Court Opinion

ID: 7954060
Source: CourtListenerOpinion
Date Created: 2022-09-08 23:45:50.327798+00
Date Added: 2024-06-11T16:34:15.516891
License: Public Domain

Coleman, C.J.
(dissenting). The question presented in this appeal is whether United States. Treasury bonds, which were redeemed at par (face) value in payment of Federal estate taxes, should be valued for Michigan inheritance tax purposes at par value or the value computed from prices quoted in the bond market as of the date of decedent’s death. Certain issues of treasury bonds (denoted "flower bonds”) are redeemable at their par value to the extent that the monies are used to pay Federal estate taxes. Predictably, bonds which are thus redeemed at par are appraised at par when computing the value of the Federal gross *546estate.1 The conflict arises because the Michigan inheritance tax act, MCL 205.201 et seq.; MSA 7.561 et seq., requires that estate property be appraised at its "clear market value”. MCL 205.213; MSA 7.574.2
Among the assets of the Daisy Gertrude Mc-Cornack estate were flower bonds with a face value of $298,000. Utilizing the prices in the over-the-counter market, quoted in the Wall Street Journal, these same bonds could be valued at $234,065.93 as of the date of death.3 The executors exercised their right to redeem the bonds at par and applied the monies received to the Federal estate tax obligation.4 The Wayne County Probate Court subsequently assigned the bonds their par value when appraising the estate for Michigan inheritance tax purposes. In a petition for rehearing, the executors argued that the "clear market value” of the bonds was the lower value computed from the over-the-counter market prices.
On May 20, 1975, the probate court adopted the valuation advocated by the executors. On appeal, the Wayne Circuit Court affirmed. However, on *547September 7, 1977, the Court of Appeals reversed the probate and circuit court judges and assigned the bonds their par value. 78 Mich App 135; 259 NW2d 396 (1977).
We would reverse the Court of Appeals and hold that the "clear market value” of these flower bonds is best reflected by the prices they could have brought in the bond market on the date of death. While we are cognizant that our decision creates an advantage to the taxpayer under the state inheritance tax act, we are persuaded that this decision best comports with the statutorily expressed intent of the Michigan Legislature. Actual value of an asset to an estate is irrelevant for purposes of Michigan inheritance tax valuation. The market value as of the date of death is the statutorily mandated standard.
I
Section 13 of the inheritance tax act requires that:
"(1) The report of the appraiser shall be filed in the office of the judge of probate, and from such report and other proof relating to any estate before the judge of probate, the judge of probate shall forthwith, as of course, determine the clear market value of all estates as of the date of transfer * * MCL 205.213; MSA 7.574 (Emphasis added.)
The date of transfer and the date on which the tax accrues is the date of death. MCL 205.203, 205.204; MSA 7.564, 7.565.
Thus, the act requires that these flower bonds be appraised at their clear market value as of the date of death. Although "clear market value” has not been defined by the Legislature, we are satis*548fled that the term can be fairly defined as the sum a willing buyer, not compelled to buy, and a willing seller, not compelled to sell, would agree upon.5
Further insight into the requirements of the inheritance tax act may be gleaned from an examination of In re Fish's Estate, 219 Mich 369; 189 NW 177 (1922). Rejecting the argument that Federal estate taxes should be deducted when computing the inheritance tax, this Court said:
"It will, therefore, be seen, although the language quoted is found in different sections and the arrangement of it might be improved, that the State by this act has levied an inheritance tax upon the clear market value of the property at the time of death and that it is then due and payable. The tax is measured not by the value of the right, but by the value of the property transferred; not by what it is worth when it reaches the possession of the beneficiary, but by the clear market value at the instant of death; not what it will net him after deducting expenses and lawyers’ fees, but by its clear market value at the date of transfer. The legislature must be deemed to have used the expression 'clear market value’ in its commonly accepted meaning.” Id., 377-378.
The Fish analysis indicates that the Legislature intended asset appraisal to be based on the commonly accepted meaning of "clear market value”. It is unlikely that one can perceive a clearer indication of market value than the bid and asked prices of the bond market. Even as the Fish Court excluded consideration of the Federal estate tax obligation, we are not bound by the actual value of the flower bonds to the McCornack estate for Federal estate tax purposes when determining *549their "clear market value” for state tax purposes. The Legislature based the amount of its transfer tax upon the "clear market value” of the estate as of the date of death. The actual value of the property to the estate and its beneficiaries when the bonds are used to pay the Federal tax is irrelevant for purposes of determining Michigan inheritance tax liability.
II
This same issue has been before the appellate courts of several other jurisdictions. For purposes of the Federal estate tax, flower bonds are valued at par to the extent that they are redeemable at par value. E.g., Bankers Trust Co v United States, 284 F2d 537 (CA 2, 1960), cert den 366 US 903 (1961); Rev Rul 69-489, 1969-2 Internal Revenue Cumulative Bulletin, p 172. Five states also assign flower bonds their face value if redeemed.6 Creating a slight majority, seven other states look to the over-the-counter bond market to determine the market value of flower bonds.7 In the 1978 case of In re Estate of Kaufman (cited in fn 7), the Ohio Court faced an even more difficult problem. Al*550though the statutory definition of "market value” stated that "[a]ll relevant facts and elements of value as of the valuation date shall be considered in determining such value”, Ohio Rev Code 5731.01(B), the Ohio Court still found for over-the-counter market valuation. The asserted basis for the decision was that it reflected the required market value, while the par value reflected actual value.
The rationale of the cases which have adopted par value does not persuade us to follow their lead. Two of those states have express policies of conforming their methods of estate valuation to the Federal valuation. In the Matter of the Estate of Behm, 19 AD2d 234; 241 NYS2d 264 (1963), aff’d 14 NY2d 826; 251 NYS2d 475; 200 NE2d 457 (1964), Stanback v Coble, 30 NC App 533; 227 SE2d 175, cert den 291 NC 177; 229 SE2d 690 (1976). Michigan has no such policy.
The three other state opinions and the Federal cases rely upon an expansive definition of market value provided by statute, administrative regulation or judicial interpretation. These definitions allow consideration of all "relevant facts and elements of value” when appraising the market value of estate assets. Bankers Trust, supra, In re Estate of Rosenfeld, 62 Cal 2d 432; 398 P2d 783 (1965), Clapp v Cass County, 236 NW2d 850 (ND, 1975), In the Matter of the Estate of Eggert, 82 Wash 2d 332; 510 P2d 645 (1973). Again, there are no statutes or regulations promulgated in this state which even suggest that consideration should be given to facts other than the bond market prices. Similarly, the much-quoted analysis in Fish’s Estate, set forth in Part I, supra, leaves no room for *551the majority’s expansive judicial interpretation of MCL 205.213(1); MSA 7.574(1).8
In Eggert, supra, the Washington Court also stated that the United States Government provided a second market (beyond the over-the-counter bond market) for flower bonds; therefore, redemption at par value could be considered when determining market value. We see little persuasive force in this position. The term "market value” presumes an open market where prices will be set by unfettered economic forces. Mr. Justice Vogel, dissenting in Clapp v Cass County, 236 NW2d 850, 859 (ND, 1975), places this argument in the proper perspective:
"To say that there are two markets, and that one of them is the United States Government, is to ignore the fact that such a 'market’ is open to only one particular type of holder, who must die to take advantage of it, and that there is only one buyer, while at the same time there is a genuine market, with many buyers and sellers and an established price elsewhere.”
Accord, Stein v State Tax Comm, 99 Idaho 70, 71; 577 P2d 798, 799 (1978), Second National Bank of Richmond v Dep’t of State Revenue, — Ind App —, —; 366 NE2d 694, 696 (1977), In the Matter of the Estate of Aul, 154 W Va 484, 489; 177 SE2d 142, 145 (1970).
We are as impressed with the logic of the seven courts9 which have adopted the bond market valuation of flower bonds as we are unpersuaded by the opposing view. Central to these holdings is the *552recognition that the terms "clear market value”, "fair market value” or "market value” preclude consideration of the actual value of estate property to the beneficiaries.
The Legislature has chosen to utilize a uniform standard when computing its tax. Market value as of the date of death is that standard.
Ill
The majority asserts that when an executor redeems flower bonds the estate is a willing seller and the Federal government a willing buyer. While in one sense this may be true, but see Stein, supra, Second National Bank, supra, Estate of Aul, supra, this is too simplistic a view of market value. Use of the term presupposes an open market, accessible to any willing buyer or seller. Such is clearly not the case with redemption of flower bonds — that is a closed market with a predetermined price designed to promote the sale of United States Treasury bonds.
Our brethren’s opinion sets the stage for extending its rationale to situations where the actual value of an asset to the estate is more than or less than its value as determined by free market forces. Such an extension would be contrary to the express legislative command to appraise assets at their clear market value. Utilization of a single, uniform standard of valuation is a wise legislative decision which we will not contravene. Further, we agree that the "clear market value” is not a market open only to one who must die in order to take advantage of it and where there is only one buyer.
We would reverse the Court of Appeals and *553reinstate the decision of the Wayne County Probate Court.
Williams and Ryan, JJ., concurred with Coleman, C.J.

 E.g., Bankers Trust Co v United States, 284 F2d 537 (CA 2, 1960), cert den 366 US 903 (1961), Rev Rul 69-489, 1969-2 Internal Revenue Cumulative Bulletin, p 172.

 MCL 205.213(1); MSA 7.574(1), in pertinent part, reads:
"(1) The report of the appraiser shall be filed in the office of the judge of probate, and from such report and other proof relating to any estate before the judge of probate, the judge of probate shall forthwith, as of course, determine the clear market value of all estates as of the date of transfer, and the amount of tax to which the same is liable, or the judge of probate may so determine the clear market value of all estates and the amount of tax to which the same are liable without appointing an appraiser.”

 The deceased died on a weekend. According to The Wall Street Journal, the bid and asked prices on such bonds on the Friday before and the Monday after death averaged $234,065.93. Flower bonds are actively traded, daily, in an over-the-counter market.

 The estate was inventoried at $1,334,194.15. The Federal estate tax obligation was $435,193.40. All the flower bonds were redeemed at a par value of $298,000 and applied in partial payment of this debt.

 E.g., Black’s Law Dictionary (4th ed), pp 318, 716. Both parties have accepted this commonly phrased definition.

 In re Estate of Rosenfeld, 62 Cal 2d 432; 398 P2d 783 (1965), In the Matter of the Estate of Behm, 19 AD2d 234; 241 NYS2d 264 (1963), aff'd 14 NY2d 826; 251 NYS2d 475; 200 NE2d 457 (1964), Stanback v Coble, 30 NC App 533; 227 SE2d 175 (1976), cert den 291 NC 177; 229 SE2d 690 (1976), Clapp v Cass County, 236 NW2d 850 (ND, 1975), In the Matter of the Estate of Eggert, 82 Wash 2d 332; 510 P2d 645 (1973). All the relevant cases on this subject are discussed in Anno: Valuation of United States Treasury Bonds for State Inheritance or Estate Tax Purposes, 62 ALR3d 1272.

 Stein v State Tax Comm, 99 Idaho 70; 577 P2d 798 (1978), Second National Bank of Richmond v Dep’t of State Revenue, — Ind App —; 366 NE2d 694 (1977), In re Estate of Voss, 55 Ill 2d 313; 303 NE2d 9 (1973), In the Matter of the Estate of Power, 156 Mont 100; 476 P2d 506 (1970), In re Estate of Kaufman, 53 Ohio St 2d 231; 374 NE2d 142 (1978), In the Matter of the Estate of Beadle, 4 Or App 477; 479 P2d 256 (1971), In the Matter of the Estate of Aul, 154 W Va 484; 177 SE2d 142 (1970).

 MCL 205.213(1); MSA 7.574(1) is quoted in relevant part in fn 2, supra. We see no basis for construing the words "other proof’ in this section to encompass the redemption price (face value). "Other proof’ relates to proof of market value and the redemption price is reflective of actual value.

 See the cases cited in fn 7, supra.