State v. Wiess, 8062.
| Decision Date | 19 May 1943 |
| Docket Number | No. 8062.,8062. |
| Citation | 171 S.W.2d 848 |
| Parties | STATE v. WIESS. |
| Court | Texas Supreme Court |
Gerald C. Mann, Atty.Gen., and Walter R. Koch, Cecil C. Rotsch, and Billy Goldberg, for appellant.
E. E. Townes and J. Q. Weatherly, both of Houston, for appellee.
This is an inheritance tax suit. It was filed in the District Court of Travis County by the State of Texas against H. C. Wiess, independent executor of the estate of Mrs. Louisa Elizabeth Wiess, deceased. Trial in the district court, without the intervention of a jury, resulted in a judgment for the executor. This judgment was affirmed by the Beaumont Court of Civil Appeals. 166 S.W.2d 216. The State brings error.
Mrs. Wiess died testate on July 7, 1936. Her will was duly probated in the Probate Court of Harris County, Texas, where she resided at the time of her death. Mrs. Wiess' will named her son, H. C. Wiess, independent executor of her estate, and he has duly qualified as such. The above-named executor, within the time provided by law, filed a State Inheritance Tax report with the County Judge of Harris County, Texas. Also, as authorized by law, the executor filed an instrument waiving the appointment of appraisers to appraise this estate for State inheritance tax purposes, and agreed that the Comptroller of this State and the County Judge of Harris County should make such appraisal.
Acting under the above waiver and agreement, the Comptroller and the County Judge fixed the value of this estate, as of date Mrs. Wiess' death, at $601,793.59. Proper orders were then entered fixing the amount of inheritance tax due by this estate to the State, under the provisions of Article 7117 et seq., Chapter 5, Title 122, Vernon's Ann.Civ.St., at $13,774.68. This sum was promptly paid by the executor to the proper State authority.
The executor also filed with the United States Collector of Internal Revenue a "Federal Estate Tax" return. This return was made under the Federal Revenue Acts of 1926 and 1932, 26 U.S.C.A. Int.Rev.Acts, pages 145 et seq. and 482 et seq. This return showed the value of the estate at the same amount as the value fixed by the authorities of this State, $601,793.59. The Federal estate tax computed on the sum just named was $88,177.71. This amount was promptly paid by the executor to the proper United States authority.
The United States Collector of Internal Revenue refused to accept the return as made by this executor, and demanded that the total value of this estate for Federal estate tax purposes be increased from $601,793.59, as shown by the executor's return, to $2,953,632.71. On this demanded increase of value the United States Revenue Collector demanded that this estate pay an additional Federal tax of $576,007.16.
The increase in value of this estate from $601,793.59, as shown by the executor's return, to $2,953,632.71, as proposed or demanded by the United States Revenue Collector, was based on two things viz.: (a) the value of the property owned by Mrs. Wiess at the time of her death was increased by $14,769.12; and (b) other properties were added. Such added properties were properties which the Federal authorities claimed had been given away by Mrs. Wiess "in contemplation of death." The Federal authorities claimed that these added properties were includible as a part of the estate of the deceased. These added properties were valued at $2,337,070 by the Federal authorities. From the above it is seen that the United States Revenue Collector proposed or demanded that the estate be valued for Federal estate tax purposes as follows:
Value of the property possessed
by Mrs. Wiess at the
time of her death, the amount
of the executor's return
$601,793.59, plus an increased
or added value of $14,769.12, $ 616,562.71
Value of property claimed
to have been given away "in
contemplation of death,".... 2,337,070.00
_____________
Total value,............. $2,953,632.71
On the above added value the United States Revenue Collector demanded that this estate pay an additional tax of $576,007.16. This additional tax was demanded under the Federal Revenue Act of 1926 and the Federal Revenue Act of 1932.
This executor duly protested the above proposed or demanded increased and added properties and valuations, and a hearing thereon was had. As a final result of such hearing, and of negotiations between the executor and the Federal authorities, a compromise agreement was entered into. By the terms of this compromise this executor agreed to pay, in full settlement of the claim for United States estate taxes, the sum of $354,435.72. This sum was agreed to be net to the United States and subject to no deductions of any kind. In making this settlement there was no agreement as to what was paid on account of any raise in the value of the properties Mrs. Wiess died possessed of, or what was paid on account of the properties given away by Mrs. Wiess during her lifetime "in contemplation of death." Simply stated, this executor made a lump sum settlement with the Federal authorities, such sum to be net to the Federal Government, subject to no deductions or credits for any State inheritance taxes that might be due. The compromise agreement did not show how much was paid under the Federal Revenue Act of 1926, or how much was paid under the Federal Revenue Act of 1932. It simply stated one sum in settlement of Federal estate taxes. This executor paid to the proper Federal authority the compromise sum above mentioned.
After the executor had consummated his settlement agreement with the Federal authorities above mentioned, and after he had paid the additional Federal estate taxes in the sum above shown, the State of Texas demanded of this executor that he pay additional State inheritance taxes in the sum of $23,625.74. The State's demand for additional "inheritance and transfer" taxes in the sum of $23,625.74 is based on the provisions of the several sections of Article 7144a, Vernon's Texas Civil Statutes, Section 2b, Chap. 192, Acts 43d Leg., 1933, p. 585 et seq., construed in connection with certain sections of the Federal Revenue Act of 1926. We will mention and discuss this Federal act later in this opinion.
The sum here sued for, $23,625.74, was calculated as follows: Although the compromise settlement with the Federal authorities above described did not show how much Federal tax was paid under the Federal Revenue Act of 1926, or how much was paid under the Federal Revenue Act of 1932, the Comptroller knew, and it is undisputed, that the sum of $354,435.72 was paid under both of such acts. Also, the Comptroller knew, and it is undisputed, that the estate had previously paid to the Federal Government, as Federal estate taxes, the sum of $88,177.71. The Comptroller therefore added the two last-named sums together, to ascertain the total of the Federal estate taxes paid by this estate under the two Federal Revenue Acts above mentioned. This total sum is $442,613,43. The Comptroller then computed the value of an estate that would produce that amount of Federal taxes under the two Federal Revenue Acts above mentioned. The Comptroller then took an estate of that value, and by proper calculations determined that this estate paid Federal estate taxes under the Federal Revenue Act of 1926 in the sum of $46,750.53. As our statute, Section 1 of Article 7144a, fixes the tax due the State at the difference between the tax due under any other Texas law (in this instance $13,774.68) and eighty per cent. of the estate taxes imposed by the Federal Revenue Act of 1926, the Comptroller found eighty per cent. of the sum of $46,750.53. This is $37,400.42. The difference between the sum last mentioned and the $13,774.68 already paid by this estate as inheritance taxes under Article 7117 et seq. of our Civil Statutes amounts to $23,625.74. This last-named sum is the amount here sued for by the State as "inheritance and transfer taxes" due under Article 7144a of our statutes.
To our minds, since the settlement above described with the Federal authorities did not allocate any sum paid by this estate to the Federal Government as between the two Federal acts above mentioned, the method used by the Comptroller in this instance to ascertain the Federal estate taxes paid under the Federal Revenue Act of 1926 was, and is, to say the least, very fair to this estate. Section 5 of Article 7144a makes it the duty of the person charged with the responsibility of filing reports of property for inheritance tax purposes to file with certain named State authorities a report showing the values placed on the estate he represents, and the amount of estate taxes assessed against the same by the Federal Government, etc. These statutory provisions cannot be avoided by making a lump sum settlement such as this with the Federal Government; and when such a settlement is made, all material doubts as to the taxes due the State under Article 7144a should be resolved against the estate.
We now come to decide whether this estate owes the taxes demanded by the State in this...
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