The Kanawha Banking v. Alderson

• Decision Date: 21 December 1946
• Docket Number: CC 714
• Citation: 129 W.Va. 510
• Parties: The Kanawha Banking And Trust Company, et al. v. George P. Alderson, State Tax Commissioner. 1946.
• Court: West Virginia Supreme Court

129 W.Va. 510

The Kanawha Banking And Trust Company, et al.

v.George P. Alderson, State Tax Commissioner.

CC 714

Supreme Court of Appeals of West Virginia.

Submitted October 2, 1946.

Decided December 21, 1946.

1. Taxation

Under certain provisions of section 1 (c), Chapter 33, Code of 1923, in effect in 1928 (embodied in Code 1931, 11-11-1 (c)), which impose a tax upon the transfer, in trust, or otherwise, of any property, or interest therein, real, personal, or mixed, of five hundred dollars or more, if such transfer be by a resident, or be of property within the State, by deed, grant, bargain, sale or gift, made in contemplation of the death of the grantor, bargainor or donor, or intended to take effect in possession or enjoyment at or after such death, the transfer of real estate by a grantor, by deed in which his wife joined, to his two sons, in consideration of the sum of one dollar, which deed was made in 1928, nearly seventeen years before the death of the grantor in 1945, and in which deed the grantor and his wife reserved a life estate in each of them in the property conveyed by such deed, is, because of such reservation, a transfer intended to take effect in possession or enjoyment at or after the death of such grantor, and is subject to the inheritance tax imposed by the statute.

Certified from Circuit Court, Kanawha County.

Proceeding in the matter of petition by Kanawha Banking & Trust Company and another, executors of the last will of B. S. Morgan, deceased, for review of an assessment of inheritance taxes, opposed by George P. Alderson, State Tax Commissioner, who filed demurrer and answer. The case was certified by the circuit court to the Supreme Court of Appeals on questions raised by the demurrer and the answer.

Ruling reversed; case remanded.

Frederick L. Thomas and Spilman, Thomas & Battle for plaintiffs.

Ira J. Partlow, Attorney General, Robert L. Ramsey and Eston B. Stephenson, Assistant Attorneys General, for defendant.

Haymond, Judge:

The controversy involved in this certified case results from an additional assessment of inheritance taxes against the petitioners, Kanawha Banking & Trust Company, and John T. Morgan, Executors of the last will of B. S. Morgan, deceased, by the respondent, the State Tax Commissioner of West Virginia, upon a transfer of real estate by deed made by the testator to his two sons, John T. Morgan and B. S. Morgan, Jr., on January 11, 1928.

An appeal from this assessment was allowed by the Circuit Court of Kanawha County, upon the petition of the executors, under Code, 11-11-21. The State Tax Commissioner filed a demurrer and an answer to the petition. The demurrer was overruled, and on joint motion of the parties the Circuit Court certified here the questions raised by the demurrer and the answer, and the case was docketed for hearing in this Court.

The points of law arising upon the demurrer and the answer of the State Tax Commissioner, and certified to this Court, are:

1. Whether a deed made by B. S. Morgan, in which his wife, Annie T. Morgan, joined, dated January 11, 1928, conveying real estate in Charleston, West Virginia, described in the deed, to his two sons, John T. Morgan and B. S. Morgan, Jr., for the stated consideration of one dollar, in which deed a life estate for each of the grantors was reserved, is subject to the inheritance taxes assessed by the State Tax Commissioner.

2. Whether the property is subject to an inheritance tax only on the remaining life estate of the widow of B. S. Morgan, deceased, who survives him.

B. S. Morgan, a well to do resident of Charleston, West Virginia, departed this life testate on M^arch 3, 1945. He disposed of his estate by will in which the Kanawha Banking & Trust Company and John T. Morgan are named as executors. The assets of his estate, listed in his name, were duly appraised and inheritance taxes were assessed upon the property embraced in the appraisement, which taxes were paid. Later, on November 29, 1945, the State Tax Commissioner, being of the opinion that the real estate transferred by the deed of B. S. Morgan and Annie T. Morgan, his wife, to his two sons, John T. Morgan and B. S. Morgan, Jr., on January 11, 1928, was subject to inheritance taxes, assessed an additional tax of $3,437.58 against the executors because of such transfer. In assessing this tax the State Tax Commissioner has acted on the assumption that, for the purpose of such tax, the real estate situated in Charleston, and described in the deed of January 11, 1928, is a part of the estate of B. S. Morgan, and that, because of the reservation by him and his wife of a life estate for each of them, the transfer did not take effect in possession or enjoyment until after the death of B. S. Morgan. It is not contended by the State Tax Commissioner that the transfer of the property by the deed of January 11, 1928, almost seventeen years before the death of B. S. Morgan, was not made in good faith, or that it was made in contemplation of his death, but the State Tax Commissioner bases his right to assess the tax upon the ground that the conveyance of the property by the foregoing deed constitutes a transfer which was intended to take effect in possession or enjoyment at or after the death of the grantor. The property was valued, as of the date of the death of the grantor, for the purposes of the tax, at $121,000.00. B. S. Morgan left surviving him his widow, Annie T. Morgan, who is now past eighty-three years of age, and his two sons, John T. Morgan and B. S. Morgan, Jr.

The executors, the petitioners in the proceeding in the Circuit Court, attack the assessment of the additional inheritance taxes as erroneous and invalid. They insist that the deed of January 11, 1928, admittedly made in good faith, constituted an irrevocable conveyance of the real estate, subject to the life estates reserved to B. S. Morgan and Annie T. Morgan, his wife, as a bona fide gift made by B. S. Morgan in his lifetime, and that, as the transfer was not made in contemplation of death, it was not intended to take effect in possession or enjoyment at or after death, and is therefore not subject to an inheritance tax under the laws of this State.

The controlling issue in the case is whether the transfer is within certain provisions of Section 1 (c), Article 11, Chapter 11 of the Code, 1931, which, as Section 1 (c), Chapter 33. Code of 1923, were in effect at the time of the execution and the delivery of the deed dated January 11, 1928.

The pertinent portions of that statute, Code, 1931, 11-11-1 (c), are couched in this language:

"A tax, payable into the treasury of the state, shall be imposed upon the transfer, in trust, or otherwise, of any property, or interest therein, real, personal or mixed, of five hundred dollars or more if such transfer be: * * * (c) by a resident, * * * by deed, grant, bargain, sale or gift, made in contemplation of the death of the grantor, bargainor or donor, or intended to take effect in possession or enjoyment at or after such death. * * *."

The above quoted provisions of the statute except the phrase "of five hundred dollars or more", were first embodied in the law of this State by Chapter 6, Acts of the Legislature of 1904, Extraordinary Session, and they have been retained in each subsequent enactment of the Legislature dealing with the subject. They are expressly incorporated in the Code of 1923 and in the Code of 1931. By Chapter 126, Acts of the Legislature of 1939, Regular Session, an amendment was added to Section 1 (c), but the amendment does not affect the operation of the section as it formerly stood with relation to the question which arises in this case. In these statutes, the tax which is imposed is characterized as an inheritance tax.

It is to be noted that the statute makes taxable the transfer of the designated property and interests, of the value of five hundred dollars or more, by any of the methods specified, made in contemplation of the death of the person making the transfer, or intended to take effect in possession or enjoyment at or after his death.

The petitioners, the executors of the will, contend that the estate in remainder, with its lawful incidents, which is all that was conveyed by the deed, vested upon the delivery of the deed, more than seventeen years before the death of B. S. Morgan, the grantor who owned the property in fee simple; that the possession and the enjoyment of the estate conveyed, which consisted of a vested remainder, attached immediately upon the delivery of the deed; that the transfer thus completed, being an absolute and irrevocable transfer of real estate, with a life estate reserved to each of the grantors, B. S. Morgan and Annie T. Morgan, his wife, was not intended to take effect in possession or enjoyment at or after death; and that the transfer is, for that reason, not within the scope of the taxing statute.

In support of this contention the petitioners rely upon a somewhat similar section, contained in certain Acts of Congress, which was in effect at the time of the transfer, the pertinent provisions of which imposed a tax upon the transfer of the net estate of every decedent dying subsequent to its enactment, and declared that the value of the gross estate of the decedent should be determined by including the value, at the time of his death, of all property, real or personal, tangible or intangible, whereever situated, "To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after death * * *."

The federal legislation just referred to was first enacted as Section 202 (c) of Title II of an Act to Increase the Revenue, and for other purposes, passed by Congress, and approved September 8, 1916. The same provisions were embodied in Section 402 (c) of Title IV of the Revenue Act of 1918, passed by Congress, and approved ...