No. 96-064 IN THE SUPREMECOURT0~ THE STATE OFMONTANA 1996 ,;,yw$ ',y" IN THE MATTER OFTHEESTATE OF EMIL10 TONYPARINI, Deceased, p j,'! ,~~F,~../f;;~ tj & Plaintiff andRespondent,

Respondent andAppellant.

APPEALFROM: District Court of the Fifth Judicial District,

In andfor the County of Jefferson, TheHonorable Frank M. Davis, Judge presiding.

COUNSELOFRECORD:

For Appellant: Deborah Harten, TaxCounsel, Department of Revenue, Office of Legal Affairs, Helena, Montana For Respondent: Leonard J. Haxby; Haxby Carl M. Davis, Attorney &Somers, Butte, Montana at Law, Dillon, Montana

Filed: Submitted onBriefs: July 11, 1996 Decided: November 7, 1996Justice W.William Leaphart delivered the Opinion of the Court

The Montana Department of Revenue (DOR) appeals from the findings of fact, conclusions of law and order of the Fifth Judicial District Court, Jefferson County, concluding that tax liability calculations madeby the Estate of Emelio Tony Parini (the Estate) were correct. Wereverse. Thefollowing issue is raised onappeal: Did the District Court err in characterizing various joint tenancies as "gifts" madeby the decedent to his relatives?
BACKGROUND The material facts of this case are undisputed. Emelio T. Parini (Emelio), died onDecember 21, 1991. Emelio never married and died without children. During his lifetime, Emelio placed title in certain personal property in himself and his various brothers, sisters, nieces andnephews asjoint tenants with right of survivorship. All but oneof the nineteen joint tenancies were created more than three years before the death of Emelio. As a joint tenant, Emelio retained all rights to possession of the property associated with joint tenancy. UponEmelio's death, all property wastransferred to the joint tenants. The DORrequested proof of contribution to the joint tenancies by the surviving joint tenants. TheDORmaintained that inheritance taxes owed by the surviving joint tenants' estate should bebased upon the full value of each of the joint tenants.

2TheEstate challenged the DORIScalculations, arguing that the tax

on the joint tenancies should be limited to 50%of each joint tenancy. TheEstate paid over $30,000 of taxes onthe full value of the joint tenancies, which had acombined value of $427,736. The District Court agreed with the Estate and concluded that inheritance taxes only apply to 50%of the value of each joint tenancy. TheDistrict Court cameto this conclusion without fully considering the amount of contribution by each surviving joint tenant. TheDORappeals from the District Court's conclusion.

STANDARDOFREVIEW Thestandard of review of adistrict court's findings of fact is whether they are clearly erroneous. Daines v. Knight (1995), 269 Mont. 320, 324, 888 P.2d 904, 906. Here, the District Court found that four of the joint tenants mayhave contributed to their respective joint tenancies. Thestandard of review of adistrict court's conclusions of law is whether the court's interpretation of the law wascorrect. Stratemeyer v. Lincoln County (Mont. 1996), 915 P.2d 175, 182, 53 St.Rep. 245, 250. In its conclusion, the District Court found that the DORIS position on taxing joint tenancies at their full value was contrary to the intent and purpose of §§ 72-16-301(2) et seq., MCA,and also found that a surviving joint tenant should only betaxed upon 50%of the value of the joint tenancy. The District Court based its decision on this Court's holding in Department of Revenuev. Dwyer (1989), 236 Mont. 405, 771 P.2d 93.DISCUSSION

Thestatute applied by this Court in Dwver (5 72-16-303, MCA (1987)) allowed the state of Montana to tax in anamount equal to Emelio's interest in the joint tenancy. Prior to the changes enacted by the 1989Legislature, the statute read as follows:

(1) Whenever anyproperty, however acquired, real orpersonal, tangible or intangible, including government bonds of the United States, is inscribed in co-ownership form, held bytwo or morepersons in joint tenancy or as tenants by the entirety, or is deposited in anybank or other depositary in the joint names of two or more persons andpayable to the survivor or survivors of them upon the death of oneof them, the right of the survivor or survivors to the immediate possession or ownership is ataxable transfer.

(2) The tax is upon the transfer of decedent's interest, one-half orother proper fraction, asevidenced by the written instrument creating the same, as though the property to which the transfer relates belonged to the joint tenants, tenants by the entirety, joint depositors, holders in co-ownership form, or persons, as tenants in commonand had been, for inheritance tax purposes, bequeathed or devised to the survivor or survivors by will, except such part thereof as maybe shown to have originally belonged to the survivor and never to havebelonged to the decedent whenthe surviving joint tenant is aspouse or issue of the decedent. In all other cases, the full value of the property shall be taxable, except the portion thereof that originally belonged to the survivor andasto which the decedent had made no contribution; if the decedent had made a contribution to the ownership of the property, the amount of the contribution shall betaxable. (3) This section shall not beconstrued to repeal or modify the provisions of 72-16-301(3). Section 72-16-303, MCA(1987), did not require the surviving joint tenant to provide evidence of contribution toward the joint tenancy. Section 72-16-303, MCA(1989), contains two significant changes to §72-16-303, MCA(1987), applied bythis Court in Dwver. First, it requires a surviving joint tenant to prove either previous ownership orpayment of consideration before tax exemption 4applies. Second, the 1989Legislature repealed §72-16-303(3), MCA

(1987)) which specifically referred to transfers in contemplation of death under §72-16-301, MCA(1987). Section 72-16-301(3), MCA (1987), provided: Every transfer by deed, grant, bargain, sale, or gift madewithin 3years prior to the death of the grantor, vendor, or donor of amaterial part of his estate or in the nature of afinal disposition ordistribution thereof and without a fair consideration in money or money's worth shall, unless shownto the contrary, bedeemedto have been made in contemplation of death within the meaning of this section, but no such transfer by deed, grant, bargain, sale, or gift madebefore such 3-year period shall be treated as having been made in contemplation of death.

. . However, application of the 1987statute wasinappropriate because all questions regarding inheritance tax must bedetermined as of the date of the decedent's death. Burr v. Department of Revenue (1978), 175Mont. 473, 476, 575 P.2d 45, 47. Here, Emelio passed awayin 1991, subsequent to these statutory changes; this madethe District Court's application of Dwver to the analysis of this case erroneous. In this case, as in Dwver, Emelio was ajoint tenant with right of survivorship with oneother person in eachof the nineteen joint tenancies. In Dwver, we held that the taxation of joint tenancies with right of survivorship not madein contemplation of death wasbased upon the decedent's portion of ownership. Dwver, 771P.2d at 96. However, modifications to §72-16-303, MCA,made by the Legislature in 1989, have changed the waythis Court must analyze transfers of joint tenancies. Although a50%taxation of the joint tenancies would havebeen

5appropriate pursuant to this Court's holding in Dwyer, the statute

now requires joint tenants to pay tax on the full value of the property they receive upon the death of the other joint tenant unless they are able to prove that they either provided adequate consideration or previously ownedthe property Asof 1989, §72-16-303, MCA,states: (1) Whenever any property is held by two or more persons in joint tenancy with right of survivorship, the right of the survivor or survivors to the immediate possession or ownership is ataxable transfer. (2) Thetax is onthe full value of the property held asjoint tenants with right of survivorship, except apart of the property asmaybeshownto haveoriginally belonged to the survivor or survivors andnever to have beenreceived oracquired bythe latter from the decedent for less than adequate andfull consideration in moneyor money's worth. Whenthe property or any part of the property, or part of the consideration with which the property wasacquired, is shownto havebeenat anytime acquired by the other person from the decedent for less than an adequate and full consideration in money or money's worth, only the part of the value of the property asis proportionate to the consideration furnished bythe other person maybeexcepted. Whenanyproperty hasbeen acquired by gift, bequest, devise, or inheritance as joint tenants with right of survivorship and their interests are not otherwise specified or fixed by law, the tax is on the value of a fractional part to be determined by dividing the value of the property by the number of joint tenants with right of survivorship. Asstated above, the 1989changes to this statute were significant. It is clear from the above language that the burden nowlies ona surviving joint tenant to prove that heor shehas contributed to the joint tenancy. Whatis not soclear is whenthe gift provision set forth in §72-16-303(2), MCA,is applicable. In its findings of fact, the District Court stated: (4)

. . The Court finds that the State's position would require the imposition of agift tax on property transferred not in contemplation of death, but 6on tenancies created in the normal estate planning

procedure. Neither the legislature nor the SupremeCourt contemplated such aposition. (5)

. Accordingly these funds and accounts were not being transferred in contemplation of death, and as such the gift of those portions of the accounts not contributed to by the surviving joint tenant cannot be taxed as such.

. . . (6) TheCourt further finds that although current Code Section 72-16-303, has deleted the specific reference to the three year rule found in 72-16-301, MCA, the three year rule is still set forth aspart of the amended72-16-301, MCA,andthe Montana Legislature has still not imposed agift tax on inter vivos gifts not made in contemplation of death and therefore without a clear mandate from the Legislature of their intent to do so, this Court candonomorethan the Dwyer Court before it did and therefore finds, without regard to contribution, the joint tenancies in this matter canonly be taxed upon the fair value of the fractional part of the joint tenancy to bedetermined bydividing the value of the property bythe numberof joint tenants with right of survivorship. (Emphasis added.) Here, the District Court, without regard to contribution, simply treated all joint tenancy estates created three years prior to death asgifts. Section 72-16-303, MCA,does not lend itself to this interpretation. Thestatute, asamendedin 1989, clearly mandates that contribution be considered. Furthermore, as aconsequence of the 1989 amendments to 572-16- 303, MCA, there is now in Montana inheritance tax law, as in federal estate tax law, aseparation of gift tax from inheritance tax onjoint tenancies. See§26U.S.C. 2040involving inheritance tax on joint tenancies, and §§ 2501, 2012, and 6019 involving taxation of gifts. In light of this distinction, the District Court erred by treating the joint tenancies asgifts. Although the last sentence in § 72-16-303(2), MCA, still

7contains areference to property acquired bygift asjoint tenants,

that sentence pertains to situations in which aperson creates a joint tenancy estate in others and relinquishes ownership of the property. For example, if afather transfers all property interest in afarm to his son anddaughter asjoint tenants, he no longer hasaproperty interest in that farm. Thus, his transfer satisfies the requirements of agift. Under the tax formula set forth in the last sentence of §72-16-303(2), MCA,"the tax is onthe value of
a fractional part to be determined by dividing the value of the property by the number of joint tenants with right of survivorship." This formula only refers to the inheritance tax imposed whenoneof several joint tenants whoreceived his or her interest as agift dies. The formula does not, as the District Court interpreted, create agift tax uponthe death of the original
owner. Thus, because each of the children in the above hypothetical received their interest in the joint tenancy as a gift, upon the death of one child, the surviving child is responsible for the tax onone-half of the value of the property. That is, afractional part to bedetermined bydividing the value of the property bytwo, the number of joint tenants. In contrast to this hypothetical, Emelio created a joint tenancy between himself andothers. Here, Emelio remained ajoint

owner and did not divest himself of ownership or control. Therefore, the joint tenancies created byEmelio did not qualify as gifts for purposes of taxation onjoint tenancies. Tobeagift,
a transfer of property must be irrevocable, complete, without

8adequate consideration or full consideration, and unmistakably

intended to divest the donor of the title, dominion and control
over the property. Tagle v. United States (W.D. MO. 1964), 229 F.Supp. 836, 848. Although the nineteen joint tenancies created by Emelio contained someof the attributes of agift, Emelio failed to completely divest himself of interest in the property. Indeed, a joint tenancy involves the dual control of property by the joint tenants. Semanv. Lewis (1992), 252Mont. 508, 510, 830P.2d 1294, 1296; 5570-l-306, and 70-l-307, MCA. Because Emelio remained a joint tenant, hedid not relinquish control of the property until the time of his death. The District Court found that, "without regard to contribution," the DORcould only tax 50%of total value of anyone joint tenancy estate. However, earlier in its decision, the court also found that the "various joint tenants may have made some contribution to the accounts andproperty, particularly Sherlee, Ted, TomandDanaParini. Theevidence wassomewhat suspect, but
wasnot rebutted bythe Department of Revenue." TheDORchallenges the District Court's finding that there mayhavebeencontribution by these four joint tenants. Regardless of whether this evidence

was rebutted or not, the burden was on the Estate to prove contribution and thus the question posed is whether the evidence presented by the Estate met this burden or whether the court's finding is clearly erroneous. After reviewing the record, wefind that the District Court's determination that someof the joint tenants contributed to the joint tenancies wasclearly erroneous.
9Theaffidavits andthe depositions of the surviving joint tenants

merely reiterate the fact that ajoint tenancy wascreated. None of the four parties claiming that they contributed to their respective joint tenancies were able to present evidence asto the amount of the alleged contribution. Section 72-16-303(2), MCA, clearly requires proof of contribution orprior ownership. Without proof of contribution in specific amounts, the DORwould have no wayto ascertain what part of the joint tenancy to tax. Therefore,
we hold that the vague and "suspect" evidence presented by the Estate did not satisfy its burden of proving contribution under 5 72-16-303(2), MCA,and, thus, the full value of the joint tenancies
are to betaxed. Accordingly, wereverse the decision of the District Court.



# L&i/*

Justice Weconcur:

Chief JustiN\

Justices 10Justice Terry N. Trieweiler dissenting.

I dissent from the majority opinion. Although the basis for the majority's decision is not quite clear to me, I conclude that, for all practical purposes, the facts in this case are identical to those in Department ofRevenue v. Dwyer (1989), 236 Mont. 405, 771 P.2d 93, and that the District Court's judgment should therefore be affirmed on the basis of that decision. At one point the majority concludes that, but for changes in § 72-16-303, MCA, which were made in 1989, fifty percent taxation of the joint tenancies created by Emelio Parini would have been appropriate. The majority then concludes that two significant changes were made to § 72-16-303, MCA, which preclude the application of Dwyw. Finally, the majority concludes that Parini's transfers of his assets to joint accounts with his relatives were not gifts in the first place, which would presumably also preclude the application of the principles established in Dwyev. I disagree with both conclusions. In Dwyer, the decedent had, more than three years prior to his death, created joint tenancies with his nephew which included interests in real estate and, as in this case, bank accounts. Both the decedent and his nephew were authorized to withdraw funds from the accounts, but at no time did his nephew deposit or withdraw any funds from the accounts prior to the decedent's death.

11Following the decedent's death, the Department of Revenue, as

in this case, issued a certificate showing a tax due on the full value of the jointly held property. The DORtook the position that it was entitled to do so based on language in the 1979 version of §72-16-303, MCA, which has the same effect as the language in the 1989 version of the statute, which is now relied on by the majority. That language provided that: In all other cases, the full value of the property shall be taxable, except the portion thereof that originally belonged to the survivor and asto which the decedent had made no contribution; if the decedent had made a contribution to the ownership of the property, the amount of the contribution shall be taxable. Section 72-16-303(2), MCA (1979). Weheld that the DORcould not tax 100 percent of the property held in joint tenancy, in spite of the aforementioned language, for the following reasons:

In the case before us, the joint tenancies were established by the decedent more than three years prior to his death. "No such transfer of ownership made before such three year period shall be treated as having been made in contemplation of death." Section 72-16-301(3), MCA. Since there is a specific statutory direction in §72-l&303(3), MCA, that the section shall not be construed to repeal or modify the provisions of 572-16-301(3), the latter section must be given force and effect. The position of the Department robs that latter section of any force and effect. We hold it is our plain duty when interpreting statutes relating to the same subject to give effect to all, if possible, consonant with the intent of the legislature. Section l-2-101, MCA. Montana's statutes donot provide agift tax upon transfers of property made by aperson during his lifetime except such gifts as are made in contemplation of death. The effect of the Department's interpretation of the statutes is to impose atax upon such transfers although not levied until the grantor's or donor's death, whether or not made in contemplation of death. We do not agree with the Department that under 572-l&303(2), MCA, only wives and 12issue of the decedent may take advantage of the

provisions of 5 72-16-301(3), MCA, which excludes from taxation transfers not made in contemplation of death, or made more than three years before the death of the grantor. We hold in this case that one-half of the values of the joint tenancy estate only is taxable. The regulations of the Department which would require a contrary conclusion are inconsistent with statutory law, and thus have no effect. Section Z-4-305(6) (a), MCA. Dwyer, 236 Mont. at 410-11, 771 P.2d at 96-97 The majority concludes that our decision in Dwyer is no longer applicable because of two changes made to §72-16-303, MCA (1979). They state that: First, it requires a surviving joint tenant to prove either previous ownership or payment of consideration before tax exemption applies. Second, the 1989 Legislature repealed 5 72-16-303(3), MCA (1987), which specifically referred to transfers in contemplation of death under §72-16-301, MCA (1987). However, the first change referred to by the majority is not really

achange at all. The language referred to in the 1989 statute, by which the majority concludes a joint tenant is required to prove previous ownership or payment, has the samepractical effect asthe language relied onby the DORin Dwyer. The 1979 language provided: In all other cases, the full value of the property shall be taxable, except the portion thereof that originally belonged to the survivor and as to which the decedent had made no contribution; if the decedent had made a contribution to the ownership of the property, the amount of the contribution shall be taxable. The language in the 1989 statute, which is relied on by the majority to distinguish Dwyer, provides in part as follows:

(2) The tax is on the full value of the property held as joint tenants with right of survivorship, except apart of the property asmaybe shown to have originally belonged to the survivor or survivors and never to have

13been received or acquired by the latter from the decedent

for less than adequate and full consideration in money or money's worth. Section 72-16-302(2), MCA (1989). The second change relied on by the majority, the deletion of the reference to §72-16-301, MCA, found in subparagraph (3) of the 1979 version of 572-16-303, MCA, is irrelevant. That language was superfluous and added nothing to the duty we already had to construe all parts of the same chapter in away that gave effect to all of those provisions. As we pointed out in Dwyer, § l-Z-101, MCA, requires that "it is our plain duty when interpreting statutes relating to the same subject to give effect to all, if possible, consonant with the intent of the legislature." Dwyer, 236 Mont. at 411, 771 P.2d at 96-97. Therefore, we are no less compelled, when interpreting 572-16-303, MCA (1989), to consider §72-16-301, MCA(1989), than

wewere compelled to consider both statutes when we decided Dwyer. Since 572-16-301, MCA (1989), still provides that transfers made by a decedent more than three years prior to death are not in contemplation of death, our rationale and holding in Dwyer is as applicable today as it was when it was decided. Montana's statutes still do not provide a gift tax upon transfers of property unless made in contemplation of death, and the effect of the Department's argument in this case, as in Du~yer, is to impose a tax on those transfers, although not levied until the time of the donor's death. The majority now accepts the

14argument that it rejected

its prior conclusion. For these reasons, I in Dwyer without any basis for changing

dissent from the majority opinion. I would affirm the judgment of the District Court.

15.-

November

7,1996

CERTIFICATEOFSERVICE IherebycertifythatthefollowingcertifiedorderwassentbyUnitedStates mail,prepaid,tothe followingnamed: DeborahHarten,TaxCounsel Department

ofRevenue,

OfficeofLegalAffairs P.O.Box202701 Helena, MT59620-2701 Leonard J.Haxby Haxby&Somers P.O.Box3008 Butte,MT59702-3008 W.G.Gilbert,III AttorneyatLaw 15South Idaho Dillon,MT59725 ‘CarlM.Davis AttorneyatLaw 122E.Glendale Dillon,MT59725

EDSMITH CLERKOFTHESUPREME COURT STATEOFMONTANA BY?4 Deputy