Peck v. State

California Court of Appeal Mar 27, 1950 No. Civ. No. 17482Published

Before: Doran

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Holding. The court held that the state's method of calculating gift tax, which failed to account for a change in the donee's status (marriage) and resulted in an unreasonable application of exemptions, was improper. The court affirmed the judgment for the taxpayer, finding the trial court's interpretation of the Revenue and Taxation Code to be reasonable.

Issues

Whether the state's method of calculating gift tax, which aggregates prior gifts without adjusting for a change in the donee's status (marriage), is consistent with the Revenue and Taxation Code.
Whether the trial court correctly overruled the state's demurrer in a suit to recover gift taxes paid under protest.

Disposition. affirmed

Quotations verified verbatim against the opinion

“The taxing power, rightly deemed a necessary adjunct to government, should not be extended by limiting the effect of exemptions given, particularly when such exemptions have reference to the close family relation here involved.”

“To adopt the appellant’s interpretation would in effect write into the Gift Tax Law something which is not there,—a function entirely outside the limits of judicial action.”

DORAN, J. The action herein is one to recover a gift tax paid under protest pursuant to section 16251 of the Revenue and Taxation Code. The state’s demurrer to the complaint was overruled; the state having failed to answer, judgment was rendered for the plaintiff, from which judgment this appeal is taken.

[639]“During the years 1940 and 1941,” quoting from the complaint, “plaintiff made gifts to Helen J. Tharp (who became plaintiff’s wife on August 10, 1943) having a net value, in excess of the annual exemption ($4,000.00), of $8,795.61. One Specific Exemption of $50.00 was applied, and a gift tax at the rate of 7% was paid on the balance of $8,745.61, or a total of $612.19.”

After the marriage of Helen J. Tharp and William Peck in 1943, the husband made further net gifts to the wife of $8,550 in 1945; $6,000 in 1946; and $6,000 in 1947; making total net gifts to Helen J. Tharp, now Helen J. Peck, of $29,345.61. Plaintiff’s position, as expressed in the complaint, is that “In determining the amount of gift tax due from plaintiff on gifts made to plaintiff’s wife during the year 1947, the Controller has erroneously included as a part of the wife’s specific exemption of $24,000.00, the sum of $8,745.61 on which the donor had already paid a gift tax at the rate of 7% for gifts made during the years 1940 and 1941.”

The present controversy turns upon the interpretation of section 15204 et seq. of the Revenue and Taxation Code. After providing in section 15203 that the gift tax “is computed on the market value of the gift at the date of the gift, but only on that portion in excess of the exemptions allowable, and at the rates which are then in effect,” section 15204 specifies that “The tax for any calendar year on gifts to a donee is computed as follows;

(a) Determine the aggregate sum of:

(1) The net gifts to the donee for the calendar year, and

(2) The net gifts to the same donee for each of the preceding calendar years.

(b) From this aggregate sum deduct:

(1) The net gifts to the donee for the preceding calendar years, and

(2) The specific exemption, less such portion as may have been used in computing the tax for preceding calendar years.

Peck v. State

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