State Bd. of Equalization v. Cole

• Citation: 195 P.2d 989,122 Mont. 9
• Decision Date: 01 July 1948
• Docket Number: 8739.
• Parties: STATE BOARD OF EQUALIZATION v. COLE. In re PERIER'S ESTATE.
• Court: United States State Supreme Court of Montana

195 P.2d 989

122 Mont. 9

STATE BOARD OF EQUALIZATION v. COLE.

In re PERIER'S ESTATE.

No. 8739.

Supreme Court of Montana

July 1, 1948

Appeal from District Court, Second Judicial District, Silver Bow County; T. E. Downey, Judge.

Proceeding in the matter of the estate of Mae H. Perier, deceased, for the determination of the inheritance tax. From an order determining in favor of A. Howard Cole, as executor of the last will and testament of decedent, that certain joint bank accounts and United States savings bonds were subject to tax upon only one half of their value, the State Board of Equalization appeals.

Reversed and remanded with instructions.

R. V. Bottomly, Atty. Gen., H. O. Vralsted of Helena, and Clarence Hanley, Asst. Atty. Gen., for appellant.

Rex F Henningsen, of Butte, for respondent.

METCALF Justice.

This is an appeal by the state board of equalization from an order determining the inheritance tax in the estate of Mae H Perier, deceased. The facts are not in dispute. Mae H. Perier died March 11, 1946. Included in her estate were five joint bank accounts, four in the name of her cousin Irene Ward and herself and one in the name of her sister Florence C. Gorman and herself, all created within three years prior to the death of decedent, and a number of Series G United States savings bonds held in the joint names of herself and other persons. The questions presented are whether the state is entitled to an inheritance tax upon the full amount of the joint bank accounts and upon the full market value of the bonds or only upon one-half of such amounts.

Although the tax on the government bonds and the tax on joint bank accounts are provided for by the same sections of the statute, the legal questions involved in determining their taxability differ materially so that they require separate treatment. We will first discuss the question as to the amount of the tax to be levied on the joint bank accounts.

Mrs. Mae H. Perier was a widow residing in Silver Bow county. Her husband died September 7, 1943. On September 25, 1943, eighteen days after the death of her husband, Mrs. Perier caused three of her individual checking and savings accounts in Butte banks to be transferred to joint bank accounts. These were made payable to herself or in the alternative to Mrs. Perier's counsin, Irene Ward. Both Mrs. Perier and Irene Ward signed a written statement directing the bank to pay the account to either of them or upon the death of one to pay the account to the survivor who would become the sole owner. Two days later a fourth account was created with identical arrangements and on May 22, 1945, a fifth account with Florence C. Gorman as joint depositor was created. The contract with the bank and the provisions for withdrawal by either co-depositor or the survivor were again identical. On March 11, 1946, Mrs. Perier died. The five bank accounts were valued at $8,347.83. The trial court held that subsection 6 of section 10400.1, Revised Codes of Montana 1935, was the proper section fixing the inheritance tax upon joint bank accounts and accordingly imposed an inheritance tax measured by one-half of the value of the joint bank accounts. From this order fixing the inheritance tax the state board of equalization has appealed.

When states began enacting inheritance tax legislation imposing taxes upon the right to take property by devise or descent the courts were confronted with the question of whether such statutes taxed the interest acquired by the survivor of a joint tenancy. The courts uniformly held that the acquisition of an additional interest in property as a result of the survivorship attribute of joint tenancy was not taxable as a succession. The courts analyzed the characteristics of a joint tenancy and concluded that the property passed to the survivor under the conveyance or instrument by which the joint tenancy was created. Therefore the property did not pass under the laws regulating descent and distribution of the property of decedent. It followed that the additional interest acquired by the survivor in property jointly held was not taxable under inheritance tax statutes taxing 'succession' to property.

The Montana legislature enacted subsection 6 of section 10400.1, Revised Codes of Montana 1935, reading as follows: 'Joint estates. Whenever any property, real or personal, is held in the joint names of two or more persons, or as tenants by the entirety, or is deposited in banks or other institutions or depositaries in the joint names of two or more persons and payable to either or the survivor, upon the death of one of such persons, the right of the surviving tenant by the entirety, joint tenant, or joint tenants, person or persons, to the immediate ownership or possession of such property shall be deemed a transfer of one-half or other proper fraction thereof as though the property to which such transfer relates belonged to the tenants by the entirety, joint tenants, or joint depositors as tenants in common, and had been bequeathed or devised to the surviving tenant by the entirety, joint tenant, or joint tenants, person or person, by such deceased tenant by the entirety, joint tenant, or joint depositor, by will, except such part thereof as may be shown to have originally belonged to the survivor and never to have belonged to the decedent.'

This subsection expressly provides for the taxation of the interest acquired by the surviving co-owner as a result of the death of the other co-owner or co-owners. It recognizes that at the death of the co-tenant there is a direct shifting of economic interest (see United States v. Jacobs, 306 U.S. 363, 59 S.Ct. 551, 83 L.Ed. 763), and it is this additional interest obtained by reason of the death of the co-tenant and not by reason of the transfer creating the joint tenancy that is taxed by such statutes as subsection 6. (Gwinn v. Commissioner Internal Revenue, 9 Cir., 54 F.2d 728, 84 A.L.R. 176.)

The early inheritance tax laws which were solely concerned with the taxation of transfers of property at death were evaded in another way. Gifts inter vivos, and inter vivos transfers were made in contemplation of death and gifts and transfers were made to take place at the death of the donor. The legislatures discovered that it was also necessary to tax transfers of this kind. Statutes such as subsection 3 of section 10400.1, Revised Codes 1935, were enacted taxing transfers 'by deed, grant, bargain, sale or gift, made in contemplation of death of the grantor, vendor, or donor, or intended to take effect in possession or enjoyment at or after such death.' Commenting on the legislative intent in enacting this section this court in Re Wadsworth's Estate, 92 Mont. 135, 145, 11 P.2d 788, 791, quoted from Chief Justice Hughes' opinion in United States v. Wells, 283 U.S. 102, 51 S.Ct. 446, 75 L.Ed. 867, "The dominant purpose is to reach substitutes for testamentary dispositions and thus to prevent the evasion of the estate tax."

So the question of the taxability of the original transfer from the deceased joint tenant to the survivor is a different question from the one involving the taxability of the interest acquired as a result of the death of the co-tenant. In re Huggins' Estate, 96 N.J.Eq. 275, 125 A. 27.

On September 25, 1943, Mrs. Perier withdrew the money from her personal checking account in the Metals Bank in Butte and redeposited it in a joint account payable to either Irene Ward or Mae H. Perier or the survivor. Both co-depositors signed a written agreement providing that either party could draw on the account and that upon the death of one of them the survivor should become the sole owner and payee of the account.

The effect of such a deposit where the money deposited belonged solely to one of the parties and the deposit was made without consideration has been exhaustively examined in notes in 48 A.L.R. 189; 66 A.L.R. 881; 103 A.L.R. 1123; 135 A.L.R. 993, and 149 A.L.R. 879. Such a joint deposit has been held to be a gift inter vivos, an arrangement for the convenience of the party creating the account or some form of testamentary disposition depending upon the intent of the person creating the account.

Of course if the transfer by the donor to the joint account be regarded as a gift it has to satisfy all the requirements of a valid gift inter vivos. The essential requisites of a gift inter vivos are delivery, accompanying intent, and acceptance by the donee. (Nelson v. Wilson, 81 Mont. 560, 264 P. 679; Fender v. Foust, 82 Mont. 73, 78, 265 P. 15; sec. 6882, Rev.Codes of Montana 1935.)

The first question is the intention of the parties making the deposit. (5 Michie, Banks & Banking, p. 101, sec. 46.) Such intention was discussed in Hill v. Badeljy, 107 Cal.App. 598, 605, 290 P. 637, 640, where the court declared, 'The question involved in cases of this character is the intention of the parties making the deposit, and where such intention is evidenced by a written agreement, as was done in the case at bar, this question of intention ceases to be an issue, and the courts are bound by the written agreement.' The above quotation was cited and approved by this court in Ludwig v. Montana Bank & Trust Co., 109 Mont. 477, 502, 98 P.2d 377, 379.

The Montana court also said, quoting from 9 C.J.S., Banks & Banking, § 286, 'Where no other evidence of intent is available, the form of the deposit may control; but when such intent is evidenced by a written agreement, the question of intention ceases to be an issue and the courts are bound by the agreement.' Ludwig v. Montana Bank & Trust Co., supra, at page 502 of 109 Mont., at page 389 of 98 P.2d

In this jurisdiction the signing of the signature card containing an agreement that the deposit was payable to either of the...