Hon. Robert S. Calvert OPINION NO. W-343

Comptroller of PublicAccounts Capitol Station Re: Mstributlon of the Estate Austin, Texas of Jesse H. Jones for InheritanceTax parposes.

Dear Mr. Calvert:

opinion We quote the following fromyour letter requesting our

on the above captionedmatter.

"Jesse H. Jones died testate on June 1, 1956,
a resident of Harris County,Texaa, seizedand possessed of a community estate that had a gross value of $10,007,506.36. The undivided one-half

6l/2) community interest of the deceased is 5,003,753.18,and accordingly,an Inheritance tax reportwas filed with this department on this basis.

"An examinationof the will of the deceased reveals that after numerous specialbequests the testator disposes of his entire community estate of himself and surviving wife. The residuary estate Is devised in trust to four trustees and from the income of said trust, the trusteesmust pay the survivingwife an annuity of $75,000.00for life. If there is any income left after the payment of the annuity of '$75,000.00 to the surviving wife, the balance of the incomemust be paid to 'Houston Endowment, Inc.', a charttable,educationalor religious foundation, for Texas. use within the State of

"The firstparagraph of the last will and testament of the deceased reads as follows:

"'The terms 'my estate", 'my residuary estate"',"my property" and other lfke expressions in this ,will

which designate,dispose of or refer to any estate or property or interest or share therein ahall (exceptwhere otherwise expressly indicated)be deemed to fnclude and affectmyi

Hon. Robert S. Calvert, page 2, OpinionNo. (WW-343)

wife's interest or share (aswell as my own) in our communityproperty and estate, and all of any separateproperty which Imay die possessed of or entitled to, It beingmy purpose and intent by provisions of this will (exceptwhere otherwise expressly indicated) to devise, bequeath,dispose of, and, as directed, to affect not only any separate property of my own, but also all (including my wife's share and interest therein as well
as my own) of the communityproperty and estate of my wife andmyself. This inclusion and disposition of my wife's share of our communityproperty and estate is made with her knowl;edge

and approval, and because of my belief that betterprovision formy wife will result. And if my wife shall,after my death, elect to claim and receiveher legal share of any of our communityproperty otherwisedisposed of by this will, then the provisions of this will for benefit of my wife shall lapse and become null and void, and at my death all of my property and estate (notincludingmy wife's share of our communityproperty and estate) shall pass and vest as hereinafter in this will expresslyprovided for such contingency.'

"The survivingwifeby this clausewas put to her election, either to take this property under the will or to repudiate ssme and claim her one-half (l/2)interest in the communityproperty. She elected to take under the will, and the questionarises over the correctmethod of distributionthereunder and the computationof the inheritance tax thereon.

"The executors of this estate reported only the decedent's one-half (l/2 undivided community interest ($5,003,753.18 as being j taxable, only one-half (l/2)of each special bequest as being taxable, and only one-half (l/2)of the annuity ($37,500.00)as being taxable to the survivingwife. The residue of the decedent'sundivided one-half (l/2) community interest was distributed to the 'HoustonEndowment, inc,' as exempt.Hon. Robert S. Calvert, Page No. 3 OpinionNo. (Ww-343)

"We believe that the entire community estate ($10,007,506.36)is taxable and should be distributed for inheritancetax purposes. Certainly, the full amount of each specialbequest is taxable
as well as the $75,000.00annuity to the surviving wife instead of the $37,500.00reported by the executors. Of course, if the value of the annuity to the wife does not exceed the value of her community Interest in the estateplus a $25,000 exemption, shewould owe no tax. The residue of the estate is exempt because the will states that the money must be used In Texas that goes to the 'HoustonEndowment Inc.' There seemsno doubt in ourminds that each special legatee receives the full amount under the terms of the last will and testament of Mr. Jones, and, therefore, the full amount is taxable to each special legatee."

Article 7117,Vernons Civil Statutes,provides in part as follows:

"All property within the jurisdictionof this State, real or personal, corporate or incorporate,

. . .which shallpass absolutely or in trust by will or by the laws of descent or distribution of this or any other State, or by deed, grant, sale, or gift made or intended to take effect In possession or enjoyment after the death of the grantor or donor, shall,upon passing to or for the use of any person, corporation, or association,be subjectto a tax for the benefit of the State'sGeneralRevenue Fund, in accordancewith the following classification.

. *

. I'(Underscorlngours)

By virtue of the above statute if upon the wife's election to take under the will, the communityproperty of the wife passed to the deviseesby the will of the husband then it is subject to the inheritancetax. The Texas inheritance tax is a privilege tax levied on the privilege of receiving or succeeding to propertywhich passes under the conditionsnamed in Article 711

. Kelly, 294 S.W. 518 Comm.App. g 3; Our courts in Kelly v.

Kerena National Bank v. Stockton 281 S.W. 5 0 (Tex.Civ. App.). and Grangev. Kayser, 80 S.W. 2d 1007 (Tex.Civ. App.) held that where the husband by will disposed of the community estate and the wife elected to take under the will that the devlsees named in the will took title to the property under the husband's will.Hon. Robert S. Calvert, Page 4, OpinionNo. (WW-343)

The court in Jones v. State, 5 S.W. 26 973 (Corm. App.), was confrontedwith a fact situationwhere an individual had died leaving a will disposing of the community estate of himself and his surviving spouse. In that case the surviving spousehad receivedunder the will of the decedent an estate equal in value to her one-half share of the total community estate. The surviving spouse elected to take under the will and the State assessed an inheritance tax'againsther based on the amount given her under the will. The courtheld that since the amount so received by herunder the will was not in excess of the amount that she owned as a one-half owner of the community estate that no inheritance tax was due. The courtheld that the tax was not due because the will passed no property to the surviving spouse. The court statedas follows in this connection:

"Now if the survivingwidow owned in her
own right an undivided one-half interest in the communityproperty of herself and husband, then shehad title to that extent to suchproperty, and if the will of deceased did not pass any property to her, clearly she is not taxable. The will did not pass any property whatever to her, because it operated only as an effectivepartition of the communityproperty after death.

. . .'I

It follows from the Jones case, in that the annuity provided for the survivingwife is less than the community share of the wife no tax is due from the surviving spouse,

The other devisees,unlike the surviving~ spouse did not own an undivided one-half interest (or other interest) in the communityproperty of Mr. & Mrs. Jones. Mr. Jones' will did not operate as to these other devisees as a partition of the communityproperty, and we hold that such other devlsees succeededto the property by virtue of the will and received title thereunder. Attorney General's OpinionsV-704, andVq146, written in 1948 and 1951held to the contrary on the theory that upon the wifess election to take under the will, that the thirdparty devisees did not take under thewill-- but received the property as a gift from the survivingwife. The Kelly, Stockton,Kaiser and Jones cases, supra,refutes this theory. As statedabove, the court in the Jones case stated that the wife's election to take under the will "operated only as an effectivepartition of the communityHon. Robert S. Calvert, Page 5, OpinionNo. (WW-343)

property after death.

. . .' It seems clear to us that this partition of the comm;lnity estatewas between the surviving wife and the husband. The wife received full titie to the property devised to her and thehusband's estate acquired complete title to the balance of the communityproperty and
as stated In the Stockton case, supra, "such ownership dated back to the date of his death."

We thereforehold that the third party devisees take under the will and are subjectto the inheritance tax levied b Article 7117, V.C.S. OpinionV-705; Prior Attorney GeneralIs

over-ruledtwo prior opinions of this office,
same being OpinionNumbers 191 and O-4109. These two opinions are re-instatedand Attorney General'sOpinions V-704 and v-1146 are over-ruled,

SUMMARY

Where surviving spouse elects to lether share in the communityproperty pass under deceased spouse"swill which disposed of the entire community estate the third party devisees are subject to the tax leviedunder Article 7117, V.C.S., according to the value of the entire community estate receivedby them. The communityproperty received by the surviving spouse is not taxable if the property received is not more than the value of her community shareplus the $25,000 exemption. Attorney Oeneral'sOpinionsV-704 and v-1146 are over-ruledand Attorney General's Opinions 191 and O-4109 are reinstated.

Yours very truly

WILL WILSON AttorneyGeneral By &-7$.yf”-“7pW. V. Geppert AssistantAttorney General WVG/vk

APPROVED: OPINION COMMITTEE George P. Blackburn, Chairman John Reeves John Webster Mary K. Wall REVIEWED FOR THE ATTORNEY GENERAL By: JamesN. Ludlum