OFFICE OF THE ATTORNEY GENERAL OF TEXAS
AUSTIN

Honorable GeorgeH. Sheppard Comptroller of Public Acoounts Austin, Texas /

De8r 

### Sir:

to time,ana-no complete recordwas kept of them.

Severalyears before his death Edwardsmade s will in which he provided thathis wife, Mollie C. Edwards, should receive 8 life income of $250.00 a month, and that the balance of theproperty should go to his son. His wifeHonorable George H. Sheppard, Page 2

learned about thiswill and oonrultedwith attorneys with the objeot of getting thewill ohanged or of being prepared for a contest of thewill upon the death **of Edwards,** 

Then Edwards exeauteda gene=1 power of attorney to his son,who lmmedlatelpbegan to dispose of Large amounts of the partnershipproperty. It appears that thiswas contrary to Edwarda vlrher and vlevs, and a suitvas filed by him against the son to restrain further disposition of ths partnershipproperty and to can041 thepower of attorney. The son filed a oross-aotlon reekingan accounting of partnernhlp affairs from the date of his mother's death, some timeprior to **1918.**

**At** this time, January 194:. Mrs. Edwardsmade **a** oontraotwith a firm of attorneys, to representme ln all matters relating to the interest I ovn ln the oommunlty estate of my.husband, C. 0. Iklvard8, and myself, and any and all otherproperties or right I may have by reason of oontraots, oonveyanoes,villa or othervlae ln theproperty of
c. 0. Edv8rds." Thlr oontraot furtherprovIdedI

**"For** such servloes to be rendered, I hereby transferand assign unto said attorneys an undlvlded one-fourth interest ln any and all **prop** artier I may obtain,whether by suit, oompromlse
or oonv4yanas **fr0m.C.** 0. Edvardr or his estate, 8nd from our oannrmnity estate."
With affairs in this oondltlon,~&Wards deolded to revokehis will referred to **above,** and to distributehis prop=rtr. On April 27, 1940, he executed an instrumentoonve Lng to his wife, Mollle C. Edwards, property valued at **&26.91,** and oonveylng thebalanoe of hlu property to

The ~onveyanoereserved to &ivards all rents on the reai eatate during his lifetime. Thls oonvey8neev8s ratifiedby the oourt ln the aooounting suit inAugust 1940. The separateproperty, and the oommunityproperty of Edwards and Hollle C. Edwards,were so Intermingled that It vs.8lmpossible to separate them. This was further oompllostedby thewithdrawals thathad been made by gdvards and his son from the partnershipbualneaa. The final result, the oonveyanoe of Apr:l 27, 1940, seems to have been 811 arbitrary



# LIionorable George Ii.Sheppard, **P8g4 3** 

dlvlslon of theproperties regardless of whether theyv4r4 54parat4 or octmnmlty.

Edvmds died on April 10, 19'11.Mrs. Edwards and her attorneys considered that thework of the attorney8 had been the oause of her reoeivlng theproperties transferred to her, and, after the death **of Edwards,**  she transferred to theattorneys one-fourth of thepropertiesvhloh she had reoelved.

It is oonoeded by representativesof the estate tit the transfer of April 1940was made In oontemplation of death, and 1s therefore taxable;and that It may be oonsldered 85 8 trensfer of Edwards' separateproperty.

The questionpresented 1s:

Should lnherltanoe tax be ocuuputed upon the en**tire mount**  of **property** which
r ssed to Mrs. Edwards under the oonv4ynno4 ofApril **27,** 19 0, or should the attorneys* fees be deduoted before oomputIng the tax?

Artlole 7117, V.A.C.S., levies a 5uao45sion tax upon propertyvhloh shall be oonveyed In oontemplatlonof death **as** well **as** upon propertywhich shallpans by will or by the laws of desoent and distribution.

Art1014 7125, V.A.C.S. defines "the only deduatlonspermS.ssibLe under this &vc ass 1 11 the debts due by est8te; (2) funeral expensesj **3** expenses inoldent to the last llln455 of the deoeased,vhIoh shall be unpaid at the time of deathj (4) all taxes due at the time of the death of the deoedent; (5) attorneg~a fees and Court costs aoorulng ln conneatlonwith the rss4~sing and 001144- tlon of.lnherlta~e taxes; and **(6)** an amount equal to the value of any property formlnga psrt of the gross 45t4te situated in the United States reaelved from any person who **dies** within **5** years prior to the death of the deaedent, etc.

These deduatlonaare quite speolflcallydefined, and the attorney's fees her&in question do not ~0514vlthIn the term4 of any of them. The taxpa r, however, Is oontendlng that ah6 did not reoeivs **4186,1** !? 6&S worth of property, but only Three-fourthsof this amount; that her sltuatlon 15 analogous to r4041vingproperty encumbered by a mortgage.,

Bonor8ble George xi.Sheppard, Page **4**

We are unable to find any ease authority In Tex55 direotly on the questionpresented, and there 544m to be but few suah 45s45 frcm other jurlsdlotlons. These, however, appear to establish the rule that amounts expended by heirs or legatees or donees In an attempt to establish theiralleged rights as.nnot be deduoted in makA.L.R. **626, 61**  C.J. 1705 Sea. 2593. So a150, th?%i?int lng an a55455m4nt for 5uoc4s5lon taxpurpo545.
paid to attorneys by the done8 of a gift oaus'e aortls, in protooting the gift against the claim of the administrator that theproperty belongs to the estate, IS not deductible from the amount subject tc lnherltanoe taxesagalnat the donee. People v. Estate of R41114 Klein, 359 Ill. 31, 193 H.E. **460,** 96 A.L.R. 622. **The oourt**  there **said:**

"t!hs attornay fee ~88 not incurredby the admlnlstwtor and van not a part of the oosts and 4xp4n545 of admlnl5tratlon. Itmay have depleted the gift vhioh the done4vas entitled to r4041v4,but did not diminish Its mount et the time It van pvpde. The gift was estebllshe& by the facts shownto exist et the time It was smde, and If Xargaret Miller **took** iit all she took et that time,aad It necessarily follows that ihe took thewhole amount of the gift. The m455ur4 of the tax us5 dependentupon the value of the interest she reoelvedby the gift r4gardl45s of whether or not shewas subsequentlyoalled upon to inaur an expense in protooting her right to it."

**Llkevlse** It has been held that expenses of heirs in 5uoc455fully**ettaoking** 8 will may not be deduated in determlnlng the amount subject to **lnherlt8nae** tax. 28 Am. Jur. 123, Sec. 247.

Ca54s of mmpromlse of a will contest are olos4ly analogous to the questionherein oonsl.dered.Rote the language of the Illlnol5 Suprene Court in Re Qraves Estate, 242 Ill. 212, 8g R.S. 978, 979:

"The tax la not upon the estate of the deoedent, but upon the right of 5uoo455lon,and It aoorues at the ssme time the estate veeta -- that 15, upon the daath of the decessed. Queetlonemay arl54
as to the persons In whom the title vests, andHonorable tIeorg4 H. sheppsrd, Page 5

suoh questions may affeot the asmunt of the tax and theperron whose estate sball be chargeablewith it; but when those questiona
me flnallydetermIned, theirdetermlnatlon relates to the time of the deoedent'sdeath. No ohang45 of title, transfers,or agr44~4nt5 of thosewho suoceed to the estate, among them841v45 or with strangers,oan affeot the tax. All questions oono4rnlngitmust be detemLned as of the deoedent~sdeath.
II The statute r4qu.lr45 all of thsproperiy*o; the estate to be appraised at its fair **market** value. 'the V81U4 of the estatevhloh pa5545 15 the value 50 ascertained 1455 the lndebtedness of the deoedent and the expenses of admin15tratlonr Whatever lltlgatlonmay ooour between tho54who suooeed to the estate 85 to their respeotlverights, or between different olalmants of interests,oannot affeat suoh velue. The fairmarket value 50 ascertained is theba5i5 upon vhloh the amount of the tax must be fixed. Unjust claimsmay be made agblnst those suaoeedlng to the estate,and theymay be put to great expense in defending their property, but thevalue of theproperty or of their respeotive interests In theproperty Is not thereby affeoted."

~mne v. bnn, 162 S.W. (2) 117 (writ of error refused), is the only a&se ia Texas passing on the deduatlb&lltg o: an smount paid in oompromlse of 8 will oontest. refusing the deduotlon, the Court seldr

I R4gardl45s of ths agreement which brought ii ;b&t, the feat resA.ns that thewill of the decedentwas probated and by the term of it the appellant reoelved 811 of the estate. Without probatlng of the will she would have got no part of the estate. By sgreelng for the oontestant to takea part of the estatewhioh thewill gave her, she puroh854d her pea04 and t$ereby scoured unquestioned title to thebal8nos.Honorable Qeorge Ii.Sheppard,Peg8 6

in ~-4 utmtburn'sEatate, ,152 R.Y. 93, 46 I.E. 315, ooncerned a alaIm for deduotlon of sttorney’s fees lnourred by the **5u4445sful** contestants of thewill. **The** Court said:

"Itwas not e olaim existing against the deaedent or **his** property. **The** tax imposed by the statute 15 upon the interests transferredby will or under the intestate l&v of **the** state, The devolutlon of theproperty and the right of the **state have**  **their orl.gia**  **et th4**  **54514** moment of time. The asoertalnment of thevel**ue** of the taxable interestand the fixing of the tax necessarily takesplaoe subsequent to the death. But the guide is the value at the time of the death,when the interestsver4 aoqulred. The fk3Ot t&t **8~41&l.lt8 VGl** **’ 4**  DUt t0 en54 in 8504rt5ln their rlRht5, and **ver4 45~**  iled in 4xp4n5lv4 llt&stlon to obtain thea,
was theirmisfortune. It dld not dlmlnleh the viQu4 of the laterestsvhloh devolved upon them
on Uestburn’r death. It van 8 1055, but

The attorneys fees **ver4** not lnoumed by theadministrator end are not, therefore,allovable es an exp4n54 and oost of admlnlstratlon. The obligation for these feeswas not ore&tedby the deoedent and 4annotbe 4onsldered **8** oharge agelnst him or his estate. It in **true** thatMrs.ZkWards **~45** put to anexpense, but thstvas an 43gens43s~

### auoert&nlng her rlght to ~404ive **8ny psrt**  **of**

She of A rll 2j 1940takes, 

### ifet all, under the oanveyanoe **)&166.91:** and She aotually reaelvedpropertyworth

iltle to thatproperty vested in her upan executionand delivery of the transferby Edwards. She exsrolsed dcminlon and oontrol **over** that entire amount, and disposed of the part of it aonveyed to **the sttorneya.**  liadthematter been a will aontest,vhlah ah4 s8em3 to hava oontempleted should it have beoome neoessbry, there ts PO question that ah4 would not have been sntltled to
a deduatlon of attorney~s fO45. me fact that the oonteet took another form cannot alter the sltuatlon.Honorable George IL Sheppard, page 7

**Therefore,** it 15 our opinion th8t theattorney~s ~h;5~ question shouldnot be deduotedbefore ocnnputlng

The entire amount reoelvedby Mrs. Edwards under the oon;eyanoe is thebasis of the tax. Any other rule would p8mit litig8ting 8kIUGntS t0 oonsumean entire estate, oompletelydefeating the State's right to taxes.

We returnherewith your file on this estate.

Very trulyyours

AImif Enol,. ATTORNEY B or TEXAS

BY
Assistant