Pierce v. Woods

OPINION BROCK, Chief Justice. James W. Pierce and Carolyn J. Pierce were husband and wife at the time of his death in 1976. They had been married eighteen years and were the parents of three children. She was gainfully employed during approximately twelve years of their marriage and he for virtually the entire time. They comingled all funds, maintaining joint savings and checking accounts. She wrote all checks for the payment of bills and, in general, was the business manager of the marital partnership. All purchasers and payments were made from joint accounts. At the time of his death they owned, in their joint names, some U. S. Series E bonds, two automobiles and their residence. During their marriage Carolyn Pierce, in addition to serving as managing partner for finances, also did all housework, maintained the yard, and performed all chores in connection with rearing the children and seeing to their proper education and upbringing. All this was without the employment of household or yard assistance. Their residence was acquired in 1967, the eighth year of their marriage. The monthly payments were $109.60. All were made by check, signed by Carolyn Pierce, drawn on their joint bank account. On the inheritance tax return filed with the State Department of Revenue following Mr. Pierce’s death the widow reported fifty (50%) percent of the value of the property held as tenants by the entirety. The Department disagreed and determined that during the marriage the husband had earned ninety-two (92%) percent of the money and the wife only eight (8%) percent. An adjustment of the taxable estate was made on that basis and the additional assessment was paid under protest. The widow seeks a refund. The death of the husband, Mr. Pierce, was a taxable event that subjected some portion of the estate by the entireties to the inheritance tax imposed by T.C.A., §§ 30-1601 et seq.\ but, we do not agree with the contention of the State that the portion subject to the inheritance tax is 92% of the value of the property held as tenants by the entireties. In Valley Fidelity Bank & Trust Company v. Benson, 223 Tenn. 503, 448 S.W.2d 394 (1969), this Court said with respect to our inheritance tax statutes: [297] “In short, we must seek to give to these statutes the effect plainly intended by the legislature, but only that effect; where any doubt arises the question will be resolved in favor of the taxpayer.” 448 S.W.2d at 396. That statement was quoted with approval in Commerce Union Bank v. Benson, Tenn., 495 S.W.2d 537, 539 (1973). The pertinent statutory language is as follows: “Whenever property was held jointly by the decedent and one (1) or more persons as joint tenants or tenants by the entirety or otherwise or was deposited in banks or other depositories in the joint names of the decedent and one (1) or more other persons and payable to one (1) or more, or to the survivor or survivors, so that, upon the death of the decedent, the survivor or survivors became entitled to the immediate possession, ownership or enjoyment of such property, there shall be included for taxation such part as may be clearly shown to have belonged to decedent, and in the absence of such showing, then “(a) A fractional part of the value of such property, to be determined by dividing the value of the entire property by the number of persons in whose joint names it was held; . . ..” T.C.A., § 30-1603. The real estate here in question was held by Mr. & Mrs. Pierce as tenants by the entireties; therefore, some portion of the value thereof became taxable upon the death of Mr. Pierce since the statute clearly subjects to taxation “property held jointly by the decedent and one (1) or more persons as . tenants by the entirety . . ..” See: Murfreesboro Bank & Trust Co. v. Evans, 193 Tenn. 34, 241 S.W.2d 862 (1951); In Re Abernathy’s Estate, 211 Tenn. 168, 364 S.W.2d 350 (1962). We find nothing in the statutory language to support the conclusion that 92% of the value of the property held as tenants by the entireties, rather than 50% thereof, should be subjected to taxation by virtue of the death of Mr. Pierce. The statute subjects to taxation only such part as may be clearly shown to have belonged to decedent, and in the absence of such showing, then (a) a fractional part of the value of such property, to be determined by dividing the value of the entire property by the number of persons in whose joint names it was held; . . . .” The word “belong” is defined in The American Heritage Dictionary of the English Language as follows: “To be the property or concern of.” There is nothing in the record to show that any greater interest in the subject property “belonged to decedent” than belonged to the survivor, Mrs. Pierce. Indeed, when property is held by husband and wife as tenants by the entireties each owns an equal interest in the property; it is impossible for more than 50% of the value of such an estate to “belong” to the decedent spouse. Robinson v. Trousdale County, Tenn., 516 S.W.2d 626 (1974). This being the case, the statute clearly defines that part of the estate to be included for tax purposes as follows: “A fractional part of the value of such property, to be determined by dividing the value of the entire property by the number of persons in whose joint name it was held; . . . Since the number of persons holding an estate by the entireties is two in number, it is clear that 50%, and no more, of the value of property held as tenants by the entireties is to be included in the taxable estate of the decedent spouse. We reach this conclusion fully mindful of the fact that this Court held to the contrary in Murfreesboro Bank & Trust Co. v. Evans, supra, and In Re Abernathy’s Estate, supra. One always concludes with reluctance that a prior decision of this Court was in error but we cannot escape that conclusion with respect to those two decisions. We are unwilling to perpetuate their error. There simply is nothing in the statute to justify the conclusion reached in those decisions that [298] ". . . the question of to whom the property, or any portion thereof, belonged was to be resolved by reference to who paid for it.” 364 S.W.2d at 351. The taxing statute with which we deal does not define the taxable estate in terms of the amount contributed by the decedent toward its purchase price, as is true in the statutes of some other jurisdictions, but, on the contrary, defines the estate in terms of the ownership interest vested in the decedent at the time of death. In our opinion the Court in the Eva ns and Abernathy cases, supra, went beyond mere statutory interpretation and, in effect, rewrote the statute insofar as it pertains to real property held as tenants by the entireties. Rather than dividing the value of the whole property by the number of persons in whose joint names it was held to determine the portion thereof taxable to the decedent, as directed by the statute, the Court determined that the taxable portion should be determined by attributing to the decedent the ownership of so much of the value of the property as was attributable to the decedent’s share of the consideration paid for acquisition of the property. Not only is this determination of the Court contrary to the plain dictates of the statute, it is grossly unfair to the surviving spouse who in the vast majority of cases is the widow whose “contribution” toward the purchase price is often not as easily and concretely demonstrated as is that of the husband. To say that 92%- of the value of the property here held by Mr. & Mrs. Pierce as tenants by the entireties belonged to Mr. Pierce and only 8% to Mrs. Pierce is pure fiction and for the Court to determine tax liability in this case upon that basis is unwarranted by the statute and is unjust. Accordingly, we reverse the decree of the trial court and hold that only 50% of the value of the property held by the Pierces as tenants by the entireties at the time of the death of Mr. Pierce is subject to the inheritance tax in this case. FONES and HENRY, JJ., concur. HARBISON, J., dissenting in which COOPER, J., joins.