Wardell v. Blum

• Decision Date: 24 October 1921
• Docket Number: 3670.
• Citation: 276 F. 226
• Parties: WARDELL, Internal Revenue Collector, v. BLUM et al.
• Court: U.S. Court of Appeals — Ninth Circuit

276 F. 226

WARDELL, Internal Revenue Collector, v. BLUM et al.

No. 3670.

United States Court of Appeals, Ninth Circuit.

October 24, 1921

Frank M. Silva, U.S. Atty., and E. M. Leonard, Asst. U.S. Atty both of San Francisco, Cal. (Carl A. Mapes, Solicitor of Internal Revenue, of Washington, D.C., and H. Maurice Darling, Special Atty., of Washington, D.C., Bureau of Internal Revenue, of counsel), for plaintiff in error.

John C Altman and Richard S. Goldman, both of San Francisco, Cal (Thos. P. Boyd, of San Rafael, Cal., John W. Preston, of San Francisco, Cal., and H. W. B. Taylor, of San Anselmo, Cal., of counsel), for defendants in error.

A. L. Weil, Forrest A. Cobb, and Perry Evans, all of San Francisco, Cal., and Lloyd M. Robbins, Luther Elkins, and Carey Van Fleet, all of San Francisco, Cal., amici curiae.

Before GILBERT, ROSS, and HUNT, Circuit Judges.

ROSS Circuit Judge.

This suit was brought for the recovery of an estate tax paid to the government under protest on the half interest of the wife of the decedent Blum in the community property which passed to her under the laws of the state of California upon the death of her husband.

All inheritance taxes are imposed on the transfer of the net estate of the 'deceased'; from which the conclusion is inevitable that the property upon which such a tax is imposed must, in truth, be the property of the deceased. In the case entitled In re Moffitt's Estate, 153 Cal. 359, 95 P. 653, 1025, 20 L.R.A. (N.S.) 207, the Supreme Court of that state held that the share of the surviving wife in the community property was subject to the inheritance tax imposed by the statute of the state, citing a number of its previous decisions to the effect that upon the death of her husband the wife took one-half of the community property only as 'heir' of her husband, and reaffirming the correctness of that holding. If she took only as heir, as a matter of course, the whole of the community property belonged to the husband at the time of his death, and was accordingly liable to the inheritance tax imposed by the then state statute.

But in 1917 (Stat. 1917, p. 880) the Legislature of California so changed its inheritance tax law as to expressly declare that for the purposes of the act the half of the community property which goes to the widow on the death of the husband shall 'not' be deemed to pass to her as 'heir' of her husband, but shall go to her as for a valuable and adequate consideration, and shall not be subject to the inheritance law of the state.

That manifestly is a clear statutory declaration that the wife's half of the community property is not part of the property of the deceased husband, at least so far as the state inheritance taxes are concerned.

The statute of the United States imposes an inheritance tax upon the transfer of the net estate of every decedent 'to the extent of the interest therein of the decedent at the time of his death which after his death is subject to the payment of the charges against his estate and the expenses of its administration and is subject to distribution as part of his estate. ' Sections 201-203, 39 Stat. 777.

How is that interest to be determined?

Manifestly, we think, by the law of the state where the property is situate. In the present instance the law of that state is declared by the statute enacted in 1917, providing that so far as state inheritance taxes are concerned, the wife of a decedent acquires upon his death one-half of the community property in her own right, and not as heir of her husband; in effect, therefore, that in so far as state inheritance taxes are concerned, the estate of a decedent has no interest of any sort in the wife's half of the community property. That, in our opinion, settles the question here presented against the contention of the government; for we not only see nothing in the above-quoted provision of the United States statute to indicate any intention to impose a federal inheritance tax upon the wife's half of community property which the statute of the state where the property is situate expressly declares passes to the wife upon the death of her husband in her own right and not as his heir, but the federal statute, as will be seen, expressly declares as one of the essential conditions to the imposition of a federal inheritance tax that the net estate of the decedent shall be 'subject to distribution as part of his estate.'

It must not be forgotten that the sole question here is one of federal inheritance tax and, even if the case was not controlled by the California statute of 1917 above referred to, applying to it the rule of law announced by the Supreme Court of the United States in the case of Arnett v. Reade, 220 U.S. 311, 320, 31 Sup.Ct. 425, 55 L.Ed. 477, 36 L.R.A. (N.S.) 1040, the result, it seems to us, must be the same. That court there said:

'It is very plain that the wife has a greater interest than the mere possibility of an expectant heir.'

Under that rule, one half of the community property would go to the surviving wife, the other half being subject to the testamentary disposition of the husband by virtue of section 1402 of the Civil Code of California, which declares, among other things:

'Upon the death of the husband, one half of the community property goes to the surviving wife, and the other half is subject to the testamentary disposition of the husband, and in the absence of such disposition, goes to his descendants.'

The judgment is affirmed.

HUNT, Circuit Judge (dissenting). U.S. Stat. L. vol. 39, p. 777, Secs. 201, 202, and 203, provide:

'That a tax * * * is * * * imposed upon the transfer of the net estate of every decedent dying after the passage of this act, whether a resident or nonresident of the United States. * * *

'The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated:

'(a) To the extent of the interest therein of the decedent at the time of his death which after his death is subject to the payment of the charges against his estate and the expenses of its administration and is subject to distribution as part of his estate.'

'Sec. 203. That for the purpose of the tax the value of the net estate shall be determined--

'(a) In the case of a resident, by deducting from the value of the gross estate--

'(1) Such amounts for funeral expenses, administration expenses * * * support during the settlement of the estate of those dependent upon the decedent, and such other charges against the estate as are allowed by the laws

of the jurisdiction, whether within or without the United States, under which the estate is being administered.'

Turning to the Civil Code of California, the following sections are pertinent:

'Sec. 172. The husband has the management and control of the community property, with the like absolute power of disposition (other than testamentary) as he has of his separate estate. ' (Enacted March 21, 1872.)

In statutes of California 1901, p. 598, an amended section 172 was made to read as follows:

'Sec. 172. The husband has the management and control of the community property, with the like absolute power of disposition, other than testamentary, as he has of his separate estate; provided, however, that he cannot make a gift of such community property, or convey the same without a valuable consideration, unless the wife, in writing, consent thereto; and provided also, that no sale, conveyance or incumbrance of the furniture, furnishings and fittings of the home, or of the clothing and wearing apparel of the wife or minor children, which is community property shall be made without the written consent of the wife.'

In 1917, chapter 583, Civil Code of California 1917, the following law was passed:

'The husband has the management and control of the community personal property, with like absolute power of disposition, other than testamentary, as he has of his separate estate; provided, however, that he cannot make a gift of such community personal property, or dispose of the same without a valuable consideration, or sell, convey, or incumber the furniture, furnishings, or fittings of the home, or the clothing or wearing apparel of the wife or minor children that is community, without the written consent of the wife.'

Again, in 1917, chapter 583, Statutes of 1917, California Civil Code, the Legislature added a new section (172a), which provided with respect to the management and control of community real property:

'The husband has the management and control of the community real property but the wife must join with him in executing any instrument by which such community real property or any interest therein is leased for a longer period than one year, or is sold, conveyed or incumbered; provided, however, that the sole lease, contract, mortgage or deed of the husband, holding the record title to community real property, to a lessee, purchaser or incumbrancer, in good faith without knowledge of the marriage relation shall be presumed to be valid; but no action to avoid such instrument shall be commenced after the expiration of one year from the filing for record of such instrument in the recorder's office in the county in which the land is situate.'

The statute for distribution of common property on the death of the husband, section 1402, Civil Code of California, provides:

'Upon the death of the husband, one-half of the community property goes to the surviving wife, and the other half is subject to the testamentary disposition of the husband, and in the absence of such disposition, goes to his descendants, * * * and in the absence of both such disposition and such...