Cory v. Coudures

Opinion

MORRIS, P. J. Executor John Coudures has appealed from an order affirming the report of the inheritance tax referee. Affirmed.

Coudures, as executor of the will of his mother, Marie Coudures, elected to pay the federal estate tax pursuant to section 6166 of the Internal Revenue Code. Section 6166 allows installment payments on the portion of the estate tax attributable to interests in farming and closely held businesses. At the time of these proceedings Revenue and Taxation Code section 14105 (repealed June 8, 1982, by Stats. 1982, ch. 1535, § 14, p. 5974) allowed a similar deferment of state inheritance taxes. However, a section 14105 election was not made in this case.

The total estate tax was determined to be $954,592.93. The Department of the Treasury determined the amount deferred under Internal Revenue Code section 6166a to be $824,611.24. Annual interest payments on this amount commenced on March 7, 1980 and continue until March 7, 1984. At that time, the annual instalments, together with accrued interest, become due.

The report of the inheritance tax referee for the state did not allow the interest paid on the estate tax as a deduction in determining the clear market value of the property. The referee reported the inheritance tax due to the state to be $272,435. The executor has paid $225,000 against this tax.

The executor filed objections to the report of the referee contending that the amount of interest paid on federal estate tax and any interest which may [744]be assessed on California inheritance tax should be allowed as a deduction. The trial court overruled the objections, confirmed the report of the referee and fixed the inheritance tax at $272,435. Executor has appealed from that order.

Revenue and Taxation Code section 13988 (repealed June 8, 1982 by Stats. 1982, ch. 1535, § 14, but in effect at all times pertinent herein) states: “The ordinary expenses of administration in the estate of any decedent are deductible from the appraised value of property included in any transfer subject to this part made by the decedent.

“Included in ‘ordinary expenses of administration’ are the following:

“(a) The ordinary commissions allowed executors and administrators under Section 901 of the Probate Code, computed on the value of the decedent’s estate as of the date of the decedent’s death.