Court Opinion

ID: 3541841
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:53:25.043656+00
Date Added: 2024-06-11T14:21:43.637837
License: Public Domain

On Petition for Rehearing
The respondents' petition for rehearing insists that the court "has overlooked or ignored" the provision of section 7724, Revised Codes of Montana of 1907, imposing the tax on "all property which shall pass by will or by the intestate laws of this State, from any person who may die, seized or possessed of the same, while a resident of this State, or if such decedent was not a resident of this State, at the time of his death, which property or any part thereof, shall be within this State, or any interest therein or income therefrom, which shall be transferred by * * * gift made in contemplation of the death of the grantor or bargainor, or intended to take effect in possession or enjoyment after such death to any person or persons, * * * in trust or otherwise, * * * by reason whereof any person * * * shall become beneficially entitled in possession or expectancy, to any such property, or to the income thereof, * * * shall be and is subject to a tax * * *." (Emphasis supplied.)
This section was quoted in the court's opinion and it was there pointed out that the foregoing language has been carried over into section 10400.1, Revised Codes of Montana 1935. *Page 175 
It is respondents' contention that the court has "overlooked or ignored" the italicized portion of the statute. If due consideration were given the phrase "in expectancy," the respondents believe the transfer would be taxable when made in 1915.
The question was considered in the majority opinion and in Mr. Justice Gibson's dissent. The dissenting opinion ably presents the very argument that counsel is here asserting. Whatever may be the value of dissenting opinions, they do indicate that the court has considered and passed upon the subjects raised in the dissent. Even a cursory reading of Mr. Justice Gibson's dissenting opinion in the instant case will reveal that the identical question the respondents raise was forcibly brought to the attention of the court.
Respondents assert that a vested estate "in expectancy" passed from Mrs. Kohrs to her daughters at the time the transfer was made in 1915. They fail to mention that this estate was enlarged at the death of Mrs. Kohrs in 1945. Something definite and tangible and of value passed to Mrs. Bogart and Mrs. Boardman at the time the transfer was made. Adopting the respondents' contention, that is taxable under the 1907 law, then in effect at the rate then imposed. But in 1945 when Mrs. Kohrs died and the beneficial interest vested in possession, another taxable transfer occurred. See State Board of Equalization v. Cole, Mont., 195 P.2d 989, decided July 1, 1948.
If the contention of the respondents were granted it would logically follow that two taxes would be imposed, one on the value of the estate of expectancy under the 1915 rate in effect at the date of the creation of the trust and the second on the additional benefits received by the remaindermen on coming intopossession. Perhaps logically the statute is open to that construction and perhaps the statute should be so construed. However the majority of this court took the respondents' admission that this was a "transfer intended to take effect in possession or enjoyment at or after death" at face value. If it was the intent of the transferor that the transfer take effect at death and the *Page 176 
tax is on the transfer, then it follows that the rate in effect at death, the time of transfer, is the proper rate to be imposed.
The legislature looks at taxation in a practical manner. Tax[11]  legislation must be construed in the same way. Thus when a property owner transfers his property to a trustee but retains certain strings on it, the legislature declares that for tax purposes that is no transfer at all. The transferor must completely sever the string. One such string is retention of life income. The legislature and the courts say the retention of a life income indicates an intention on the part of the transferror to keep so much of the property and to exercise so many of the normal incidents of ownership over it that it is not to be considered a transfer at all. Something passed but the beneficiary obtained such a slim fingerhold and the donor kept such a firm grip that for tax purposes the so-called transfer is nugatory. And that is what was done here. Mrs. Kohrs kept the benefits of her gift throughout her lifetime. Those benefits passed to Mrs. Boardman and Mrs. Bogart at her death. That is the time they received their beneficial interest in possession. That is the time the tax is imposed. They received so little when they received an estate in "expectancy" by the trust agreement of 1915 that for tax purposes it is disregarded.
If the court is in error in disregarding it, it is an error redounding to the benefit of the taxpayer and one of which the respondents should not complain. Accordingly the petition for rehearing is denied.
Mr. Chief Justice Adair and Associate Justice Choate, concur.