Dwight v. Riley

CARTER, J. This appeal presents a controversy in relation to the rate and method of computation of the inheritance tax payable by reason of property transfers to appellants at death and prior thereto designed to take effect in enjoyment or possession at death. It is conceded by appellants and respondent that both the transfers before death and at death are subject to inheritance tax, those before death taking effect in possession or enjoyment at or after death. (Stats. 1935, p. 1266, sec. 2 (3) [Deering’s Gen. Laws, 1937, Act 8495].)

The three appellants are adult daughters of the deceased. The taxable transfers made to them by the deceased prior to her death were as follows: First, in June, 1920, when each of the appellants received property of the value of $15,000; second, on December 13, 1926, when each appellant received property valued at $7,000; and third, on June 20, 1927, when each appellant received property valued at $92,163.51. Thus each appellant received by reason of the ante death transfers, property of a total value of $114,163.51. The deceased died on September 24, 1935, and each of the appellants received by her will, after deductions were made, property of the value of $36,909.58. In the probate proceeding on deceased’s estate, and pursuant to the report of the Inheritance Tax Appraiser, the court below, by its order here appealed from, fixed the inheritance tax on the transfer of the property to each appellant at $6,225.12. In computing this tax with reference to the exemptions and the rate bracket applicable, the court chose as the figure upon which to make its calculation the total amount of the transfers received by each appellant before and at decedent’s death, or the sum of $151,073.09. The four transfers were thus treated as one or as one taxable unit. One exemption of $10,000 was allowed to each appellant, and the rate applied was 1% on the first $25,000, 2% on the next $25,000, 4% on the next $50,000, 7% on the next $14,163.51, and 7% on the next $36,909.58.

It is appellants’ contention that the transfer at death of $36,909.58 should have been treated separately from the inter [240]vivos transfers and taxed according to the rates provided for in the Inheritance Tax Act of 1935 in effect at the time of decedent’s death (Stats. 1935, p. 1266); that the inter vivos transfers should have been aggregated, a $10,000 exemption allowed, and the rates fixed at 1%, 2%, 4% and 7% on the amounts above mentioned; and that on the transfer at death an additional exemption of $5,000 should have been allowed and a rate of 2% on $25,000, and 3% on $11,909.58 applied. The total tax on all the transfers to each appellant would thus be $1,826.39 less than that fixed by the court. The basis of appellants’ theory is that the rates and exemptions provided for in the 1935 Inheritance Tax' Act could apply only to the transfer at death, and that the transfers inter vivos must be treated as separate transfers and governed by the law in effect prior to 1935. The rates under the 1935 act are 2% on the first $25,000, 3% on the next $25,000, 4% on the next $50,000, and 7% on the next $100,000.