HE NE OF

Honorable Robert S. Calvert OpinionNo. M-1196 Comptroller of PublicAccounts State Finance Building Re: Whether the value of a Austin, Texas 78774 life estatemay be deducted in computing lnheritance taxeswhen the life tenant died within five years after receivBear Mr. Calvert: lng same.
We have gathered the following facts from the files submitted in connectionwith your request on the above captionedmatter. George A. Mahler, husband of EthelMahler, died testate October 15, 1965. His wife, Ethel Mahler, received a life estate in his one-half of the community and in all his separateproperty. After allowabledeductions, ,these propertieswere duly valued for Inheritance tax purposes; and the inheritance~taxon thewife's life estatewas computedand paid on said valuation. At the same time, inheritance taxeswere also paid on the remainder interests, which passed to their two children. EthelMahler died February 2, 1968, devising her entire estate to the two children in equal portions. The Comptrollerhas not included the value of her life estate in determining the amount of inheritance taxeswhich accrued at her death. The attorneys for the estate contend that the value of themother'8 life estate should be deductedas previously taxedproperty in computing the Inheritancetaxes due from the two children.
At the death of both George A.Mahler and Ethel Mahler, the deduction for previously taxedproperty provided in Article 14.101

l Vol. 20A, Tax.-Gen.,V.C.S. (Allsubsequent article references are to Vernon's AnnotatedTexas Statutes.)

-5836-Honorable Robert S. Calvert,page 2 (M-1196)

read as follows:

"The only deductionspermissible under this law are ...and an amount equal to the value of any property forming a part of the gross estate situated in the United States received from any personwho dies within five (5) years prior to the death of the decedent, this deduction,however, to be only in the amount of the value of theproperty uponwhich an Inheritance tax was actuallypaid and shallnot include any legal exemptions claimed by and allowed the heirs or legatees of the estate of theprior decedent.

...'
You have advised us that it has been your consistentdepartmental constructionfor more than forty years, that Is, since the enactment o the originaldeductionprovision for previously taxed property,

5 that no part of the value of a life estate received from a prior decedent could be allowed as a deduction on the death of the life tenantwithin the five-yearperiod. The attorneys for the estate take the position that the only requisites for this deduction are (1) the inclusion for inheritance tax purposes of the value of property in the gross estate of the prior decedent, and (2) the death of the recipient of said propertywithin the five-year period. They argue that this result necessarily follows from thefact that the original Texas deduction provisionwas taken from the then currentFederal estate tax deductionprovision. We quote the following excerpt from their brief submitted in connectionwith this request:

"The.oldFederal law and Texas law have identlcal construction through the phrase 'fiveyears prior to the death of the decedent'. There is some dlfference in wordage in that the Federal statute reads Iof any person who died', while the Texas statute reads 'receivedfrom anyperson who dies'. (underlinedfor emFhasis.)‘he meaning in eitherevent is not changed. Both statuteshave reference to the value of property

2 Formerly Article 7125. Acts 1929, 41st Leg., R.S., ch. 26, p. 60.

-5837-.

Honorable Robert S. Calvert,page 

### 3

which formedpart of the gross who died five years 'prior'to (Rnphasistheirs.) (M-1196)

estate of the person the decedent."

We think that the above noted difference is one of major distinction,predicated upon the fundamentaldifference in the nature of an Inheritance tax (leviedupon the privilege of sucmn and computed upon the net value of the share received, by each recipient) and of an estate tax (leviedupon the privilege of transfer 33 d of the transferor). computed upon the net value of the estates This differe ce, long recognized in Texas,4 was applied in Strauss v. Calvert, 9 and resulted in a denial of a deduction for previously taxedproperty which was not received from the prior decedent (asopposed to no receipt from the second decedent in this case).
In the Strauss case, the court held that where, at the~death of a husbandmederal Government imposed an estate tax upon the entire community estate, and the State levied the full 

### 80$ of the allowable Federal credit under Section 1 of Article 7144,a,6 on the death of the wife within the five-yearperiod, the beneficiaries of the wife's will were not entitled to a deduction

3 42 Am.Jur.2d 221, Inheritance,etc., Taxes, 

### s5. 4 Inheritance taxes are not Imposed upon property passing at death, but upon the 290 S.W. 

### 244 (Civ.App. State, 5 S.W.2d 973.(Com.Ap& 1928); State v.-Honn. m.2d 6%. rehearingdenied 72 S.m

l&j-S.W.2dc :OS.W.2d 820: 

### 159.Tix.385, 336,322 S.W. 1Nat, Bank, 1 T533-3 is the right 

### m-913 (1970). burdened-with ' fer." to receive as distinguished from the right of transBethea v. She ard 

### 206S.W.2d 221 (1947 -Y---- supra; Simco v. Shirk, 

### 146Tex. 259,

5 246 S.W.2d 

### 287 (Tex.Civ.App.,error ref., n.r.e. 1952). 

### 6 II

...eighty (80)per cent of the total sum of the estate and transfer taxes imposed on such estate by the United States Governmentunder the Revenue Act of 1926, by reason of the property of such estatewhich is situated in this State and taxable under the laws of this State." -5838-. .

Honorable Robert S. 

### Calvert,page 4 (M-1196)

for the value of her one-half of the community in computing the basic inheritance taxes levied by Article 

### 7117. At pages 289, 290, the court said:

"Theappellee has a fourth counterpointto the effect that since the decedent,Mrs. Taub, did not receive her one-half of the community estate from her husband,Max Taub, at the time of his death, and since no State inheritance tax was levied against her share of such estate, Article 7125 does not authorize a deduction of the value of this property in computing the inheritance taxes due at Mrs. Taub's death. "The Comptroller'sDepartmenthas consistently construedArticle 7125 to allow the deduction for previously taxedproperty only if such propertyhad been received from a prior decedent. The defiartment had construed the deduction allowed by Article 7125 for previously taxedproperty as inapplicableto a surviving spouse's share of the communityestate on the death of such surviving spouse, 

### eventhough the entire community estate had been Included in computing the Federal estate taxesdue at the death of the spouse first to die. "AttorneyGeneral's opinionV-402, addressed to the Comptroller,held that the inclusion of the entire community estate in determining the amount of Federal estate tax due at the death of a husband did not pre

### vent the State from imposing an Inheritance tax on the right to succession to thewife's one-half community interest, even though the wife died less than five years after the death of her husband.
"Webelieve that the opinion of the Attorney General and the departmental constructionby the Comptroller'sDepartment is entitled to and should be given considerationand deference. Walker v. Mann, Tex.Civ.App., 

### 143 S,W.id 152 (errorref.).
"m Mrs. Taub owned one-half of the community estate and as such owner did not receive anything from her husband other than a more complete control

-5839-.

Honorable R0bert.S. Calvert,page 

### 5 (M-l196)

of her property, and consequentlyhad not received it from a decedentwithin five years prior to her death, and no inheritance.taxwas assessed by or paid to the Statewithin the last five years under the provisions of Chapter 

### 5 by reason of the transfer or receipt of any part of the propertywhich constitutedMrs. Taub’s estate at her death. Jones v. State, Tex.Com.App.,

### 5 S.W.2d 9 

### 3; Wless, 

### L Statev. 

### 141Tex.303,171 S.W.2d 

### 84 , 147A.L.R. 

### 460." Tl-qs, the inclusionin the decedent’s estate of the same property subjected to tax in the estate of a prior decedent did not result in a deductionfor previously taxed property, even though the property had, in fact, been sub,jected to Texas death taxes at the death of the prior decedent within the five-year period, and,even though it was actually received at the death of the second decedent. The evidentpurpose of the deduction for previously taxed property is to prevent.thediminution, or even extinction, of estateswhich would ,otherwise be subjected to inheritance taxes within the five-year period.7 In order for inequitableresults to ensue, theremust not only have been an inheritance tax paid at the death of the prior decedent., but also a second inheritance taxmust accrue at the death of the second decedent within the five-year period by virtue of the receipt of the previously’ taxed propertye In the instant case, no part of the value of themother’s life estate was received by the two children. No tax accrued from which to make any deduction. No inequitable result has ensued. Although we do not think that our conclusionneeds

### more than the foregoing analysis to sustain it,we are of the further opinion that in the event the deduction for previously taxed property be deemed in anywise ambiguous or uncertain, a reasonable

7 Themost recent amendmentprovides for even greater amelisration by allowing a deduction of a percentage of the value of previously taxed property in graduated decreasing amounts over a ten-yearperiode Acts 1971, 

### 62ndLeg., p- 2$+5> ch. 974, B,3> eff. Aug. 

### 30, 1971.

-5840-HonorableRobert S. Calvert,page 6 (M-1196)

constructionplaced upon a statuteby the Department chargedw th its administration Is entitled to considerationand deference,8 and will ordinarilybe adopted and upheld by the courts. This rule is particularly applicable to an~administrativeconstruction of long standing, In the Instant case,more than forty years.

SUMMARY The deduction allowed for previously taxed property In Article 14.10, 20A, Tax.-Gen.,V.C.S., does not authorize the deduction of the value of a life estate In computing inheritancetaxes when the life tenant dies within five years after receiving same.

ney General of Texas Preparedby Marietta McGregor Payne AssistantAttorney General
APPROVED: OPINION COMMITTEE
Kerns Taylor, Chairman W. E. Allen, Co-Chairman
James Broadhurst Arthur Sandlln John Reeves

SAMUEL D. MCDANIEL Staff Legal Assistant
ALFRED WALKER ExecutiveAssistant
NOLA WHITE First Assistant

8 Strauss, lnfra,p. 5; 52 Tex.Jur.2d 259-263, Statutes, a77. -5841-