Opinion ID: 2618070
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Heading: American Law of Property 121, supra.

Text: In the case at bar, the amounts which were contributed by decedent to the retirement fund and also the amounts contributed by the employer to the fund were his earnings and had the quality and character of community property as of the time of deposit into the trust fund. 11 Am.Jur. Community Property, sec. 20; Lawson v. Ridgeway, 72 Ariz. 253, 233 P.2d 459, 29 A.L.R.2d 518; McDonald v. Lambert, 43 N.M. 27, 85 P.2d 78, 120 A.L.R. 250. Cf. McKay, Community Property 121 (2d ed. 1925). After deposit in the trust the funds retained their community character inasmuch as the change in form does not change the basic character of the ownership. Crossan v. Crossan, 35 Cal.App.2d 39, 94 P.2d 609; United States v. Goodyear, 9 Cir., 99 F.2d 523; Womack v. Womack, 141 Tex. 299, 172 S.W.2d 307; McBride v. McBride, 11 Cal.App.2d 521, 54 P.2d 480. Cf. In re Hunter's Estate, 125 Mont. 315, 236 P.2d 94 and Commonwealth v. Terjen, 197 Va. 596, 90 S.E.2d 801. Both of these latter two decisions hold that real estate acquired within the respective states by payment of proceeds earned in community property states is subject to the tax. See criticism in 43 Va.L.Rev. 49, entitled Common Law Mutilates Community Property by de Funiak. The language of the trust instrument that payment was to be made in case of the death of the employee to the person entitled thereto by law is significant. As mentioned above, this language was in recognition of rights of Mrs. Bejarano growing out of the marital relationship. If, therefore, the rights of Mrs. Bejarano in the earnings of her husband whether retained in a fringe benefit plan or paid out to him accrued at the very outset, those rights are now entitled to recognition, and the decision of the decedent to take part in the trust was not an act or decision capable of altering these rights. In the light of this conclusion we cannot accept the Commissioner's contention that the election of decedent was a gift or a grant intended to take effect in possession or enjoyment at or after death. He was merely managing the community property which, under the laws of California, he had a right to do. The principles applicable to this case have been applied to a related problem in Kohny v. Dunbar, 21 Idaho 258, 121 P. 544, 547, 39 L.R.A.,N.S., 1107. There it was held that the intestate laws of Idaho did not operate to vest the wife's share of property in her. The Supreme Court of Idaho said:    While, therefore, the survivor in this case receives the entire community estate by reason of the death of her husband, half of it was already hers, and the only additional interest or right she acquires in that half by reason of the death of her husband is the right of management, control, and disposition.    See also In re Williams' Estate, 40 Nev. 241, 161 P. 741, L.R.A. 1917C. 602. In view of our being persuaded to accept the proposition that Mrs. Bejarano acquired rights at the outset which are entitled to recognition now, we need not consider the detailed analysis of the statutes and decisions of California submitted by the Commissioner in support of his argument that the wife's interest in the community property is less than a full vested right. It is a sufficient answer to this contention to point out that the right is vested to the extent that the death of the decedent did not under the present statute give rise to a taxable event. The judgment is affirmed. McWILLIAMS, J., not participating.