### No. 

### 1-3.106 LN THE SUPEXMI.! COUKT 

### OF '1'HIi 

### STATE 

### OF 

### MONTANA 

### 1976

!W 

### THL MATTER 3F THE 

### ESTATE 

### OF ARTHUR 

### J. MOSBY, a/k/a A. 

### J. MOSBY, Deceased.

ippedl 

### from: District Court of the Fourth Judicial District, Honorable Edward 

### T. Dussault, Judge presiding. Counsel af Record: For Appellant: 

### Skelton & 

### Knight, Missoula, Montana Robert Knight argued, Missoula, Montana Garlington, Lohn and Robinson, Missoula, Montana .Seorge Goodrich argued, Missoula, Montana bor 

### Kespondent : 

### Boone, Karlberg & 

### Haddon, Missoula, Montana Karl Karlberg argued, Missoula, Montana

Submitted: 

### September 

### 1, 1976 ~ecided:$iij; 

### ; j

# ,;;

# -Mr. Justice Frank I. Haswell delivered the Opinion of the Court.

The question in this

### case iswhether the widow's elected statutory share of her deceased husband's estate, which qualifies for themarital deduction and generates no federal 

### estate tax liability, 

### is exempt from payment of a proportional shareof the federal estatetax attributable tothe estate. The district court held 

### it exempt. Wereverse. Arthur J. Mosby died testate, 

### a resident of Missoula County,Montana, on November 26, 1970. His

### willprovided, among other things: "Third: I have made no provision inthis

### will formy wife, Ruth Greenough Mosby, since she has a separate 

### estate which 

### ismore than adequate to 

### meether needs." The 

### will

### was admitted toprobate inthe districtcourt of Missoula County on December 

### 21, 1970. InMarch, 1971, Ruth Greenough Mosby, widow of Arthur J. Mosby, by her guardian, filed 

### a "Renunciation of Willand Election toTake Dower and Intestate Share" pursuant tothe statutethen in effect, section 22-107, R.C.M. 1947, which provides: "Widow may elect. Every devise or bequest toher by her husband's 

### will shall bar a widow's dower inhis lands and her share inhis personal estate unless otherwise expressed inthe

### will; but she may elect whether she 

### willtake under the provisions for her inthe

### willof her deceased husband or

### willrenounce the benefit of such provisions for her, and take her dower in the lands and her share in the personal estateunder the succession statutes, as if there had been no 

### will, but not in excess of two-thirds (2/3) of the husband's net 

### estate, real and personal, after thepayment of creditors' claims, expenses of administration and any and alltaxes, including 

### state and federal inheritance and 

### estate taxes." The intestate share of Ruth Greenough Mosby was one-third of the decedent's net estate inaccordance with succession statute, section 91-403 (I), R.C.M. 1947. Ruth Greenough Mosby died on January 24, 1972.The Mosby estatepaid United States federal 

### estate taxes inexcess of $230,000, including a deficiency payment plus interest, by May of 1975. Thereafter the Mosby estate representatives filed their report and petition in the district court, proposing todistribute to the estateof Rugh Greenough Mosby (hereinafterthe Greenough estate), out of the personal property of the Mosby estate, one-third of the inventory and appraisement value, 

### less debts, administrative expenses and federal estate taxes paid. The petition

### was served on 

### all interested persons. One week later thepersonal representative of the Greenough estate filed objections tothe Mosby estatereport and petition. Hisprimary contention 

### was that the Greenough 

### estate's elected intestate share consisted of one-third of the personal property of the Mosby estatereduced only by the debts of Arthur J. Mosby, but without reduction for costs of administration or federal estate tax. Following hearings and on January 8, 1976, the districtcourt entered an amended order holding, insofar 

### as 

### ispertinent tothis appeal, that the Mosby estatewas required todistribute to the Greenough estate the intestate shareof Ruth Greenough Mosby, reduced by debts of Arthur J. Mosby, costs of administration, and Montana inheritance taxes, but not subject topayment of federal estate taxes. The districtcourt expresslypredicated 

### its ruling upon the decision of the United States Court of Appeals for the Ninth Circuit inRobinson v. United States, 518 F.2d 1105 (1975)

# . On January 16, 1976, counsel for the Mosby estate and counsel for Fredaline M. Yonce, one of the residuary legatees of Arthur J. Mosby, filed a motion forrehearing and motion to alter and amend the amended order of January 8, 1976. The motion alleged that the districtcourt erroneously relied uponRobinson, supra, and erroneously applied the rule of "equitable apportionment" to the facts before the court. They further alleged that the representative of the Greenough 

### estate, prior tohis filing objections, affirmatively acquiesced in and agreed with the allocation of federal estate taxes tothe share of Ruth Greenough Mosby; that such acquiescence created an inequity to the remaining legatees which should prevent the Greenough estate from benefiting from an equitable apportionment rule; and that the Greenough estate's objections should be barred by laches and equitable estoppel. After a hearing on January 26, 1976, 

### at which the districtcourt heard further arguments and an offer of proof, the districtcourt denied the motion in 

### allrespects and confirmed 

### its amended order of January 8, 1976. The representatives of the Mosby estate and Fredaline M. Yonce, residuary legatee, appeal from the amended order of January 8, 1976. The controlling issue on appeal 

### iswhether the widow's elected intestate share of the decedent's estate, which wholly qualifies for the marital deduction under federal estate tax 

### laws, is exempt from payment of a proportionate share of the federal estate tax liability. Section 2056(a) of the Internal Revenue Code of 1954, 26 U.S.C. §2056(a),covers themarital deduction. It allows a deduction: 

## " 

# * * * from the value of the gross estatean amount equal tothe value of any interest in property which passes or has passed from the decedent tohis surviving spouse, but only to the extent that such interest is included in determining the value of the gross estate." The maximum marital deduction allowable, however, is 50 percent of the value of the adjusted gross estate. 26 U.S.C. §2056(c)(l). In this case the elected intestate share of the Greenough estatequalifies for themarital deduction. As 

### a consequence,this one-third elected share does not constitute a portion of the gross estateand does not cause, contribute toor generate any federal estate tax. The Mosby estateand Fredaline M. Yonce, a residuary legatee, argue that because the entire 

### estate is liablefor payment of federal estatetaxes before distributionof the widow's share, such share should bear 

### its proportional share of the federal estatetax. The Greenough estate, on the other hand, contends that no part of the federal estate tax should be deducted from the widow's elected statutory share as such share generates no tax because of themarital deduction. Attheoutset

### we observe that the federal 

### estate tax is

an excise tax upon the transfer of an estateupon the death of the owner asdistinguished from an inheritance tax imposed upon the interest passing toa particular distributee. In

### re Glover's Estate, 45 Hawaii 569, 371 P.2d 361; Seattle-First Nat. Bank 

### v. Macomber, 32 Wash.2d 696, 203 P.2d 1078. The federal 

### estate tax 

### is imposed upon the value of the estatereduced by themarital deduction. Sec. 2056(a) of the Internal Revenue Code of 1954, 26 U.S.C. Sec. 2056(a). The purpose of the marital deduction is topermit a noncomrnunity property stateto attain equality of federal estatetax treatment with a community property stateif 

### its legislature 

### is sominded. Old Colony Trust Co. v. McGowan, 156 Me. 138, 163 A.2d 538. It is not togrant the surviving widow a tax exemption. In 

### re Estate of Hurlbut, 126

### Vt562, 238 A.2d 68; In

### re Uihlein's Will, 264 Wis. 362, 59 N.W.2d 641, 38 ALR2d 961. The marital deduction is for thebenefit of the entire estate; the surviving widow shares inthat benefit with other distributees because the gross value of the estate is reduced by the marital deduction resulting ina smaller federal estate tax;

so the widow's distributive sharemust bear 

### its proportionateshare of the burden of the federal estate tax unless the ultimate burden 

### isotherwise shifted under 

### state law. In 

### re Estate of Hurlbut, supra; Old Colony Trust Co. V. McGowan, supra. Congress has not seen fittoallocate the burden of the federal estatetax, but has left 

### it to statelaw todetermine the ultimate thrust of the tax; thus the question of the ultimate burden of federal estate taxes 

### is one of state, rather than federal, law. Riggs v. DelDrago, 317 U.S. 95, 63 S.Ct. 109, 87 L.Ed 106, 142 ALR 1131 (1942); Estate of Marans v. Newland, 143Mont. 388, 390 P.2d 443. Initially, we 

### are confronted with the plain language of section 22-107, R.C.M. 1947. This statute 

### statesunequivocally that a widow may renounce and take her intestate share of the husband's personal estate "after the payment of 

## * 

## * * any and all taxes, including

## * * * federal

## * * * estate taxes." This provision would appear toburden the Greenough estate's share with 

### a proportionate share of the federal estatetax. However, the Ninth Circuit Court of Appeals inRobinson

v. United States, 518 F.2d 1105, 1108 (1975), deciding 

### a case arisingunder the provisions of a 

### willand the estate tax 

### laws of the United States, construed Montana law otherwise: "Accordingly, 

### we find that under Montana 

### law federal estate taxes, unless their payment 

### is otherwise specifically provided for inthe 

### will, must be equitably apportioned among residuary interests so that a residuary interest not generating any estate taxes does not bear any burden for payment of such taxes." In Robinson, the "residuary interest not generating any 

### estate taxes" was thewidow's testamentary one-third of the residue which, 

### as inthis

### case, fullyqualified for themarital deductionunder 26 U.S.C. 52056. The Robinson court held that: 

### " 

# * * 

## * the share passing tothe spouse is onethird of the residuary estatebefore payment of federal estate taxes and that the estate 

### is entitled under 82056 of the Internal Revenue Code to

### deduct the fullamount of the interest passing to the spouse." The districtcourt inthe instant case held that the equitable apportionment rule announced inRobinson applied with equal force tothe Greenough estate's elected statutory share qualifying for themarital deduction. The court of appeals inRobinson recognized that the burden of the estate tax was a question of statelaw, but also recognized that there

### were no Montana cases directly inpoint with the question before it. 

### The federal appeals court then proceeded todetermine "asbest it 

### can what the statecourt would decide". It 

### then looked toour decision inEstate of Marans v. 

### Newland, 143Mont. 388, 390 P.2d 443, for guidance and found that the controlling rationale therein was that a widow's share of a deceased husband's estatewhich did not generate a federal estate tax 

### was exempt from paying a proportionate share of said tax. We thereforemust decide if the Robinson decision correctlyreads Marans and applies tothe factsof the instant case. InMarans, the specific issue

### waswhether section 22-107 

## -- should impose a tax burden from nonprobate assets 

### upon thewidow's elected intestate share of the husband's estate. The effect or applicabilityof themarital deductionwas not in issue. The deceased husband's estatewas largely in the form of property jointly owned by him and his son and daughter. This nonprobate property substantially increased the estate's tax liability. The widow renounced the

### willand elected totake her statutory share. It 

### appeared that if

### thewidow were

### required todischarge the entire estate tax liability from her intestate shareof theresidue, then she would be leftwithout any property to inherit. This Court held that a rule of equitable apportionment would be invoked to prevent the disinheritance of a widow under section 22-107 where the bulk of the federal estate taxes was generated by nonprobate

### assets. Therefore, estate taxes were ordered tobe apportioned between the widow's residue and the children's nonprobate assets. Marans did not hold that the widow 

### was exempt from payment of allfederal estate taxes; rather, she

### was not required topay any part of the federal 

### estate tax which arose from the nonprobate property. The overriding consideration of Marans was expressed by thisCourt 

### at 394-395 of 143Mont.: 

### " 

## * 

## * 

# * If 

## * * * the legislature intended to subordinate thewidow's statutory share totaxes



### . generated by non-probate assets, the effect of the statute [section 22-1071 would be tocutoff the widow's only means of protection against 'tax disinheritance,' 

### i.e., her option to take against the

### willand nullify the testator's expressed intention relative tothe taxes with which her sharewould be encumbered. In view of the policy of the law toprotect a widow from disinheritance, asreflected by the very statuteunder consideration

## * * 

## * we do not impute to the legislature the intent togive and take away in one statutorypronouncement." (Emphasis supplied.) While the result of Marans 

### is sound, the federal court of appeals misapplied it 

### inthe Robinson case. Robinson did not dealwith the problem of the tax burden imposed by nonprobate property, nor did 

### it concern section 22-107. Marans held that taxes generated by nonprobate property would not be charged to disinherit a widow; Robinson went considerably further and held that property not generating tax would be exempt from alltax liability. Marans did not announce this latter proposition. We 

### hold that the equitable apportionment rule adopted in Marans does not apply to the instant 

### case. The parties agree that theMosby estate is 

### almost wholly comprised of probate assets. ~hus there is 

### no inequitable burden imposed upon the widow's share by nonprobate assets. In the absence of a compelling equitable argument, aswasmade inMarans, we can find no legal or policy justification for the exemption of an undivided one-third interest inthe gross estate from the payment of taxes while requiring theother two-thirds tobear the burden. This 

### was the view expressed inthe opinion of Hon. James F. Battin, federal districtjudge inRobinson v. United States, 369 F.Supp. 925 (1974),which was later reversed by theNinth Circuit Court of Appeals in 518 F.2d 1105. We recognize the conflict of authority from other jurisdictions regarding the question of whether a qualified marital deduction which generates no tax should bear any burden of federal estatetax. Under the facts of this case, where thewidow renounced and took her intestate sharepursuant to section 22- 107, R.C.M. 1947, 

### we areconstrained to forego further analysis of the conflicting cases and follow the express direction of our statute. The mandate of the statute is that the Greenough estate's elected intestate share 

### is subject to its proportionate payment of federal estatetaxes. This holding renders irrelevant the other issues presented in this appeal. The districtcourt's amended order of January 8, 1976, is reversed insofar as it orders the representatives of theMosby estatetodistribute one-third of the personal property of the estateto the representatives of the Greenough estate exempt from payment of federal estate taxes. This case 

### is remanded to the districtcourt with directions toorder the distribution of the personal property of theMosby estate inaccordance with this opinion.

Justice

-9-