Estate of Darby

California Court of Appeal Jul 28, 1949 No. Civ. No. 16550Published

Before: Shinn

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Holding. The court held that the inter vivos transfer of property from joint tenancy to tenancy in common was not subject to inheritance tax because the transfer was supported by valuable and adequate consideration, as required by the Revenue and Taxation Code.

Issues

Whether the 1946 conveyances were taxable transfers under sections 13641 and 13642 of the Revenue and Taxation Code.
Whether the mutual exchange of property interests between joint tenants constitutes 'valuable and adequate consideration' for inheritance tax purposes.

Disposition. reversed

Quotations verified verbatim against the opinion

“The record contains no evidence, however, which supports the court's finding of a want of a valuable and adequate consideration.”

“The law does not forbid the minimization of tax liability by legal means.”

93 Cal.App.2d 96 (1949) Estate of MELLIE M. DARBY, Deceased. NATALIE D. MARK et al., Appellants,

STATE CONTROLLER OF THE STATE OF CALIFORNIA, Respondent.

Civ. No. 16550. California Court of Appeals. Second Dist., Div. Three.

July 28, 1949. Conroy, Conroy & Light for Appellants.

James W. Hickey, Chief Inheritance Tax Attorney, J. D. Lear, Assistant Inheritance Tax Attorney, and Morton L. Barker, Deputy Inheritance Tax Attorney, for Respondent.

SHINN, P. J.

This is an appeal from an order overruling the objections of Natalie D. Mark and Louine D. Boyer, legatees and devisees of decedent Mellie M. Darby, to the report of the inheritance tax appraiser, and fixing the amount of an inheritance tax due and payable from them.

The facts are not in dispute. By deed dated August 14, 1924, deceased acquired real property which is the subject of the tax here in controversy for a consideration of $28,500 furnished entirely by her. She was the mother of three children. In 1929, she conveyed the property to a third party, who simultaneously reconveyed to her and her two daughters, Natalie and Louine (appellants here), as joint tenants. The one-third interest thus transferred to each of the daughters was intended as a gift for the purpose of equalizing a gift of $10,000 previously made to their brother James.

The property was held by the mother and two daughters as joint tenants for nearly 17 years. On March 21, 1946, Natalie and her mother conveyed their interests therein to Louine; and on March 25, 1946, Louine reconveyed an undivided one-third interest to her mother, Natalie, and herself, respectively, as tenants in common. These conveyances were made upon the advice of counsel that if upon the date of death of the deceased the property stood in joint tenancy, it was likely that the entire value thereof would be included in the estate of the deceased for inheritance tax purposes. The purpose of these transfers was to destroy the joint tenancy and create a tenancy in common, in order to reduce the potential inheritance tax liability. At the time of the transfers, in March, 1946, decedent had been ill for some time but was not critically ill. She died on September 10, 1946.

After a hearing the court made findings that the transfers in March, 1946, had been made in contemplation of death [98]

Estate of Darby

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SHINN, P. J.

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