while he was still living.
Henry Keating at first considered the formation of a family corporation but after learning of the federal law with reference to family partnerships concluded to organize a partnership. His motive for making the gifts was shown to be that he was thus enabled to relieve himself of much of the responsiblility of operating the ranch, and at the same time give the other members of his family an adequate income to be enjoyed while he was still living, and to prevent the high federal income tax rates from consuming the income from the ranching operations. The arrangement also afforded him leisure time for travel and recreation. At the time of the transfers, Henry Keating was in sound physical condition and in good health and was then making preparations for a trip to Africa.
The plan of the deceased as above set forth could not have been accomplished by a testamentary disposition of his property to take effect at death. He desired that the partnership arrangement be accomplished during his lifetime. On these facts, as above stated, the district court ruled that the motive of the deceased in making the gifts in question was associated with life and that the gifts were not made in contemplation of death.
Under our statute, section 91-4402, R.C.M.1947, every transfer made within three years prior to the death of the grantor of a material part of his estate and without a fair consideration in money or money's worth, unless shown to the contrary shall be deemed to have been made in contemplation of death. Hence the only question for us here is, was the court justified in finding that the evidence was sufficient to overcome this presumption?
The State contends that this presumption cannot be overcome by the testimony of interested witnesses, relying upon the cases of McLaughlin v. Corcoran, 104 Mont. 590, 69 P.2d 597; and Lewis v. Bowman, 113 Mont. 68, 121 P.2d 162. All that these cases hold is that this presumption is not overcome as a matter of law by the testimony of interested witnesses but that the question still remains one of fact to be determined by the trier of the facts. We cannot say that the district court abused its discretion in finding that the gifts in question here were associated with life rather than with death, and hence were not made in contemplation of death.
In the case of Estate of Maggie M. Holding, the circumstances were much the same as those here. That case was recently decided by the tax court of the United States, being Docket No. 65341. The opinion was filed on July 31, 1958. There the donor was 87 years of age at the time of the gifts in question. The gifts were made in September and October of 1952, and in February of 1953. Gift return was regularly filed. The donor died on September 16, 1953. The first notice of symptoms of illness occurred within a period of approximately one month prior to being admitted to the hospital on July 19, 1953. Prior to this last illness she had enjoyed excellent health for many years. She had made a practice of giving substantial gifts of money to her children and grandchildren on occasions before the gifts in question. The decedent had deplored the practice of some of her associates of keeping their wealth until they died. She believed in sharing it with her descendants while she was alive and able to see them enjoy it.
The court ruled that none of the gifts were made in contemplation of death or in lieu of testamentary disposition; that the dominant motive which prompted decedent to make the several gifts was to see the donees enjoy the use of the money given to them while she was yet living. The same reasoning applied in that case fits this case. The court in that case called attention to the case of Bradley v. Smith, 7 Cir., 1940, 114 F.2d 161, where the donor was 85 years of age and where the gift was made within four months prior to his death and yet held that the same was not made in contemplation of death. The court also referred to the case of Levi v. United States, 1936, 14 F.Supp. 513, 83 Ct.Cl. 284, wherein the decedent was a man 75 years of age and where death resulted from cancer two months after the gifts were made, and yet the court held that they were not made in contemplation of death. Other cases holding that similar facts were sufficient to sustain a finding that the motive was associated with life rather than death are the following: First Nat. Bank of Kansas City v. Nee, D.C.W.D.Mo., 67 F.Supp. 815; Estate of Benjamin P. O'Neal, P-H 1947, T.C.Mem.Dec. p47, 167; Estate of Genevieve Brady Macaulay, 3 T.C. 350; Estate of Anna Scott Farnum, 14 T.C. 884; Estate of Charles J. Rosebault, 12 T.C. 1; Constance McCormick, Executrix, 38 B.T.A. 308; Estate of Julius Bloch-Sulzberger, P-H 1947, T.C.Mem.Dec. p47, 304; Estate of Herbert G. Larsh, P-H 1947, T.C.Mem.Dec. p49, 221; Thomas A. Scully, Executors, 34 B.T.A. 218; Blakeslee v. Smith, D.C.Conn., 26 F.Supp 28, affirmed 2 Cir., 110 F.2d 364; Fair v. United States, D.C.W.D.Pa., 59 F.Supp. 801; Greer v. Glenn, D.C.E.D.Ky., 64 F.Supp. 1002.
This court under very similar facts has reached the conclusion that the court was justified in concluding that the gifts were not made in contemplation of death, but for purposes associated with life. In re Warren's Estate, 128 Mont. 395, 275 P.2d 843.
Under the authority of these cases, as well as others which might be cited, including that of United States v. Wells, 283 U.S. 102, 51 S.Ct. 446, 75 L.Ed. 867, the court was warranted in concluding that the gifts in question here were not made in contemplation of death or in the nature of a final distribution of the estate of donor as contemplated in section 91-4402, and that the presumption to the contrary was overcome by the evidence. The order appealed from is affirmed.
Henry Keating died on the 12th day of November 1952 at Columbus, Stillwater County, Montana, where all of his estate and property was located. Less than one year prior to his death, Henry Keating gave by an inter vivos transfer an undivided one-seventh interest in certain real and personal property to his wife, and a like interest to each of his five children. He retained a one-seventh interest for himself. The value of the transferred interests was $210,004.41. When the petition for determination of inheritance tax was filed during the probate of Henry Keating's estate, the value of these gifts was not included. The State Board of Equalization objected to such omission and pursuant to their objections a hearing was had to determine whether such gifts were taxable by the inheritance tax laws of the State of Montana. The Board of Equalization asserted that the value of the gifts should be included for inheritance tax purposes under the provisions of section 91-4402, R.C.M.1947, which provides:
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Ludington's Estate, In re
...446, 75 L.Ed. 867, and which we followed in In re Warren's Estate, 128 Mont. 395, 275 P.2d 843, and in the recent case of Estate of Keating, Mont., 332 P.2d 906. Appellants contend that the donees did not testify that the gifts were not made in contemplation of death. However that would hav......