Court Opinion

ID: 4136636
Source: CourtListenerOpinion
Date Created: 2017-02-18 02:15:53.95395+00
Date Added: 2024-06-11T14:45:45.607810
License: Public Domain

Hon. Robert S. Calvert         OPINION NO. W-343
Comptroller of Public Accounts
Capitol Station                Re: Mstributlon of the Estate
Austin, Texas                      of Jesse H. Jones for
                                   Inheritance Tax parposes.
Dear Mr. Calvert:
          We quote the following from your letter requesting our
opinion   on the above captioned matter.
               "Jesse H. Jones died testate on June 1, 1956,
          a resident of Harris County, Texaa, seized and
          possessed of a community estate that had a gross
          value of $10,007,506.36. The undivided one-half
           l/2) community interest of the deceased is
          65,003,753.18, and accordingly, an Inheritance
          tax report was filed with this department on this
          basis.
               "An examination of the will of the deceased
          reveals that after numerous special bequests the
          testator disposes of his entire community estate
          of himself and surviving wife.  The residuary es-
          tate Is devised in trust to four trustees and from
          the income of said trust, the trustees must pay
          the surviving wife an annuity of $75,000.00 for
          life. If there is any income left after the payment
          of the annuity of '$75,000.00to the surviving wife,
          the balance of the income must be paid to 'Houston
          Endowment, Inc.', a charttable, educational or
          religious foundation, for use within the State of
          Texas.
               "The first paragraph of the last will and
          testament of the deceased reads as follows:
               "'The terms 'my estate", 'my residuary es-
          tate"',"my property" and other lfke expressions
          in this ,willwhich designate, dispose of or refer
          to any estate or property or interest or share
          therein ahall (except where otherwise expressly
          indicated) be deemed to fnclude and affect my
                                                        i

Hon. Robert S. Calvert,   page   2,   Opinion No. (WW-343)

       wife's interest or share (as well as my own)
       in our community property and estate, and all
       of any separate property which I may die
       possessed of or entitled to, It being my pur-
       pose and intent by provisions of this will
       (except where otherwise expressly indicated)
       to devise, bequeath, dispose of, and, as
       directed, to affect not only any separate
       property of my own, but also all (including
       my wife's share and interest therein as well
       as my own) of the community property and
       estate of my wife and myself. This inclusion
       and disposition of my wife's share of our
       community property and estate is made with
       her knowl;edgeand approval, and because of
       my belief that better provision for my wife
       will result. And if my wife shall, after
       my death, elect to claim and receive her
       legal share of any of our community property
       otherwise disposed of by this will, then
       the provisions of this will for benefit of
       my wife shall lapse and become null and
       void, and at my death all of my property
       and estate (not including my wife's share
       of our community property and estate) shall
       pass and vest as hereinafter in this will
       expressly provided for such contingency.'
            "The surviving wife by this clause was
       put to her election, either to take this
       property under the will or to repudiate ssme
       and claim her one-half (l/2) interest in the
       community property. She elected to take under
       the will, and the question arises over the
       correct method of distribution thereunder and
       the computation of the inheritance tax thereon.
            "The executors of this estate reported
       only the decedent's one-half (l/2 undivided
       community interest ($5,003,753.18j as being
       taxable, only one-half (l/2) of each special
       bequest as being taxable, and only one-half
       (l/2) of the annuity ($37,500.00) as being
       taxable to the surviving wife. The residue
       of the decedent's undivided one-half (l/2)
       community interest was distributed to the
       'Houston Endowment, inc,' as exempt.
Hon. Robert S. Calvert,   Page No. 3   Opinion No. (Ww-343)

             "We believe that the entire community estate
        ($10,007,506.36) is taxable and should be dis-
        tributed for inheritance tax purposes. Certainly,
        the full amount of each special bequest is taxable
        as well as the $75,000.00 annuity to the surviving
        wife instead of the $37,500.00 reported by the
        executors. Of course, if the value of the annuity
        to the wife does not exceed the value of her
        community Interest in the estate plus a $25,000
        exemption, she would owe no tax. The residue of
        the estate is exempt because the will states that
        the money must be used In Texas that goes to the
        'Houston Endowment Inc.' There seems no doubt
        in our minds that each special legatee receives
        the full amount under the terms of the last will
        and testament of Mr. Jones, and, therefore, the
        full amount is taxable to each special legatee."
        Article 7117, Vernons Civil Statutes, provides in
part as follows:
             "All property within the jurisdiction of
        this State, real or personal, corporate or in-
        corporate, . . . which shall pass absolutely or
        in trust by will or by the laws of descent or
        distribution of this or any other State, or by
        deed, grant, sale, or gift made or intended to
        take effect In possession or enjoyment after
        the death of the grantor or donor, shall, upon
        passing to or for the use of any person, corpora-
        tion, or association, be subject to a tax for
        the benefit of the State's General Revenue Fund,
        in accordance with the following classification.
        . * .I' (Underscorlng ours)
        By virtue of the above statute if upon the wife's
election to take under the will, the community property of
the wife passed to the devisees by the will of the husband
then it is subject to the inheritance tax. The Texas inherit-
ance tax is a privilege tax levied on the privilege of re-
ceiving or succeeding to property which passes under the
conditions named in Article 711 . Our courts in Kelly v.
Kelly, 294 S.W. 518 gComm. App.3; Kerena National Bank v.
Stockton 281 S.W. 5 0 (Tex. Civ. App.). and Grange v.
Kayser, 80 S.W.2d 1007 (Tex. Civ. App.) held that where
the husband by will disposed of the community estate and
the wife elected to take under the will that the devlsees
named in the will took title to the property under the
husband's will.
Hon. Robert S. Calvert,   Page 4,   Opinion No. (WW-343)

        The court in Jones v. State, 5 S.W. 26 973 (Corm.
App.), was confronted with a fact situation where an indi-
vidual had died leaving a will disposing of the community
estate of himself and his surviving spouse. In that case
the surviving spouse had received under the will of the
decedent an estate equal in value to her one-half share
of the total community estate. The surviving spouse
elected to take under the will and the State assessed an
inheritance tax'against her based on the amount given her
under the will. The court held that since the amount so
received by herunder the will was not in excess of the
amount that she owned as a one-half owner of the community
estate that no inheritance tax was due. The court held
that the tax was not due because the will passed no property
to the surviving spouse. The court stated as follows in
this connection:
             "Now if the surviving widow owned in her
        own right an undivided one-half interest in the
        community property of herself and husband, then
        she had title to that extent to such property,
        and if the will of deceased did not pass any
        property to her, clearly she is not taxable.
        The will did not pass any property whatever
        to her, because it operated only as an ef-
        fective partition of the community property
        after death. . . .'I
        It follows from the Jones case, in that the annuity
provided for the surviving wife is less than the community
share of the wife no tax is due from the surviving spouse,
        The other devisees, unlike the surviving~spouse did
not own an undivided one-half interest (or other interest)
in the community property of Mr. & Mrs. Jones. Mr. Jones'
will did not operate as to these other devisees as a
partition of the community property, and we hold that such
other devlsees succeeded to the property by virtue of the
will and received title thereunder. Attorney General's
Opinions V-704, andVq146, written in 1948 and 1951 held
to the contrary on the theory that upon the wifess
election to take under the will, that the third party
devisees did not take under the will-- but received the
property as a gift from the surviving wife. The Kelly,
Stockton, Kaiser and Jones cases, supra, refutes this
theory. As stated above, the court in the Jones case
stated that the wife's election to take under the will
"operated only as an effective partition of the community
Hon. Robert S. Calvert, Page 5,   Opinion No. (WW-343)

property after death. . . .' It seems clear to us that this
partition of the comm;lnityestate was between the surviving
wife and the husband. The wife received full titie to the
property devised to her and the husband's estate acquired
complete title to the balance of the community property and
as stated In the Stockton case, supra, "such ownership
dated back to the date of his death."
        We therefore hold that the third party devisees
take under the will and are subject to the inheritance
tax levied b Article 7117, V.C.S. Prior Attorney GeneralIs
Opinion V-705;over-ruled two prior opinions of this office,
same being Opinion Numbers 191 and O-4109. These two
opinions are re-instated and Attorney General's Opinions
V-704 and v-1146 are over-ruled,
                           SUMMARY
         Where surviving spouse elects to let her share
         in the community property pass under deceased
         spouse"s will which disposed of the entire com-
         munity estate the third party devisees are sub-
         ject to the tax levied under Article 7117, V.C.S.,
         according to the value of the entire community
         estate received by them. The community property
         received by the surviving spouse is not taxable
         if the property received is not more than the
         value of her community share plus the $25,000
         exemption. Attorney Oeneral's Opinions V-704
         and v-1146 are over-ruled and Attorney General's
         Opinions 191 and O-4109 are reinstated.
                                  Yours very truly
                                  WILL WILSON
                                  Attorney General
                                  By &-7$.yf”-“7p-
                                     W. V. Geppert
                                     Assistant Attorney General
WVG/vk
APPROVED:
OPINION COMMITTEE
George P. Blackburn, Chairman
John Reeves
John Webster
Mary K. Wall
REVIEWED FOR THE ATTORNEY GENERAL
By: James N. Ludlum