Cory v. Jenney

California Court of Appeal Apr 27, 1978 No. Civ. No. 52118Published

Before: Cobey

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Holding. The court held that the decedent's failure to exercise a general power of appointment during the year of her death was taxable under Revenue and Taxation Code section 13696 to the extent of $30,000, while prior annual lapses of the power were exempt from taxation.

Issues

Whether the decedent's inter vivos release of a general power of appointment was taxable under section 13697.
Whether the decedent's power of withdrawal was cumulative or noncumulative for inheritance tax purposes.
Whether the decedent's failure to exercise the power of appointment in the year of her death was taxable under section 13696.

Disposition. reversed

Quotations verified verbatim against the opinion

“The inter vivos transfers of trust property effected in 1949 by the partial release of the general power of appointment was not taxable under section 13697 since that 1965 statute taxing releases of general powers of appointment is not retroactive”

“the failure of Winifred to exercise the power during the calendar year of her death (1969) was taxable to the extent of $30,000 under the aforementioned section 13696.”

Opinion

COBEY, Acting P. J. Kenneth Cory, State Controller, appeals from an order fixing, after objections, the total inheritance tax payable by the [517]beneficiaries of the estate of Winifred W. O’Donnell, also known as Mrs. Thomas A. O’Donnell, as $58,042.36. The appeal lies. (Prob. Code, § 1240.)

The report of the inheritance tax appraiser set the tax due as $891,692.18. The trial court, however thereafter, sustained written objections, filed jointly by the executor of the estate of the above-named decedent and by the trustee of the Thomas A. O’Donnell trust, to this figure. The inheritance tax appraiser included as an inter vivos transfer, taxable under Revenue and Taxation Code, sections 13641 to 13648,1 one-third of the trust property—the one-third being appraised at $6,152,371.88.

This case presents several questions regarding the taxability under our Inheritance Tax Law (§ 13301 et seq.) of the aforementioned one-third of the trust property over which the decedent, Winifred, held a power of appointment jointly with two others. The Controller contends in this court that this one-third is taxable under section 13696, either in its entirety or, at least, to the extent of $600,000 thereof. The objectors respond that the transactions before us are exempt under section 13697.2 In our view neither of these positions is correct.

[518]Facts3

The decedent herein, Winifred W. O’Donnell, died on January 24, 1969. She was the surviving spouse of Thomas A. O’Donnell, who died on or about February 21, 1945. By a declaration of trust, dated August 15, 1939, the said Thomas A. O’Donnell created the Thomas A. O’Donnell trust. He thereafter amended this declaration of trust on July 29, 1942, to create a joint power of appointment (exercisable only after his death) in the decedent, Winifred, and two daughters of Thomas by a prior marriage, under which the holders of the power could cause by unanimous written request the distribution to them in equal shares of all or any part of the principal of the trust estate. On or about February 21, 1945, the trust became irrevocable by reason of the aforementioned death of the trustor.

Cory v. Jenney

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