Lonsdale v. United States

• Decision Date: 23 November 1928
• Docket Number: No. 8185.,8185.
• Citation: 31 F.2d 482
• Parties: LONSDALE et al. v. UNITED STATES.
• Court: U.S. District Court — Eastern District of Missouri

31 F.2d 482 (1928)

LONSDALE et al. v. UNITED STATES.

No. 8185.

District Court, E. D. Missouri, E. D.

November 23, 1928.

Irvin V. Barth, of St. Louis, Mo., for plaintiffs.

Louis H. Breuer, U. S. Atty., of Rolla, Mo., C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and P. E. Miller, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., for the United States.

FARIS, District Judge.

The demurrer of the defendant, the United States, will be overruled. The ground of this demurrer is that the petition does not state facts sufficient to constitute any cause of action against the defendant, or, to put that somewhat more plainly, that the petition discloses upon its face that no cause of action exists.

The single decisive question raised by the demurrer is whether the plaintiffs as trustees of the estate of Milliken, deceased, may, in determining the gross value of the estate in their hands subject to federal estate tax, deduct the amount paid by them as taxes under the provisions of the Missouri inheritance tax law.

It is conceded that the federal law of 1916 (39 Stat. 756) applies to the case. This law, so far as it is apposite to the controversy in hand, provides thus (section 203):

"That for the purpose of the tax the value of the net estate shall be determined — (a) in the case of a resident, by deducting from the value of the gross estate —

"(1) Such amounts for funeral expenses, administration expenses, * * * and such other charges against the estate, as are allowed by the laws of the jurisdiction, whether within or without the United States, under which the estate is being administered."

I gather from the briefs that both parties here concede that the words "and such other charges against the estate as are allowed by the laws of the jurisdiction" apply to a state inheritance tax, if so it be that such a state tax is levied against the estate itself, and not against the property which the beneficiaries take. In other words, if the Missouri state tax is a charge against the estate, and not a charge upon the respective interests of the beneficiaries, the demurrer ought to be overruled.

If this concession is not made by the parties, I think the law makes it for them. This is to be fairly deduced, not only from the decided cases, but also from the significant language of the act of 1918 (40 Stat. 1057), wherein it was specifically provided that deductions from the gross amount subject to federal estate taxes should not include "inheritance taxes." Moreover, it seems that in the Revenue Act of 1928 (26 USCA § 2001 et seq.) the Congress again returned to what I deem to be the rule and policy of the Revenue Act of 1916. In short, the Revenue Act of 1928 substantially provides that, if the deduction for state inheritance taxes shall be claimed by the estate, such deduction shall be allowed to it, but, if claimed by the beneficiaries, it shall be allowed to them.

The decided cases also seem clearly to take as a test the single and simple question whether, under the state inheritance tax law, the charge or tax levied is made by the state law a tax on transmission of the estate, to be paid by the estate, or a tax on the taking or receiving, to be paid by the beneficiaries. See Keith v. Johnson, 271 U. S. 1, 46 S. Ct. 415, 70 L. Ed. 795, 44 A. L. R. 1432; U. S. v. Mitchell, 271 U. S. 9, 46 S. Ct. 418, 70 L. Ed. 799; Thayer v. Malley (D. C.) 3 F.(2d) 194.

So, if we coincide in the view that the language, "such other charges against the estate," etc., includes the state inheritance tax, if so it be that such taxes are charges against the estate, and not against the beneficiaries, we come to the question whether under the local law such state taxes are levied against the estate or against the beneficiaries.

The cases cited by the demurrant are for the most part (in fact, all but one) decisions of the Supreme Court of Missouri, dealing with an old law of Missouri commonly called the collateral inheritance tax law. In the latter law the word "property" — that is to say, taxable property, with which the law is presumed to deal — was thus defined: "The word `property,' as used in this section, shall be taken to mean the property or interest therein passing or transferred to individual legatees, devisees, heirs, next of kin, grantees, vendees, or donees, and not as the property or interest therein of the testator, intestate, grantor, bargainor, vendor, or donor." Laws of Missouri 1899, p. 328, § 1.

I may assume or concede, arguendo, that the Supreme Court of Missouri held under the above language that the tax levied by the Missouri collateral inheritance tax law was a tax against the beneficiaries, and not a tax against the estate. Such concession in no wise militates against the position contended for by the plaintiffs here.

But the difficulties of the case are not to be solved by reference to any provision of the collateral inheritance tax law, because that was not the law under which the state taxes here sought to be deducted were paid. As I gather from briefs, the taxes here sought to be deducted were taxes paid by the plaintiffs under the provisions of the state inheritance tax law of 1917. Laws of Missouri 1917, p. 115 et seq. The first section of the above law says: "A tax shall be and is hereby imposed upon the transfer of any property," etc. Another section makes this tax a lien upon the entire estate. Section 562, Revised Statutes of Missouri 1919. Still another section renders the personal representative...