Mayer v. Reinecke

• Decision Date: 24 July 1942
• Docket Number: No. 7866.,7866.
• Citation: 130 F.2d 350
• Parties: MAYER et al. v. REINECKE.
• Court: U.S. Court of Appeals — Seventh Circuit

130 F.2d 350 (1942)

MAYER et al. v. REINECKE.

No. 7866.

Circuit Court of Appeals, Seventh Circuit.

June 23, 1942.

Rehearing Denied July 24, 1942.

Gerald L. Wallace, Samuel O. Clark, Jr., and J. Louis Monarch, Asst. Attys. Gen., Julian G. Gibbs and Robert R. Barrett, Sp. Assts. to Atty. Gen., J. Albert Woll, U. S. Atty., and Joseph M. Solon, Asst. U. S. Atty., both of Chicago, Ill., for appellant.

Isaac H. Mayer, Carl Meyer, Frederic Burnham and Louis A. Kohn, all of Chicago, Ill., for appellees.

Before EVANS and KERNER, Circuit Judges, and LINDLEY, District Judge.

KERNER, Circuit Judge.

We are asked to decide whether an Illinois decedent's gross estate, for federal estate tax purposes, should include the value of the widow's dower and her statutory one-third interest in the personalty.¹

Plaintiffs as testamentary trustees sued the Collector for the recovery of an alleged overpayment of estate taxes, after the Commissioner had rejected their refund claim premised upon the theory that the value of these marital interests was improperly included in the gross estate. The trial court overruled the Government's demurrer and proceeded to try the case. It entered judgment for the plaintiffs and the Government appeals.

The decedent, Levy Mayer, died testate on August 14, 1922, leaving his widow and two daughters as the principal beneficiaries under the will. October 16, 1922, the will was admitted to probate by the Cook County Probate Court, and letters testamentary were issued to the executors, who duly accounted for all of the estate's property and distributed it according to the will. The Probate Court discharged the executors on December 30, 1925, and, pursuant to that court's order and the provisions of this will, turned over the balance of the estate to the trustees named in the will.

The will provided a substantial legacy for the widow and in addition directed the trustees to pay her a life income from one-half of the residuary estate, and if such trust income was insufficient to meet "her needs and requirements," the will authorized the trustees "in their discretion to use any portion of the principal" of such one-half of the residuary estate for that purpose.

By § 10 of the Dower Act, c. 41, § 10 et seq., 41 Smith-Hurd Annotated § 11, these testamentary provisions for the widow barred her dower, unless she renounced in writing their benefits so as to become entitled to dower in the lands and to one-third of the personal estate after the payment of all debts. Moreover, if the renunciation was not within one year after letters testamentary were issued, she would be deemed to have elected to take under the will. The widow made no such renunciation and took under the will.

Initially, we must determine whether this acceptance of the will by the widow or the antecedent execution of the will by the decedent affects the estate tax significance of the value of the marital interests.

It is clear that if either of these events controlled the taxable status of the decedent's property, the entire value of the realty and personalty covered by the will would be includible under § 402(a) and the marital interests would be of no moment.

The taxing statute here involved requires that the taxable status of the decedent's property be determined as of the time of his death. We may not substitute the now certain fact of the widow's acceptance of the will for that which was a mere possibility at the time of the decedent's death; the subsequent renunciation of the marital interests can not affect the value of the estate subject to tax. Nor can the decedent's execution of a will obviate the problem of whether the value of the marital interest is to be excluded from the gross estate. The widow's dower and statutory share existed to the extent that the decedent could never make an effective testamentary disposition of his estate in derogation of her rights. Therefore, at the decedent's death, it could not be said that all of the property passed under the will, for the wife might not be willing to give up her rights for any testamentary offer of her spouse. This reality existed at the decedent's death and should prevail. Section 10 of the Dower Act does not require the contrary; it merely provides a more simplified procedure of election than the familiar election in equity between the marital rights and the inconsistent provisions of the will, Davis v. Mather, 309 Ill. 284, 288, 141 N.E. 209.

We conclude that neither the execution of a will nor the widow's acceptance of it eliminates the problem of whether the gross estate should include the value of the marital interest. Cf. Briscoe v. Craig, 6 Cir., 32 F.2d 40; Schuette v. Bowers, 2 Cir., 40 F.2d 208.

State law creates the marital interests and determines the quality and quantity of the interest of each spouse in the property of the other. Our task is to ascertain the quality and quantity of these interests under Illinois law and then to determine by the criteria of the estate tax law whether they are among the objects Congress intended to tax. Allen v. Henggeler, 8 Cir., 32 F.2d 69, 71.

Section 402 provides that the gross estate shall include the value, at the time of the decedent's death, of all property, real or personal, "(b) To the extent of any interest therein of the surviving spouse, existing at the time of the decedent's death as dower, * * * or by virtue of a statute creating an estate in lieu of dower * * *." The plain mandate of this section is that the value of the widow's dower at her husband's death be included in the gross estate.

The estate tax is an excise upon the transfer of an estate at the death of the owner: it fixes upon the interest which ceased by reason of the death, rather than the interest to which some person succeeded on death. Y. M. C. A. v. Davis, 264 U.S. 47, 50, 44 S.Ct. 291, 68 L.Ed. 558; Edwards v. Slocum, 264 U.S. 61, 62, 44 S.Ct. 293, 68 L.Ed. 564. The reference in § 402(b) to the dower interest of the surviving spouse is in no way a departure from the fundamental excise character of the tax; the statute does not tax the widow's dower, it merely uses it as a measure of that part of the deceased husband's interest in his realty which was beyond his testamentary control and which ceased at his death. The quality and quantity of the widow's dower under Illinois law are therefore of importance only to the extent that they may indicate an interest of the husband which ceased at his death.

In Illinois, it is clear that before the husband's death, the wife "has a mere inchoate right of dower in his lands, — an expectancy, — which does not vest or become property until it is consummated by the death of the husband. * * * Marriage does not in this state vest in the wife the absolute right to dower, but as an incident of the marriage she is given capacity to acquire the right in the event she shall survive her husband," Virgin v. Virgin, 189 Ill. 144, 151, 59 N.E. 586, 587, and before the husband's death, the wife can bring no action for it. Bigoness v....