Cory v. Crocker National Bank

Opinion

MILLER, J. The State Controller appeals from an order fixing inheritance tax made by the superior court.1 The order sustained objections filed by the executor of the estate of Edna Louise Lake to the report of the inheritance tax referee.

Edna Louise Lake’s will provided that her estate be distributed in the following order: 1) tangible personal property to be distributed to 14 legatees; 2) a conditional devise of mining lands to one James L. Lake; 3) a direction to sell all other real property and to add the proceeds to [327]her residuary estate; 4) pecuniary bequests totalling $234,000 to 13 individuals and charitable institutions; 5) the residue to be set up in trust. The will then provided that all taxes, occasioned by the testator’s death, be paid by the estate as part of the expenses of administration and charged to the residuary estate. Finally, the decedent granted a power of sale to the executor.

In settling the estate securities were sold for $503,759 sustaining a loss on the sale of $42,270. Pursuant to the direction of sale, one piece of real property was sold for a loss of $28,884. Therefore, total losses from the sale of estate property amounted to $71,154.

Although it is unclear from the record how he reached such a figure, the inheritance tax referee allowed deductions for a loss of only $53,266.2 The trial court determined that deductions should be allowed for all losses sustained on sales during administration. Accordingly, the total inheritance tax due from named beneficiaries was reduced from $276,200 to $271,907.

The single issue on appeal is one of first impression; namely, when specific monetary bequests are made by will and the executor is given full power and authority to sell, are losses from the sale of decedent’s property to make distributions deductible pursuant to inheritance tax regulation (Cal. Admin. Code, tit. 18, § 13988.4) when there is insufficient cash at the time of death to pay such bequests.

The California inheritance tax is not a tax upon property as such but is imposed upon the privilege of succeeding to property. (Estate of Rosenfeld (1965) 62 Cal.2d 432, 435 [42 Cal.Rptr. 447, 398 P.2d 783]; Estate of Radovich (1957) 48 Cal.2d 116, 121 [308 P.2d 14]; Estate of Webb (1966) 241 Cal.App.2d 85, 87 [50 Cal.Rptr. 397].) “Section [328139]