Cory v. Flagg

Opinion

RACANELLI, P. J. On appeal by the State Controller from an order fixing inheritance tax, we consider the question of the proper computation for inheritance tax purposes of the survivor’s contribution to acquired joint tenancy property under section 13671 of the Revenue and Taxation Code. For the reasons which we explain, we conclude the trial court erred in fixing the survivor’s contribution at one-half of the value of the property.

The facts are uncontroverted. Rose Flagg and her husband purchased the subject residential property in 1957 for the sum of $16,500; a down payment of $12,500 was made and their daughter, Frances (who lived with her parents), agreed to make the monthly payments on the unpaid balance of $4,000.

Rose Flagg became sole owner as surviving joint tenant upon her husband’s death later that year. In 1960, decedent created a joint tenancy in the property with Frances in recognition of the latter’s discharge of the monthly loan payments.

Frances continued to live in the family residence with her mother and paid property taxes, insurance, maintenance costs and repairs, as well as other financial support for her mother. Frances understood that she would succeed to ownership of the residence in return for her financial assistance. (Frances concedes, however, that she would have supported her mother in any event.)

Following the death of Rose Flagg in May 1980, the inheritance tax referee determined for tax computation purposes the value of the joint tenancy to be [772]$127,500, and that Frances as the surviving joint tenant was entitled to a proportionate exclusion of $30,855 based upon her purchase price contribution.1

Frances filed objections to the inheritance tax referee’s report arguing that all payments made by her in relation to the property and support of her mother should be considered in determining the amount of excludable contributions. The trial court implicitly agreed and found that Frances was entitled to an exclusion “credit” equal to one-half of the value of the property or $63,750. This appeal by the State Controller ensued.

Discussion

Upon the death of a joint tenant, the surviving tenant’s acquisition of immediate ownership is deemed a transfer from the decedent subject to inheritance taxes. (Rev. & Tax. Code, § 13671.) Under the statute the tax incidents of joint tenancy property are based upon the portion of the consideration contributed by each joint tenant. (Estate of Sperry (1968) 258 Cal.App.2d 728, 730 [66 Cal.Rptr. 217].) Consequently, where the survivor furnished partial consideration for his interest, the survivor is entitled to an exclusion from taxation “proportionate to the consideration furnished by such survivor.” (Rev. & Tax. Code, § 13672.)2