Opinion ID: 2229012
Heading Depth: 1
Heading Rank: 1

Heading: determination of death taxes

Text: On September 7, 1980, Loyd West, a resident of Knox County, died testate and had devised his estate to his surviving widow, Theo Lewis West, and his four children. After issuance of Letters of Personal Representative to Theo, on May 8, 1981, in the county court, Theo filed an inventory which reflected that Loyd's gross estate, located entirely within Nebraska, had a value of $2,319,355 at the date of Loyd's death. Frank Roubicek was the attorney representing Theo as personal representative, while John Thomas was the county attorney for Knox County. Applicable Death Tax Statutes. The rate of inheritance tax for a transfer to an immediate relative, such as a widow or child, is 1 percent of the clear market value of property in excess of $10,000 taken by such recipient; provided, the succession interest of the surviving spouse is exempt from inheritance tax. See Neb.Rev.Stat. § 77-2004 (Reissue 1986). Deductions for determination of the inheritance tax are itemized in Neb.Rev.Stat. § 77-2018.04 (Reissue 1986). An additional death tax, namely, the Nebraska or state estate tax, is imposed under Neb.Rev.Stat. § 77-2101.01 (Reissue 1986), which states in appropriate part: [I]n addition to the inheritance taxes imposed by the laws of the State of Nebraska, there is levied and imposed an estate or excise tax upon the transfer of the estate of every resident decedent and upon the value of any interest in Nebraska real estate of a nonresident decedent. The amount of such tax shall be the amount by which the maximum credit allowance upon the tax imposed by the Federal Revenue Act imposing such tax shall exceed the aggregate amount of all estate, inheritance, legacy, or succession taxes paid to any state or territory or the District of Columbia, or any possession of the United States, in respect of any property subject to such tax. To compute the amount due the United States for the federal estate tax, I.R.C. § 2011 (1982), as a part of the Federal Revenue Act mentioned in § 77-2101.01, allows credit for state death taxes paid up to a maximum credit specified in the federal statute. Therefore, the Nebraska estate tax is computed by reference to, or designed to pick up, the difference between the maximum credit allowance under the Federal Revenue Act and the amount actually paid as the Nebraska inheritance tax. Among other Nebraska statutes pertinent to inheritance tax are Neb.Rev.Stat. § 77-2018.03 (Reissue 1986), which provides in part: [N]otice served upon the county attorney shall constitute notice to the county and the State of Nebraska. It shall be the duty of the county attorney to represent the county and the State of Nebraska in such matters as its attorney. In so representing the county and the State of Nebraska, the county attorney is authorized, in addition to such other powers as he normally may exercise as attorney for the county, to enter into and bind the county and the State of Nebraska by stipulation as to any facts which could be presented by evidence to either the inheritance tax appraiser or the county court, and to waive service of notices upon him to show cause or of the time and place of hearing, and to enter a voluntary appearance in such proceeding, in behalf of the county and the State of Nebraska, and Neb.Rev.Stat. § 77-2022 (Reissue 1986): When the value of the property has been fixed, as provided in [statutes requiring that property subject to inheritance tax be appraised at fair market value], the county judge shall determine and assess the tax to which the same is liable. Inheritance Tax Worksheet. On behalf of the personal representative, Roubicek prepared an inheritance tax worksheet, which was tendered to county attorney Thomas. That worksheet recited that Loyd West's gross estate had a value of $2,319,355 (the same value reflected in the personal representative's inventory filed with the court), the widow's succession interest was valued at $1,069,744, and the net value of the West estate, subject to Nebraska inheritance tax, was $1,249,611 (gross estate less widow's succession interest; no itemized deductions were claimed on the worksheet). In the worksheet's section entitled NEBRASKA INHERITANCE TAX COMPUTATION, there was only the notation As per material filed, which was inserted before the last line of the computation section Nebraska inheritance tax balance due ... $48,375.00. Roubicek signed the worksheet on May 7, 1981, the same day that Thomas, as Knox County attorney and pursuant to Neb.Rev.Stat. § 77-2018.01 (Reissue 1986), signed the worksheet and its incorporated certificate: I have examined the foregoing worksheet and have no objections thereto for inheritance tax purposes only. The inheritance tax worksheet was filed in the county court on May 8. Neither Roubicek nor Thomas filed any material to substantiate, or show the method of computing, the $48,375 figure stated in the worksheet as the inheritance tax due from devisees in the West estate. On June 2, the Knox County treasurer issued a receipt for payment of $48,375 as Inheritance tax Loyd West Estate, and, also on June 2, an associate county judge of Knox County signed a CERTIFICATE EVIDENCING PAYMENT OF COUNTY INHERITANCE TAX of $48,375 regarding the inheritance tax levied by this Court against the estate of Loyd West on the 2 day of June 1981. (The record does not contain the June 2 order indicated in the associate county judge's certificate.) Form 706N, a Nebraska estate tax return, was signed by Roubicek on June 3 and, in reference to the West estate, recited that there was a taxable estate of $1,249,611, a credit of $48,375 was taken for state death taxes (which had been claimed on the federal estate tax return for the West estate), and inheritance tax was paid in the amount of $48,375, the same amount taken as a credit against the federal estate tax. Certification from Knox County, attached to the West estate's form 706N, verified payment of the inheritance tax stated in the state estate tax return. The 706N for the West estate then stated that the estate tax due the State of Nebraska was $0. (For the West estate, there would be no state estate tax if the correct amount of inheritance tax paid was the same as the credit allowed against the federal estate tax. See § 77-2101.01.) Based on the information contained in the state estate tax return (706N), the Nebraska Department of Revenue, on June 10, issued its Certificate Evidencing Payment of Nebraska Estate Tax, which stated: Amount of Nebraska Estate Tax Paid NO TAX DUE. As a result of a hearing held on June 16, County Judge James J. Duggan entered a FORMAL ORDER FOR COMPLETE SETTLEMENT AFTER INFORMAL TESTATE PROCEEDING, which recited the court's finding: Inheritance tax has been determined, paid, and proper receipts filed. Inheritance tax is hereby approved as completed in this case. The certificate from the Nebraska Department of Revenue (NO TAX DUE) was filed in the county court on June 19. According to the Estate Tax Closing letter, issued by the district director of the Internal Revenue Service on October 28, 1981, the tentative federal estate tax for the West estate was $448,140, but, after credits, including the $48,375 credit for state death taxes, the net federal estate tax on the West estate was $357,265.