Coke v. Calvert

PHILLIPS, Chief Justice. This suit was brought by Appellant as temporary administrator of the estate of Hazel Long Coke, deceased, against the Comptroller of Public Accounts, the State Treasurer and the Attorney General to recover a part of the inheritance tax paid by the estate under Tex.Rev.Civ.Stat.Ann. art. 14, Title 122A, of the Revised Statutes of Texas. [832] The question to be determined is whether interest paid on money owing at the time of Mrs. Coke’s death could be claimed as a deduction either as expenses of administration or as “debts due by the estate” under Tex.Rev.Civ.Stat.Ann., art. 14.10, Title 122A. The deduction was not allowed and the amount said due was paid under protest. In a trial to the court without a jury judgment was rendered for Appellees; consequently, this appeal. We reverse and render judgment. We hold that interest accruing after death on indebtedness owing by the decedent at time of death is properly deductible from the gross estate for inheritance tax purposes; and also such interest accruing after death is deductible up to and including the period allowed to close the estate and pay the tax due. The facts in the case are uncontroverted. It was shown that at the time of her death, Mrs. Coke was heavily indebted, and, while her estate was solvent, it was not liquid. In order to pay all the debts it would have been necessary to sacrifice some of the assets. The record disclosed that the keeping of certain property was necessary for the preservation of the estate. While there is no specific provision in the statute for permitting deduction of such interest art. 14.10 allows deductions for debts “due by the estate.” A logical construction of the statute, bearing in mind that a taxing statute must be strictly construed against the State,1 would permit the deduction paid on the debts of the estate up to and until the time that the estate is closed according to law. This construction was followed by the only two cases on the subject2 from other jurisdictions involving similarly worded statutes. Ballance v. United States, 347 F.2d 419 (7th Cir. 1965); Maehling v. United States, 20 AFTR 2d, Par. 147, 165 (1967), 67-2 U.S.T.C. (1967). There are no cases in point in Texas. It is a fair presumption that persons charged at law with the settling of an estate will do all things possible to preserve the estate. This, in the long run, will inure to the benefit of the State. We reverse and render the judgment of the trial court as indicated. Reversed and rendered. Footnotes [1] Lewis v. O’Hair, 130 S.W.2d 379 (Tex. Civ.App., Austin, 1939, no writ). [2] The Attorney General has cited us to Lynch v. Kentucky, Tax Commission, Court of Appeals, Ky., 333 S.W.2d 257 as being contrary to the position we take in the case at bar. The case can be distinguished as the statute in question refers to “debts of the decedent” rather than debts of the estate.