Schnepp's Estate, In re
| Decision Date | 14 December 1965 |
| Docket Number | No. 51839,51839 |
| Citation | 138 N.W.2d 886,258 Iowa 333 |
| Parties | In the Matter of the ESTATE of Florence SCHNEPP, Deceased. Robert J. SCHNEPP, the Merchants National Bank of Cedar Rapids, Executors- Appellees, v. IOWA STATE TAX COMMISSION, Objector-Appellant. |
| Court | Iowa Supreme Court |
Lawrence F. Scalise, Atty. Gen., and Thomas W. McKay, Sp. Asst. Atty. Gen., for appellant.
David G. Bleakley, Bleakley & Vietor, Cedar Rapids, for appellees.
This case reaches us as an appeal by the tax commission from an order of the trial court overruling its objections to the discharge of the executors of the will of Florence Schnepp. The commission claimed there was deficiency in the payment of inheritance tax. The one question to be determined is whether the inheritance tax on a contingent remainder paid before the contingencies are resolved should be determined by the order of passing under the provisions of the will or by the probable order of passing calculated mathematically under standard mortality tables.
Testatrix's will created a trust under which her surviving spouse, age 52, was to receive the income for life. Her three brothers, all of whom were older (57, 64, 67) than the spouse were each to receive a portion of the corpus of the trust if they survived him. The share of any brother who failed to survive the spouse was bequeathed to specified nieces and nephews. We have referred only to the portions of the will directly involved in the question presented here. The executors made a final inheritance tax return in which they computed and paid the inheritance tax, including that on the deferred contingent estates, in accordance with the option provided by the pertinent sections of Chapter 450, Code of Iowa. The tax was computed at the rate of 5% on the remainder interest which would pass to the brothers under the will if they were alive at the termination of the life estate. The tax commission objected, arguing that as any interest the brothers would receive was contingent upon their surviving a younger man and as no mortality table shows an older man will outlive a younger man, as a matter of probability, the remainder interest will pass to the nieces and nephews and should be taxed at the 10% rate.
This interesting theory is presented to us for the first time. The only authorities cited to us by the commission are our own inheritance tax statutes and a New York case. We do not understand the commission to claim our inheritance tax statutes clearly provide for the taxing of contingent remainders on the basis of probability. If they do so contend, we must disagree, as we cannot read such authorization into our statutes. Section 450.51 provides for the use of mortality tables in computing the value of deferred estates, but does not authorize their use in determining to whom a contingent estate will pass. Section 450.96 is concerned with the taxation of contingent estates, but its terms do not embrace the situation confronting us here. The tax commission is then, at best, faced with the rule that in taxing statutes subject to construction, all doubts must be resolved against the government and in favor of the taxpayer. Tavener v. Tax Commission, 231 Iowa 162, 164, 300 N.W. 653. It may be that this rule disposes of the case, but we believe the commission's position deserves further discussion.
The tax commission misconstrues In re Hoffman's Estate, (1892) 143 N.Y. 327, 38 N.E. 311, 313, which is cited in support of its position. The court there states it could 'scarcely imagine a contingency depending upon lives which mathematics could not solve by the doctrine of chances and the averages of mortality', but it did not follow this line of construction which would open 'all the nice and difficult questions which arise under a will as to the vesting of technical legal estates, although future and contingent, and assess the tax upon what are in reality only possibilities and chances'. Instead it subordinated the technical phrases 'to the facts of actual and practical ownership'. It compelled taxation 'to wait until chance and possibilities develop into the truth of an actual estate possessed, or to which there exists an absolute right of future possession'. The appraisal was adjourned 'until the rights of Ella and Olga became fixed and actual'. The New York court rejected the mathematical...
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