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THE.ATTORNEY GEti- h" " 

OF =XAS 

September 9, 1959 

Honorable Robert S. Calvert Opinion NO. NW-690 

Comptroller of Public Accounts 

Capitol Station Re: Taxability for inheritAustin, Texas ante tax purposes of 

Social Security lumpsum death payment to 

widow, of Social Security insurance benefits 

to widow and of payments 

to widow from Civil 

Service Retirement and 

Dear Mr. Calvert: Disability Fund. 

You have requested the opinion of this office on 

several questions which we will consider seriatim. The 

first of these pertains to the lump-sum death payment 

which a..w~idow receives by virtue of that portion of the 

Social Security Act which i P codified in United States 

Code Annotated under Title 42, Chapter 7, Section'402 

(iI. 

In 1940, the Treasury Department ruled that amounts 

payable under Title II of the Social Security Act, as amended 

by the'Act of August 10, 1939, to a widow were not to be 

included in the gross estate of the decedent for Federal 

estate tax purposes. CB 1940-2, 285. The reasons given 

for such ruling werethat the decedent had no control over 

the designation of the beneficiaries or the amounts payable 

to them,, said beneficiaries and amounts being fixed by the 

provisions of the Social Security Act, as amended, and the 

payments being made directly to the beneficiaries. The ruling 

further pointed out that the decedent had no property interest 

in the "Federal Old-Age and Survivors Insurance Trust Fund" 

created under Section 201 (a) of Title II of the Social 

Security Act, as amended. 

Revenue Ruling 55-87, CB 1955-1, 112, is to the 

effect that lump-sum payments under Title II of the Social 

Security Act are not includible in the decedent's gross 

estate for estate tax purposes. 

7 Due to the basic difference in the nature of 

inheritance and estate taxes, this office has held in 

certain instances that rulings of the Federal Government 
. 

Honorable Robert S. Calvert, page 2 (Opinion No. ww-698) 

in connection with Federal estate taxes are inapposite in 

a determiration of liability for Texas inheritance taxes. 

However, we think the provision of our statute necessitates 

the same result. The only provision of Article 7117, 

Vernon's Civil Statutes, which couldsubject the Social 

Security,,benefits to a tax is the one which taxes transfers 

made by .deed, grant, sale or gift made or intended 

to take effect in possession or enjoyment after the death 

of the grantor or donor. . . .' The covered employee 

having no choice in the matter of coverage, nor in the 

selection of beneficiaries, liar indeed any assurance that 

either he or anyone else will ever receive any Social 

Security benefits, can scarcely be said to have made a 

gift intended to take effect in possession or enjoyment 

after his death. You are therefore advised that the Social 

Security lump-sum death payment to the widow is not subject 

to inheritance tax. 

You have also requested that we advise you whether 

the old-age and survivors insurance benefit payments which 

the widow will receive by virtue of Title 42, Section 402, 

Chapter 7 (e), United States Code Annotated, will be subject to inheritance taxes. These benefits are paid to the 

widow in monthly installments. For the same reasons which 

we have just stated in connection with the lump-sum death 

payment, you are advised that such benefits are not subject 

to an inheritande tax.. 

You request that we advise you as to the taxability 

of a survivor annuity payable to a widow from the Civil 

Service Retirement and Disability Fund pursuant to the provisions of Section 2260, Title V, U.S.C.A. 

In Revenue Ruling 55-682, IRB Nov. 14, 1955, 18, 

the Treasury Department ruled that where the decedent did 

not designate a beneficiary other than his estate, the 

amount payable upon his death is includible in his gross 

estate under subdivision (a) of Section 302 of the Revenue 

Act of 1926 as amended, and where he did designate a beneficiary other than his estate, the amount payable upon his 

death is includible in his gross estate under subdivisions 

(c) and (d) of that section. This ruling has been printed 

in CB 1955-2, 601. 

Rev. Rul. 56-1,' kt',i956,~1, 444, reads as follows: 

"Where an individual who is covered by 

the United States Civil Service Retirement 

System dies before retirement, the amount 

includible in his gross estate under section 

2039 of the Internal Revenue Code of 1954 on 
_ - 

.: 

1 

Honorable Robert S. Calvert, page 3 (Opinion N,. WW-698) 

account of an annuity payable to this 

surviving spouse, or other beneficiary, 

., is the amount of the decedent's contri- 

' bution to the system." 

In so;,far as community property states are concerned, the following ruling has been made: 

-.,. 

"State community property laws do not 

apply to annuities, death benefits or 

refunds payable under the Civil Service 

Retirement Act, as amended. Accordingly, 

the full value of retirement contributions, 

plus the accrued interest thereon, are 

includible in the gross estate of a 

Federal civil service employee under section 

2039 of the Internal Revenue Code of 1954." 

Rev.Rul. 57-446, CB 1957-2, 619. 

Death benefits payable to a decedent's estate as 

well as benefits payable to designated beneficiaries under 

employees' retirement plans have been held subject to State 

death taxes. 28 Am.Jur. 192, 193, Sec. 256. Cases so 

holding may be found in 150 A.L.R. 1287, 1292. 

In Attorney General's Opinion No. WW-92, this 

office held that the receipt of benefits by a designated 

nominee under the Teachers' Retirement System Act was subject to inheritance tax. 

We are of the opinion that an inheritance tax is 

due upon that portion of the widow's annuity which is 

attributable to the decedent's contributions to the 

Retirement System. Decedent had a vested interest in such 

contributions and could have obtained a refund thereof 

had he become separated from the Civil Service prior to 

eligibility for an annuity. Sec. 2261, Title V, U.S.C.A. 

However, we are of the opinion that if such 

contributions were paid from community funds, then only 

one-half of the amount of the annuity attributable to such 

contributions is taxable, cf. Blackman v. Hansen, 140 Tex. 

536, 169 S.W.2d 962 (1943); and the inheritance taxes 

should be computed accordingly. 

.,:,, 'I 

SUMMARY 

Social Security lump-sum death payment 

to widow is not subject to inheritance tax. 

Social Security insurance benefits are 
Honorable Robert S. Calvert, page 4 (Opinion No. ww-698) 

'not subject to inheritance tax. That 

portion of the widow's'annuity which is 

attributable to the decedent's contributions 

to the Civil ,Service Retirement and DisabLlity,Fund is subject to an inheritance 

tax. If such contributions were paid from 

community funds, then only one-half of the 

.amount of the annuity attributable to such 

contributions is taxable. 

Yours very truly, 

WILL WILSON 

Attorney General of Texas 

MMP:cm : 

APPROVED: 

OPINION 'COMMITTEE.: 

Geo. P. Blackburn, Xhairmap 

Wm. D.'Armstrong 

Robert T. Lewis 

Fred B. Werkenthin 

Charles D.-Cabaniss 

Tom L. McFarling, : 

REVIEWED FOR THE ATTORNEY GENERAL 

By: W. V. Geppert