Wilhite v. Commissioner

HUGH WILHITE, W. N. PITTMAN, AND HARRIS L. MOORE, EXECUTORS AND TRUSTEES, ESTATE OF WILLIAM STONE WOODS, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Wilhite v. Commissioner Docket No. 7462. United States Board of Tax Appeals 11 B.T.A. 85; 1928 BTA LEXIS 3873; March 20, 1928, Promulgated *3873 Inheritance taxes paid by executors of an estate to the State of Missouri are deductible from gross income of the estate. Harris L. Moore, Esq., for the petitioners. J. F. Greaney, Esq., for the respondent. ARUNDELL *85 The respondent determined deficiencies in income taxes for the years 1920 and 1921 in the respective amounts of $1,723.79 and $5,384.32. Petitioners alleged that taxes for 1919, as well as the deficiencies for 1920 and 1921, were in controversy. The respondent moved to dismiss the proceeding in so far as it purports to appeal from a deficiency for the year 1919 on the ground of lack of jurisdiction, to which motion counsel for petitioners stated at the hearing that he has no objection. One allegation of error was abandoned, leaving in issue only the question whether inheritance taxes paid to the State of Missouri are deductible in determining the taxable net income of an estate of a decedent. FINDINGS OF FACT. Petitioners were the executors of the estate of William Stone Woods, deceased, and are now trustees of the estate of the decedent, under his will and under the proceedings and direction of the Circuit Court of*3874 Clay County, Missouri. Petitioners' decedent died on July 5, 1917, a resident of Clay County, Missouri. He left surviving him his daughter, Julia Woods Rubey, his widow, Bina M. Woods, and two granddaughters, daughters of Julia Woods Rubey. The pertinent portions of decedent's will are as follows: Subject to the special bequests and the trust herein provided for, I will and bequeath all of the personal property of my estate which may be in the hands of my trustees at the expiration of this trust, to my wife, if living, my daughter, Julia Woods Rubey, my grandchild, Gladys Grissom, my grandchild, Ruth Rubey, and such other children as my daughter, Julia Woods Rubey, may have living at the expiration of this trust, share and share alike * * *. Subject *86 to the trust, terms and conditions herein created and provided for, I will and devise to my wife, if living, at my death, an undivided one-third interest for and during her natural life, and subject to said undivided one-third for life, I will devise to my daughter, Julia Woods Rubey, and her bodily heirs, to my grandchild, Gladys Grissom, and her bodily heirs, and my grandchild, Ruth Rubey and her bodily heirs, and*3875 such other children as my daughter, Julia Woods Rubey may have living at the time of my death, and their bodily heirs, share and share alike, all of the real estate which may be held by my said trustees at the expiration of this trust * * *. The intention of the above devise is that said real estate shall not descend, in fee simple, to my wife, or any of my heirs living at the time of my death, but my wife shall have a life estate, as aforesaid, and subject thereto my daughter and any grand-children living at the time of my death, shall take a life estate, with remainder over, in fee, to their bodily heirs, that is, their lineal descendants, subject to the trust herein provided for . Where there is a remainder over to the bodily [heirs], then, in case of death the life tenant without such heirs, such estate shall go to my heirs. No interest in the real estate herein devised shall be sold or alienated, either voluntarily or involuntarily, by the devisees of the life estate during the continuance of this trust, and no devisee or legatee shall be allowed to mortgage or anticipate any devise or bequest under this will. In 1921 the executors paid inheritance tax to the State*3876 of Missouri in the amount of $21,250, which was designated as paid on account of "Contingent life estates and uncertain remaindermen: Julia Rubey interest - additional." OPINION. ARUNDELL: The respondent has moved to dismiss the proceeding for 1919 for want of jurisdiction. As it does not appear that any deficiency for that year has been found and as the motion is not resisted by the petitioners, the respondent's motion is granted and the proceeding in so far as it relates to 1919 is dismissed. There is no issue as to 1920. For 1921 the issue, as stated in petitioners' brief, is this: Are inheritance taxes paid the State of Missouri by the executors during the year 1921 a proper deduction from income of the estate in computing the income tax for that year? The inheritance tax here involved was imposed by an act of the General Assembly of the State of Missouri, approved April 12, 1917, contained in the session laws of 1917, p. 114, et seq., now sections 558-589, Revised Statutes, 1919. The preamble to the act states that it is "An act providing for a tax on the transfer of gifts, legacies, inheritances, bequests, devises, appointments, and successions: * * *." Under*3877 the law as it appears in the Revised Statutes a tax is "imposed upon the transfer of any property * * * to persons * * * not hereinafter exempted * * *." (Sec. 558 R.S.). The tax on transfers is graduated, measured by the degree of relationship of the beneficiary and the clear market value of the estate. (Sec. 560 R.S.). Executors, administrators, and trustees are made primarily liable for the tax and have as full power to sell so much of the property of decedent *87 to enable them to pay the tax as they have for payment of debts of the estate. (Sec. 564 R.S.) Counsel for the petitioners says there are no decisions of the Supreme Court of Missouri directly defining the nature of the State inheritance tax, and our independent research discloses none. The Missouri courts, however, in determining the taxability of contingent interests, follow the decisions of the courts of New York and Illinois as to their inheritance tax statutes. See . Lacking a definitife statement by the State courts as to the nature of the Missouri inheritance tax we may properly have resort to the interpretations placed on similar statutes of*3878 other States. From a comparison of the Missouri statute with those of New York and Illinois we are unable to perceive any distinction which causes us to place a different construction on the former than on those of the two latter States, with respect to which it has been held that the State tax is payable primarily out of property of the estate, is deductible from the income of the estate and not by the beneficiary. See ; ; . In conformity with those cases, we are of the opinion that the inheritance tax paid by petitioners to the State of Missouri in 1921 is a proper deduction from the gross income of the estate. The proceeding is dismissed as to 1919. The respondent's determination of a deficiency for 1920 is approved. Order of redetermination for 1921 will be entered on 15 days' notice, under Rule 50.