HE NE 

OF 

Honorable Robert S. Calvert Opinion No. M-1196 

Comptroller of Public Accounts 

State Finance Building Re: Whether the value of a 

Austin, Texas 78774 life estate may be deducted in computing lnheritance taxes when the 

life tenant died within 

five years after receivBear Mr. Calvert: lng same. 

We have gathered the following facts from the files submitted 

in connection with your request on the above captioned matter. 

George A. Mahler, husband of Ethel Mahler, died testate 

October 15, 1965. His wife, Ethel Mahler, received a life estate 

in his one-half of the community and in all his separate property. 

After allowable deductions, ,these properties were duly valued for 

Inheritance tax purposes; and the inheritance~tax on the wife's 

life estate was computed and paid on said valuation. At the same 

time, inheritance taxes were also paid on the remainder interests, 

which passed to their two children. Ethel Mahler died February 2, 

1968, devising her entire estate to the two children in equal 

portions. The Comptroller has not included the value of her life 

estate in determining the amount of inheritance taxes which accrued at her death. The attorneys for the estate contend that 

the value of the mother'8 life estate should be deducted as previously taxed property in computing the Inheritance taxes due 

from the two children. 

At the death of both George A. Mahler and Ethel Mahler, the 

deduction for previously taxed property provided in Article 14.101 

l Vol. 20A, Tax.-Gen., V.C.S. (All subsequent article 

references are to Vernon's Annotated Texas Statutes.) 

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

read as follows: 

"The only deductions permissible 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 person who 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 the property upon which an Inheritance 

tax was actually paid and shall not include any legal 

exemptions claimed by and allowed the heirs or legatees 

of the estate of the prior decedent. . ..' 

You have advised us that it has been your consistent departmental construction for more than forty years, that Is, since 

the enactment o the original deduction provision 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 tenant within the five-year period. 

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 property within the five-year period. They argue that 

this result necessarily follows from the fact that the original 

Texas deduction provision was taken from the then current Federal 

estate tax deduction provision. We quote the following excerpt 

from their brief submitted in connection with this request: 

"The.old Federal law and Texas law have identlcal construction through the phrase 'five years 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 

'received from anyperson who dies'. (underlined for 

emFhasis.)‘he meaning in eitherevent is not changed. 

Both statutes have 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 formed part of the gross 

who died five years 'prior' to 

(Rnphasis theirs.) 

(M-1196) 

estate of the person 

the decedent." 

We think that the above noted difference is one of major 

distinction, predicated upon the fundamental difference in the 

nature of an Inheritance tax (levied upon the privilege of sucmn and computed upon the net value of the share received, 

by each recipient) and of an estate tax (levied upon 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 taxed property which was not received 

from the prior decedent (as opposed 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-year period, 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%. rehearing denied 72 S.m 

l&j-S.W.2d c 

:O S.W.2d 820: 

159.Tix. 385, 

336, 322 S.W. 

1 Nat, 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 

206 S.W.2d 221 (1947 -Y---- 

supra; Simco v. Shirk, 146 Tex. 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 

Government under the Revenue Act of 1926, by reason of the property of such estate which 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: 

"The appellee has a fourth counterpoint to 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's Department has consistently 

construed Article 7125 to allow the deduction for 

previously taxed property only if such property had 

been received from a prior decedent. The defiartment 

had construed the deduction allowed by Article 7125 

for previously taxed property as inapplicable to a 

surviving spouse's share of the community estate on 

the death of such surviving spouse, even though the 

entire community estate had been Included in computing the Federal estate taxes due at the death of 

the spouse first to die. 

"Attorney General's opinion V-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 prevent the State from imposing an Inheritance tax on the 

right to succession to the wife's one-half community 

interest, even though the wife died less than five 

years after the death of her husband. 

"We believe that the opinion of the Attorney 

General and the departmental construction by the 

Comptroller's Department is entitled to and should 

be given consideration and deference. Walker v. Mann, 

Tex.Civ.App., 143 S,W.id 152 (error ref.). 

"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-l 196) 

of her property, and consequently had not received 

it from a decedent within five years prior to her 

death, and no inheritance.tax was assessed by or 

paid to the State within the last five years under 

the provisions of Chapter 5 by reason of the transfer or receipt of any part of the property which 

constituted Mrs. Taub’s estate at her death. Jones 

v. State, Tex.Com.App., 5 S.W.2d 9 3; 

Wless, L 

State v. 

141 Tex. 303, 171 S.W.2d 84 , 147 A.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 evident purpose of the deduction for previously taxed 

property is to prevent.the diminution, or even extinction, of 

estates which would ,otherwise be subjected to inheritance taxes 

within the five-year period.7 In order for inequitable results 

to ensue, there must not only have been an inheritance tax paid 

at the death of the prior decedent., but also a second inheritance 

tax must accrue at the death of the second decedent within the 

five-year period by virtue of the receipt of the previously’ 

taxed property e In the instant case, no part of the value of 

the mother’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 conclusion needs 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 The most recent amendment provides 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-year period e Acts 1971, 62nd Leg., p- 2$+5> ch. 974, B,3> 

eff. Aug. 30, 1971. 

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

construction placed upon a statute by the Department charged w th 

its administration Is entitled to consideration and deference, 8 

and will ordinarily be adopted and upheld by the courts. This 

rule is particularly applicable to an~administrative construction 

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 inheritance taxes when the life tenant 

dies within five years after receiving same. 

ney General of Texas 

Prepared by Marietta McGregor Payne 

Assistant Attorney 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 

Executive Assistant 

NOLA WHITE 

First Assistant 

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

a77. 

-5841-