F 

9 OFFICE OF THE ATTORNEY GENERAL OF ‘TEXAS 

1 

P AUSTiN 

iioaorablo 000. H. Sheppard 

a~Dt?Oller Of Publio AoOOUata 

.i -. . 22 

Dear Sir: 

septembar 7, 1943 

the Bouaton Land 

op$nioa or this 

re ~sold in order 

ebta of an estate, 

ad suaoesaioa taxes, is 

blo o thar than on the 

011. with ths sale? In 

ax payable by vlrt!m or the 

e !Viill to benefiolsrles, althou& 

under a Sill. Is a transfer tax 

a able 

5f 

(1) on the trenstsr under the WI11 and 

2 in oonneotion with the *alo trh’ieh is neoeesarp 

to erieat division of the estate? 

n * 

. . . , :: 
Honorable Gee. R. Sheppard, pagv 2 

In our Opinion No. O-G34 (Conference C-pinicn No. 

jZO?l ‘19 held that VmumZers by operation of lawa are, by 

nsoerr8ery implioatlan, exempt from the tax imposed by t!e 

Texas Stoak Transrer Tax Aat (A&isle 7047111, V. A. 0. S.). 

Proaeeding from this pr6o1se, m also ruled 13. said oplnica 

that a tmnsrer rr0m an lntsstata to his heirs or next or 

kin in a tranafrr wholly eireoted by operation or law and 

hanae io tax sxompt, bat that a transfer imm a tertator 

to hi8 legatcer 38 taxable aa e transfer etrected at leaart 

in part bF the rat Of the parties thereto. 

The Tmaa Stook !kawier Tax Aot follows almost 

verbatim the Xew York TraMi6r Tar Aot, and it 18 oomnly 

known that oar rtatote ua8 adopted frola and modeled after 

Ohm Xew York Aot. Likewise, our aat la ldantloal in no& 

.nspeots-iriththa Federal. Stook Transfer Tax Act and with 

the rotlr-via btbar,etater. .~ Coossquently, in interpreting 

oa.atatute vm. have -beelr iooustomed te hollow the dealsions 

and adminisitmtf~ Suzingo: or these other jurfadiotionr, 

and pmtiarilsrly thoal) of ~Xer York, sinoe, as is aaid In 

39 Tex. Jar. 264-2651 

,*‘A phrase, provisign or statute adopted rroa 

ths.Laua GS another state or ootantry will ordi- 

,muril be iron 2110 8wimi oonstnt8ttism~in Teraa ,:...~~ ~. 

that I t ha 3 ruceltod fxths farisdiation from 

uhiah it uar borroued. If it had been gi+t~ a 

tixed and defiaite meanlag by the aoarts of that 

jurisdiotlon, it will be given the acme meaning 

In Texas. The rule rests upon the presumption 

that the Legislature was aware oi the judioial 

interpretation given in Me jurisdiotion rrca 

rhioh the atatuts am tak%, and that ia adoptina auah sfetute it intended also to aooept suoh 

oon5traotlon. * 

Under the Herr York and federal acts, only one 

treneSer tax aocruee Men stook psseiw by ~13.1 to 6 legate6 

but la sold by the exsoutor to satisfy debts and expense8 

of the e&ate. Axtiole 15(16) of the Be* York Rolsa and 

m3gulations~ brtlole 34(n) 0r Treasury Regulations Ho. 71; 

reprinted in Christy and 230L8an, Tb6 %h~Sre? Or t%OOk, pp. 

683 sad 602, mapeatively. This is oocaaioned by the Paot 

thet tbsee Jurisdictions adhere to the aomnoa law rule whemby title to perronclty paesce frown a test&or to his executor and thence from.suah sxeuutor to legatesa, to areditore 

0r the estete, or to posslbls vendees. Consequently, these 
; 

- 24 

’ 

i 

Bonorebla C&o. R. Sheppard, page 3 

juriadiotiona hold that the transfer m the teatstor to 

hla itxeontor is tax exempt 813 8 trensfer by op&etion of 

law and that the Odly tax8b.la event ooaura when the 8XeCiutop 

mkaa a further tmmrer 81th~ to a legates, to a Or8ditOr 

Of the estett, or to a vendee to whoa th8 stook is sold ior 

the ~ur>oa8 Or securing iunda to diaaharga the debts or exenaea oi the estate. Weloh t. Kerokhoif, 84 F(2d) 2QS* 

106 A. 1. R. l434; Christy and XoLean, op. oit. SUVM, 164. 

Obvloaalywhen the atook la a01d by the exsautor to aatiaiy 

dobta end expenses oi the estate, no tax ever arlaea on a 

trenaier to a lagatee beoauae au& tranarar is never msde 

by t& exaouter. 

0-+3-jf Rower, as maa pointed out in our Opinion No. 

~Artlela 3314 Y. A. C. 3. abrogatea the a~amon law 

rule inthis State by prorIddiag,that title to peraoaalty 

Teats in the lagataes iarss4bit8l.y upon the death of the 

t88tatQr, rubJ8ot to the power of~tha exaoutor,fo sell or 

otherwlab appl aaeh peraonaltp to aatlaS .debts of thb 

estate, funera 3 l x p enaaaiunily , ellowanoaa; and other 

expenses oi administration. 

531 

tiOrr811 T. Hamhtt, 24 S.W.(2d) 

Rlaherda0n t. Vaughan, 23 S.V. 640 (Sup. Ct.); Leal T. 

Isa i 291 8.3. 340; 1) Ter. Jur.~S%; 15 Tex. Jw. 172-173. 

Reoa$e oi t&i8 fe8tare oi our deaedants' ~estets law, mmosivably it would be poasibla to aar thet~trro:frana$er.., 

tares aoarue In the situation above deaoribad--one when 

tha title vests immediately in the lagatsaa~, 8nd anothar 

when the executor a8lla~tha atook in ths uoura8 ot adidniatration. Traotiaally apeaiclng, suah a oonatruotioa of our 

trenafer tax eot would result in taxing a tranarer in whloh 

the tranaiarae never raosivea the us8 and enjoyment of th8 

atook 8nd never reosivea an urknouzbered legal or equitabl8 

title thereto. !ue reel that such 8 result was Iwfer within 

the oontaahplatlon or intention oi the legislature at the 

time of the passage oi our stock transfer tax eot. Rather, 

wa real, when OUF lagialatura adopted the New York set, it 

must also be deeasd to heve adopted the oonstruotion plaoed 

on auoh ect whereby but one tar accrues in tha altuatics 

under diaousslon. This aonolualoa results both irom the 

prinoipla of statutory ooonatruoticxn above set forth and from 

the rollowIng sdditional oonalderationr Upon the death oi 

a te&atOr, clay int%r8St aoqulred by a legstee ia SUbhOt 

to a peer of sale in the executor whloh may be srerciaed 

under presorlbed oonditioas. Until suoh the a9 it la known 

ðer 07 not the executor lnust exeralse this peer, alI 

rights of a legatee 8r6 contl.ngsnt. 11' the pcmr la ersrolsed, 
i- . 

X@lOrable 000. H. Shapprrd, pegs 4 

ell rights OS a legates are extin&ulshsd. Consequently, 

w&en stock pessas by will and it Is wocssarr for the 

es8outor to diapoae Of ths atook in order to eatiafy 

the debta and expenaoa OS the estate, wa feel that the 

atook trenaier tax aocruea only when auoh diaposltloa 

Is made, fOF the OOQtfn~enoy Milch prevents th8 ogaplatioo of tbe tFsnaSer to the 1ag8tSaa has ooouxred and 

no oomplett transfer to them la ever aoooorpliahad. Convera81f, whaa no auoh diagoritian is neoeaaary and &en 

the powtr of ash ‘porraeased by 8n txtoutor is artin.&ahed 

b0osua0 no neaesabty ror its txarois0 has d~isen, we itO1 

that the tranaier iroa the testator to his lsgatata is 

omplet0 and thst auoh.tranaSeF la then taxable under the 

pFinOipl88 snuaoiated in our OpiaiOQ NO. w. o-+//y 

These vrinoiplsa are ala0 applioabls to instsno es of intes@'o y. 

r ahen it is n0o0aaarg SOPS 8n administrator of the estate Of 'any inteatclta.,,tO,~la~oae OS: 

&oak to aatiaSy:~the debts.arni txpenses~.of, t&0 qatats, 

8.taX 6OOFUeS U~U,SU4h'~S8bB~'f4~ th4 lJ4~6~~U8BZl+,;bt 

aeld tO be one In which the transstr is eSS,eotail by operatlon of lsw. Contrarides, however, uhen no auoh 

sale is neotiaaarJ, and when the pa;lrer OS sale in the adainlatretor~ia axtirrguiahs~, -the tranattr to ,the halra 

or nert'oi kin~,is theo'awplttt Bad,,88 waa:~:crsLd.in our 

wholly by o&!%%%!& .', "

OQinioB Ro. afadb adoh tzanaler: lti’...affoeted ; :, 

of la,w, no tsx aosruea thiwetinP~~‘-~ 

Your aaaond question relates to a situation ia 

whiah a trensisr OS atoOk is ntada to etieot or to faoilitate the dlvlaion ot an estate among the various legatees. 

Ytaltiple 18gat888 hold prO@rty i13 8 fOra Of OO-OwIleMhip 

olossly 8kZn to, it not identioal with, oo-tenehoy. Any 

divisicn efi6ctSd Smong suah tenants or eny sale made by 

thea Sor the purgoa0 ot dividing the- prooeeda therm3 

neosssorily is a transfer efseoted by the aot ot the parties 

thereto rather than a transfer affsoted by operation of 

law. Such tranaiera are tarable under the Near York and fed8rd a0t8, Artioh3-15(19-22) or the taw York Rules and 3egaatlcoa; Christy and YoLeSn, op. ait. auprs, 56.b565, and 

tvtn without the aid aiiorded by the ooostruoti0m3 in these 

Jurisdlotlona, xe would feel aonatrainad to hold auob trtlnsiera taxSUe sin08 thay tell Within neith0F the express 

erenptione aontained in our atetute AOS the tiplied SXSZPtfofi eoeorded transisr8 by oparttion of &5ii?. COnSo~U~tlY, 

you are respectfully advised that in auoh 9 Situ&ion two 
. - 

7 

-. 

26 

Xonoreble Gea. A. Sheppard, psge 5 

tren3fer terse eoorue--on6 when the trensiar to the maltiple’lagatees becmies aoinglete, shd another when swh 

leg&sea effect 6 division emong themelves by Ale or 

otherwise. Xotioe, hovmer, What if the division ie 

being eifected by fiultl?le heirs or next of ;tin who have 

taken by fnteetscy, 6 tax aocrues ohly upon the diviaicn 

eaong thtunaelvea einoe suoh hotis or next oi kin receive 

the stock initielly bg operation of la**. 

, 

Moreover, should an axeeator or admMstr&or 

uell stook for the purpose or effecting or recllit8ting 

Q diV;aiOtl aPlOti6 th6 lQg@Xi#b, htiir8 OF IieXt Of kin, and 

not r0r the purpose of paying the debts and sxpensas or 

the estate, the 88~~ prinalples are a?plfoable. Tha parer 

of sale poeaessed by an exaoutor or admlnistrstor extendr, 

aa has been said above, only to axles which are necessary 

.to pay the debts and expenses of the estate. Unless tho 

atook is aold for this purpoea, the transfer to the lagstess, 

hsira or next of kin beoomes oomplete. If the ~stook 8hould 

be soEd for any gurpoae other than thla, the aituaticu is 

tha Bane as lf the trensfer to *the legatees, heirs or next 

of kin had first Boone oca$ete, and euoh persons had then 

aoted to effeot a division emong themselves. In mating auoh 

a aale. an ereoutor or adviinistrator acts as a reprssenteitiva or the legatees, heirs or ,aext of kin rather than aa ,a 

represantative of the estate, and, for purposes of the atook 

transfer tax, hia aets bo this~ respeot ere to be treated ae 

if they wore the acte of the prties x%osn he repreeents. 

Consequently, in auoh a aituatim stook transfer taxes would 

aoorue fn acoordanoe with th8 priaoipl~e dieaueaed in the 

last preoeding paragraph. 

~Trustlng that ths foregoing disoussion sstisfaotorfly bnawers your Icquiries, ae are 

Your3 very truly