Phellis' Estate, In re

CourtUnited States Court of Appeals (Ohio)
Citation177 N.E.2d 66,113 Ohio App. 439
Parties, 16 O.O.2d 268 In the Matter of the ESTATE of Verne H. PHELLIS, Deceased. Esther P. GREGG, Executrix of the Estate of Verne H. Phellis, Deceased and Helen Phellis, Appellants, v. DEPARTMENT OF TAXATION of Ohio, Stanley J. Bowers, Tax Commissioner, Marjorie P. McNally and Esther P. Gregg, Appellees.
Decision Date08 November 1960

Wallace W. McCoy, Mechanicsburg, Roscoe G. Hornbeck, London, for appellants.

Mark McElroy, Atty. Gen., by Joseph D. Karam, Asst. Atty. Gen., for appellees.

WISEMAN, Presiding Judge.

This is an appeal on questions of law from the judgment of the Probate Court of Madison County sustaining exceptions of the tax commissioner of Ohio to the original order determining the inheritance tax in the estate of Verne H. Phellis, deceased.

The record shows that the decedent, a resident of Madison County, State of Ohio, died testate on January 19, 1958, leaving his widow, Helen Phellis, aged 76 years, and two adult daughters, Marjorie P. McNally and Esther P. Gregg, surviving.

The question presented arises under Item II of the will of the testator, which provides as follows:

'All of the Real Estate, of every kind and description, wheresoever situated, which I may own or have the right to dispose of at the time of my decease, I Give and Devise to my wife, Helen Phellis, for and during the term of her natural life, with full power and authority to sell or encumber and convey the whole or any part of said real estate, if, in her judgment, the same is necessary for her comfortable support; and the legal Remainder therein I Give and Devise to may daughters, Marjorie P. McNally and Esther P. Gregg, in equal shares, each one-half thereof, to have and to hold the same to themselves, their heirs and assigns forever. It is my intent that said Remainder interest shall vest in my said daughters at the time of my death, subject to being divested by the power and authority of my wife as hereinbefore provided.'

In the exceptions to the original order the tax commissioner contended that the court erred in the original order in not assessing inheritance tax against the widow on the remainder interest in the real estate by a temporary order under the provisions of Section 5731.28, R.C. The exceptions were sustained.

In assessing the remainder interest against the widow on a temporary order the tax amounts to $3,550.77. The tax under the original order amounted to $2,363.85. The State of Ohio under the temporary order receives as tax $1,186.92 more than it would have received under the original order.

This appeal raises one question which is stated by counsel for appellant: Did the probate court err in sustaining the exceptions of the tax commissioner?

Section 5731.28, R.C., under which the temporary order was made provides as follows:

'When, upon any succession, the rights, interests, or estates of the successors are dependent upon contingencies or conditions by which they may be wholly or in part created, defeated, extended, or abridged, a tax shall be imposed upon such successions at the highest rate which, on the happening of such contingencies or conditions, would be possible under sections 5731.01 to 5731.56, inclusive, of the Revised Code, and such taxes shall be due and payable forthwith out of the property passing, and the probate court shall enter a temporary order determining the amount of such taxes in accordance with this section; but on the happening of any contingency by which said property, or any part thereof, passes so that such ultimate succession would be exempt from taxation under such sections, or taxable at a rate less than that so imposed and paid, the successor shall be entitled to a refund of the difference between the amount so paid and the amount payable on the ultimate succession under such sections, without interest. The executor or trustee shall, immediately upon the happening of such contingencies or conditions, apply to the probate court of the proper county, upon a verified petition setting forth all the facts, and giving at least ten days' notice by mail to all interested parties, for an order modifying the temporary order of said probate court, so as to provide for a final assessment and determination of the taxes in accordance with such ultimate succession. Such refund shall be made in the manner provided by section 5731.20 of the Revised Code.'

The appellants contend that the interest taken by the widow was a life estate only, notwithstanding the power conferred under Item II of the will. Appellants further contend that under the will there are only three successions subject to tax, which must be taxed separately, viz.: A life estate in the widow; a vested remainder in Marjorie P. McNally; and a vested remainder in Esther P. Gregg. The tax commissioner recognizes that the interest taken by the widown under the will is a life estate with a power to consume, and the power to consume any or all the real estate, the remainder, if any, to pass equally to the two daughters.

Unquestionably, a contingency exists: Whether the widow will exercise the power to consume, and what portion of the remainder, if any, will pass to the remaindermen.

The Ohio inheritance tax is not a tax on property but on the right of succession to property. In re Estate of Chadwick, 167 Ohio St. 373, 376, 149 N.E.2d 5. Our Supreme Court has interpreted the section under construction in the case of Wonderly v. Tax Commission of Ohio, 112 Ohio St. 233, at page 238, 147 N.E. 509, at page 510, as follows:

'It is to be noted that the foregoing section relates to succession rights or interests in an estate which are dependent upon 'contingencies or conditions whereby they may be * * * created, defeated, extended or abridged.' Applying this language to the case at bar, the estates in the brothers and sisters are to be 'created' upon the contingency of Wilbur Francis Kingseed dying 'before arriving at the age of twenty-five years without leaving living heirs of his body,' and the estate of Wilbur Francis Kingseed may be 'defeated' by the same contingency, and the law provides for each of above contingencies that the tax shall be imposed upon such passing of property in possession or enjoyment, present or future, at the highest rate; in other words, when it appears that any successions are dependent upon a contingency, the rate that will make the highest return to the state by way of inheritance tax must...

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2 cases
  • Luce's Estate, In re
    • United States
    • Ohio Court of Appeals
    • 13 Febrero 1962 with power to consume, if necessary, for her support with remainder, if any, to two daughters. See Gregg v. Tax Commission, 113 Ohio App. 439, 177 N.E.2d 66, 16 O.O.2d 268. They are used in the sense usually employed in conveyancing and with reference to the divesting or diminution......
  • Jones v. Schneider
    • United States
    • Ohio Court of Appeals
    • 21 Diciembre 1964
    ...the contingency that rights in the named beneficiary may be cut off is provided for in the will. See In re Estate of Phellis, 113 Ohio App. 439, 177 N.E.2d 66. But it is not sufficient merely to demonstrate that the right of the named beneficiary is defeated or abridged; it is also necessar......

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