Opinion ID: 1813911
Heading Depth: 1
Heading Rank: 6

Heading: taxable transfer

Text: Having determined that the property was subject to tax at the husband's death, we now look to see whether inheritance tax on the property for which the wife held a general power of appointment was properly assessed at the wife's death. The appellants argue that based on §§ 77-2008.03 and 77-2008.04, a general power of appointment is deemed to have transferred at the date of the donor's, not the donee's, death. The appellants further argue that the wife's exercise or failure to exercise the power of appointment at her death was not a taxable transfer subjecting the part I trust assets to inheritance tax on her estate. We agree. Section 77-2008.04 specifically states that the exercise or nonexercise of the power of appointment by the donee is not a transfer subject to the taxation provisions of Neb.Rev.Stat. §§ 77-2001 to 77-2008.02 (Reissue 1990). To ascertain the intent of the Legislature, a court may examine the legislative history of the act in question. Southern Nebraska Rural Public Power District v. Nebraska Electric Generation and Transmission Cooperative, Inc., 249 Neb. 913, 546 N.W.2d 315 (1996). We therefore look to the Revenue Committee statement on L.B. 276 to clarify the intent of §§ 77-2008.03 and 77-2008.04. This statement provides in part the following explanation: Sec. 1. Present law does not distinguish between a general and a limited power-of-appointment. This clarifies that the donee of a general power shall pay the tax; and that the specific beneficiaries under a limited power shall pay the tax. Sec. 2. Present law says that a transfer of interest in the property of the deceased (thru a power-of-appointment) is not taxable unless the power is exercised by the donee. However, the Donee's use or non-use of the power is not the determining factor in whether or not there is a transfer of an interest, and this section so specifies. It is correct always to refer to Sec. 1 to find the recipient of an interest thru a general or limited power-of-appointment. Statement of Purpose, L.B. 276, Revenue Committee, 67th Leg. Sess. (May 3, 1955). During a hearing on L.B. 276, it was stated that [t]he tax comes into existence when the husband dies, and sometimes the property is taxed in both cases, that is, his and his wife's death. Under L.B. 276 in case of general power of appointment where there is no restriction as to who will get the property the power of appointment will be taxed at his death just as if it were going to the person who has the power to designate that power.... There is no power of taxation at all when the wife in most cases says where the property is to go. (Emphasis supplied.) Revenue Committee Hearing, L.B. 276, 67th Leg. Sess. (February 24, 1955). Based on a reading of this legislative history and the plain language of the statutes themselves, we determine that in the case of a general power of appointment, the Legislature clearly intended interest in the property to transfer from the donor to the donee at the time of the donor's death whether or not the power itself is exercised. In the present case, that transfer would have been from the husband to the wife at the husband's death. It is also clear from the above legislative history, however, that in the special case where the donor and donee are also husband and wife, the Legislature intended such property to transfer without being taxed. While we may not understand the Legislature's motivation, we are bound to follow its statutory mandate. We therefore determine that the wife's failure to exercise her general power of appointment is not a transfer. Pursuant to § 77-2008.03, the only time this asset could be taxed was at the donor's (husband's), not the donee's (wife's) death. Therefore, this asset cannot be taxed as part of the wife's estate upon her death. In In re Estate of Muchemore, 252 Neb. 119, 560 N.W.2d 477 (1997), however, we stated that our holding did not mean that the property in the marital deduction trust passed to heirs or devisees inheritance-tax-free. We stated therein that in the event that the appellee did not exercise the power of appointment prior to her death, the property would pass to the decedent's nephew and nieces pursuant to the terms of the credit shelter trust, and that in such an event, the trust assets would be subject to Nebraska inheritance tax at that time as part of the appellee's estate. To the extent that this language is in conflict with our decision in the present case, that portion of In re Estate of Muchemore is specifically disapproved.