Court Opinion

ID: 9724239
Source: CourtListenerOpinion
Date Created: 2023-08-26 10:49:36.768234+00
Date Added: 2024-06-11T18:24:58.286432
License: Public Domain

FLEMING, J., Concurring.
— Respondents have apparently solved the problem of transferring property from one generation to the next without paying either gift or inheritance tax..
The method involves the transfer of property from parent to child in *956return for a promise, the attribution of an inflated value to the child’s promise, and the assertion on the death of the parent that adequate and full consideration for the property was paid at the time of its transfer. In this case we are solemnly assured that an unsecured promise by private persons to pay a lifetime annuity is worth the same amount of money ($120,000) as a similar promise by Mutual Life Insurance Company of New York. Under this argument the unsecured promise of a private individual becomes equal in value to the promise of one of the largest insurance companies in the world. Wholly ignored is the far greater probability of the insurance company’s performance of its promise, brought about by its vastly superior financial resources, its stability and safety as an enterprise, its regulation as a life insurer by the State of New York, its legal requirements for reserves, its prudential limitations on investments, and its perpetual existence. At bench, not only was the private promise to pay wholly unsecured but it was the promise of relatives, a notoriously unreliable class of promise performers when weighed in the scales of human experience. Additionally, the rights of the promisee were made nonassignable and nontransferable, and no minimum period for payment of the annuity was provided.
Under my calculations the unsecured promise of a relative to pay a nontransferable annuity is worth less than half the comparable promise of a reliable- life insurance company. On this evaluation property worth $120,000 was transferred for a promise whose actual value amounted to less than $60,000. And while it is true that the subsequent income of the transferred property is not strictly relevant to the issue of adequacy of consideration at the time of transfer (Estate of Stevens, 163 Cal.App.2d 255, 265-266 [329 P.2d 337]), still the fact that the annual payments under the annuity were less than the annual income of the property points up the gross inadequacy of the consideration given for the transfer.
While the foregoing conclusions seem self-evident to me, the record is wholly barren of any evidence or expert opinion to alter the tableau staged by respondents, which depicts the unsecured promise of relatives to make periodic payments to the promisee as identical in value with the secured promise of a reliable life insurance company to do the same thing. Unaccountably, the State Controller failed to present any evidence of the true value of respondents’ promise and elected to stand on the evidence produced by his opponents. The record thus contains nothing to contradict the finding and conclusion of the trial court, fantastic though it may be, that the transfer was for an adequate and full consideration in money’s worth. (Rev. & Tax. Code, § § 13641, 13645.) This court cannot create *957evidence, and at this stage of the litigation it would be inappropriate to require the parties to start anew. Respondents, therefore, have won their case by default, and the finding must stand.
A petition for a rehearing was denied May 18, 1973, and appellants’ petition for a hearing by the Supreme Court was denied June 20, 1973.