Welp v. Iowa Dept. of Revenue, 68654

• Decision Date: 20 April 1983
• Docket Number: No. 68654,68654
• Citation: 333 N.W.2d 481
• Parties: William L. WELP, Executor of the Estate of Neil T. Chadderdon, Deceased, Appellee, v. IOWA DEPARTMENT OF REVENUE, Appellant.
• Court: Iowa Supreme Court

Page 481

333 N.W.2d 481

William L. WELP, Executor of the Estate of Neil T. Chadderdon, Deceased, Appellee, v. IOWA DEPARTMENT OF REVENUE, Appellant.

No. 68654.

Supreme Court of Iowa.

April 20, 1983.

Thomas J. Miller, Atty. Gen., Harry M. Griger, Sp. Asst. Atty. Gen., and Mark R. Schuling, Asst. Atty. Gen., for appellant.

James R. Moore of Welp, Harrison, Brennecke & Moore, Marshalltown, for appellee.

Considered by REYNOLDSON, C.J., and HARRIS, McCORMICK, LARSON, and SCHULTZ, JJ.

SCHULTZ, Justice.

The Iowa Department of Revenue (Department) claims that Iowa Code section 450.39 is a statute of limitations that is applicable to both the Department and the personal representative of an estate. The Department contends that this section prevents the representative from amending a preliminary inheritance tax report and probate inventory to reflect the true value of a reported asset if sixty days have passed since the filing of such inventory, unless the Department requires an appraisal of the reported assets. In reviewing the decision of a hearing officer, the director of revenue adopted the Department's view; on judicial review, however, the district court disagreed with the Department's contention. We affirm the decision of the district court.

The basic facts are not disputed. Neil T. Chadderdon died testate on September 26, 1979. His will was admitted to probate and William L. Welp was appointed executor of the estate. Welp filed a preliminary inheritance tax report and probate inventory on November 20, 1979. Under the category of assets, the inventory listed a promissory note that was payable in installments over a ten year period and bore 6.5% simple annual interest. On the date of death the unpaid principal was $517,469 and the unpaid interest was $2,211.64. The inventory listed the value of the note at $519,670.64.

The executor subsequently received a letter dated May 15, 1980, from the president of the Fidelity Brenton Bank and Trust Co. of Marshalltown, Iowa, that stated as follows:

According to our calculations, the principal note in the Neil Chadderdon Estate which is drawing 6.5% interest would be discounted to 54.16% of its value in order to yield the 12% rate. You will recall from my letter of May 12, 1980, that the good Commercial/Agricultural loans on September 26, 1970, were yielding 12% to us here at the bank. In other words, the principal balance of $517,466.00 would need to be discounted to $280,273.00 in value on 9/26/79.

Welp filed an amendment to the inventory on May 21, 1980, that withdrew the note's previous valuation and substituted the amount of $280,273.00. In the amendment Welp stated that due to economic conditions and prevailing interest rates the unpaid balance on the note did not represent its fair market value.

On September 12 Welp filed the final inheritance tax return listing the amended value of the note. On October 1 the Department notified Welp that the amendment filed on May 21 was not accepted because section 450.39 "provides for finality of value sixty days after the inventory is filed unless an appraisal is requested." On October 24 the Department assessed the estate additional inheritance tax of $18,668.32. This appeal is an outgrowth of a protest filed by Welp to this assessment.

The dispute in this case centers on the interpretation of section 450.39, which provides as follows:

1. An appraisal is not required for an item of property in an estate if the item is listed on an inventory or report filed in the estate or an amendment thereto, unless the department of revenue requests appraisal by filing a written request with the clerk where the inventory or report is filed, within sixty days after the filing. When a request is filed, the clerk shall notify the personal representative and his attorney of the request. The department of revenue may waive an appraisal which has been previously requested.

2. If appraisal of an item of property is not required or is waived, the personal representative, trustee, or the persons entitled to or claiming the item of property shall be charged, for the purpose of computing the tax, with the full value of the item as reported in the inventory or report.

The Department interprets this section to mandate that the listed value of an inventory item is fixed finally for inheritance tax purposes once sixty days have passed after its filing, unless the Department requests an appraisal. The district court disagreed with this interpretation, however, and concluded that the statute provides no limitation on amendments to the inventory and only requires the Department to request an appraisal "within sixty days after the filing." It further concluded "the filing refers to not only the 'inventory or report' but also to an amendment thereto."

While we give deference to the Department's interpretation of a tax statute, "the meaning of a statute is always a matter of law, and final construction and interpretation of Iowa statutory law is for this court." Sorg v. Iowa Department of Revenue, 269 N.W.2d 129, 131 (Iowa 1978). Some familiar principles that we have adopted in order to aid our interpretation and construction of tax statutes are:

(1) In considering legislative enactments we should avoid strained, impractical or absurd results.

(2) Ordinarily, the usual and ordinary meaning is to be given the language used but the manifest intent of the legislature will prevail over the literal import of the words used.

(3) Where language is clear and plain, there is no room for construction.

(4) We should look to the object to be accomplished and the evils and mischiefs sought to be remedies in reaching a reasonable or liberal construction which will best effect its purpose rather than one which will defeat it.

(5) All parts of the enactment should be considered together and undue importance should not be given to any single or isolated portion.

(6) We give weight to the administrative interpretation of statutes, particularly when they are of longstanding.

(7) In construing tax statutes doubt should be resolved in favor of the taxpayer.

Iowa National Industrial Loan Co. v. Iowa State Department of Revenue, 224 N.W.2d 437, 440 (Iowa 1974) (citations omitted). All rules of statutory construction that shed light on legislative intent should be utilized and none of these rules is to be used to the exclusion of the others. American Home Products Corp. v. Iowa State Board of Tax Review, 302 N.W.2d 140, 143 (Iowa 1981).

An additional rule of construction is applicable to this case. The determinations of the actual value of the taxable assets are adversary proceedings that afford rights of notice, objection, hearing, and appeal. See Iowa Code §§ 450.15, .28, .29, .31, .32, and .33 (1981). Although section 450.39 is an alternative to the appraisement, it is a part of the procedures that impose liens on property and result in judgments. See §§ 450.7, .55. Consequently, since the Department is claiming that section 450.39 is a statute of limitations and since the appraisement of property for inheritance tax has an adversary mien, we believe that we should apply the rules appropriate for interpreting and construing a statute of limitations.

Courts do not favor statutes of limitations. When two interpretations of a limitations statute are possible, the interpretation which allows the litigant seeking relief a longer period is to be preferred. Orr v. Lewis Central School District, 298 N.W.2d 256, 261 (Iowa 1980). It is also a settled principle that a statute of limitations should not be extended or applied to cas...