### No. 81-174 IN THE SUPREME COURT OF THE STATE OF MONTANA 1981

IN THE MATTER OF THE TERMINATION OF JOINT TENANCY OF RONALD MILLER SINCLAIR, Deceased.

Appeal from: District Court of the Eighteenth Judicial District, In and for the County of Gallatin, Honorable Joseph B. Gary, Judgepresiding. Counsel of Record: For Appellant: Bolinger & 

### Higgins,Bozeman, Montana For Respondent: 

### Mike Rieley, Dept. of Revenue, Helena,Montana

Submitted on briefs: November 18, 1981 Decided:February 18, 1982
Filed:

### Mr. JusticeFred J. Weber delivered the Opinion of the Court

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Mrs. Jane Sinclair, the widow of Ronald Sinclair, deceased, appealed to the District Court of the Eighteenth Judicial District from a determinationby the Departmentof Revenue (Department) that inheritance tax was due as a result of transfers in contemplationof death. The District Court affirmed the Department's determination. We reverse the DistrictCourt. Mr. and Mrs. Sinclair,husband and wife, had a joint tenancy bank account formany years. Mr. Sinclair became ill. Mrs. Sinclair withdrew $55,000 from the account, and obtained one $5,000 joint tenancy Federal Credit Bond with

one sister and a $25,000 joint tenancy Treasury Note with each of two other sisters. Mrs. Sinclairwas named as a joint tenant on each instrument with one of her sisters. The District Court found that the money was to be used by the sisters-in-law to pay for the expenses of Mr. Sinclair in the event thatMrs. Sinclair became incapacitated. Mr. Sinclair died within three years of the transfer. The bond and notes had not been cashed at his death. Mrs. Sinclair has since cashed the $5,000bond for herself and has always had possession of the two notes. Mr. Sinclair had no part in transferring the funds. The Department contends that as a result of transfers in contemplation of death to the sisters of Mrs. Sinclair,

an inheritance tax is due in the total amount of $2,182.25. The Department bases its contention on section 72-16- 301,MCA, which provides in part: "A

### tax shall be and is hereby imposed upon any transfer of property, real,personal, ormixed or any interest therein or incometherefrom in trustor otherwise to any person, association, or corporation inthe following cases, except ashereinafter provided:

"(3) when the transfer 

### is of property made 

## -- -- by a resident or by a nonresident when such -- nonresident's property iswithin the state orwithin itsjurisdiction by deed, grant, bargain, sale, or giftmade incontemplation of the death of the grantor, vendor, ordonor or intended totake effect in or enjoyment ator after such death. Every transfer by deed, grant, bargain, sale, or giftmade within 3 years prior to the death of the grantor, vendor, or donor of a materialpart of his estate or in the nature of a finaldisposition or distribution thereof and without a fairconsideration inmoney ormoney's worth shall, unless shown tothe contrary, be deemed tohave been made in contemplation of death within the meaning of this section, but no such transfer by deed, grant, bargain, sale, or giftmade before such 3 year period shallbe treated as having been made incontemplation of death." (Underscoring added.) The funds were not transferred tothe new joint tenancy bond or notes by Mr. Sinclair but rather by Mrs. Sinclair. The Department contends thatMrs. Sinclair was acting for her husband and it was as if he transferred the funds. The Department and the District Court relied upon Haneke v. United States (4thCir. 1977), 548 F.2d 1138. The factual situation inHaneke was similar to the present situation. The husband established five savings accounts injoint tenancy with hiswife. The husband became ill, and the wife, inorder to take care of him if anything should happen toher, transferred funds from the joint tenancy accounts with her husband tojoint tenancy accounts with her sisterin-law. This was without the husband's consent or knowledge. He died within three years of the transfer. The court in Haneke held that the transfers were made incontemplation of death and were includable inthe decedent's gross estate for Federal Estate Tax purposes under Section 2035 of the Internal

### Revenue Code. The court rejected the argument that the funds could not be included in the husband's estate because the wife, not her husband, had made the transfers. The court stated that "Mrs. Haneke was acting as her husband's alter ego, and consequently,her intention should be imputed to him." Haneke, 548 F.2d at 1140. In support of its holding the 4th Circuit Court cited City Bank Farmers Trust Co. v. McGowan (1945), 323 U.S. 594, 65 S.Ct. 496, 89 L.Ed. 483. In that case a woman had been adjudicated an incompetent by the New York Supreme Court,and a committeewas appointed to care for her property. The court directed the committee to pay large yearly allowances to certain relatives. These transfers were found to be made in contemplation of death even though the decedent did notmake the transfers. The courtheld "thatwhere, as in New York, the court is to substitute itself as nearly as may be for the incompetent, and to act upon the samemotives and considerations as would have moved her, the transfer is, in legal effect, her act and the motive is hers." 

## -- City Bank Farmers Trust Co., - 

### 323 U.S. 

### at 599, 65 S.Ct. at 498, 89 L.Ed. at 489. As the decision is by the Fourth Federal Circuit, Haneke is not binding upon this Court, except to the degree that the reasoning of the decision appears compelling. We disagree with the basic determination in Haneke and do not find that City Bank Farmers Trust - 

### Co. is authority for its conclusion. City Bank Farmers Trust Co. 

### - held that the actions of a court-appointed committee acting in the capacity of conservator and guardian of the assets of an incompetent

are the equivalent of actions by the incompetenthimself, so that transfersmade by the committeewere considered to be in contemplationof death in the samemanner as though the incompetenthimself had made the transfers. That analysisis appropriate. However, Haneke extended this theory to transfers by a joint tenant from a bank account with one joint tenant acting as the alterego of the other joint tenant. ~egardless of the intention on thepart of Mrs. Sinclair atthe 

### timeshewithdrew the $55,000, Mrs. Sinclair thereby did not become an alter ego or agent of her husband. As a joint tenant, Mrs. Sinclair had the right towithdraw funds from the account atany 

### time, and under theMontana Inheritance Tax Law, the intention orpurpose atthe 

### timeof withdrawal isnot controlling for the determination of inheritance tax. Because the rationale of Haneke 

### is not appropriate inMontana, 

### we do not adopt it as authority. The facts here show thatthe critical step for inheritance taxpurposes was thewithdrawal by Mrs. Sinclair of the $55,000. That 

### is the taxable event, if any. By the withdrawal of the $55,000, Mrs. Sinclair acquired full dominion over themoney and terminated any joint tenancy interest on the part of her husband. Casagranda v. Donahue (1978), 178Mont. 479, 483, 585 P.2d 1286, 1288. Our key question thereforebecomes whether thewithdrawal of the $55,000 is taxable under Montana inheritance tax law. Under section 72-16-313 

### (1) 

## , MCA, a transfer toa spouse is not taxable. As a result, thewithdrawal of funds by Mrs. Sinclair, althoughmade within three years of death, is not

a taxable transfer. After withdrawal, Mrs. Sinclairused the $55,000 for the acquisition of the bond and notes which she placed in joint tenancies inher name and thatof her three 

### sisters. The steps taken inthe acquisition of thebond and notes do not constitute transfers from the deceased toanyone, and therefore arenot transfers subjecttoMontana inheritance tax.Wereverse the DistrictCourt, and remand with instructions toenter an appropriate order showing no inheritance taxdue.

WeConcur: 

# 34w4.J~&a.A?Q Chief.Justice

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