Court Opinion

ID: 9447023
Source: CourtListenerOpinion
Date Created: 2023-08-03 22:23:31.048626+00
Date Added: 2024-06-11T17:30:52.320890
License: Public Domain

On Petition by Appellee for Rehearing
Before POPE, Circuit Judge, and JAMESON, District Judge.
PER CURIAM.
Appellee has filed a petition for rehearing and has requested that action thereon be deferred until Estate of Mendenhall, decided by the Superior Court of the State of California, in and for the County of San Diego, has been reviewed by the appellate court. In our opinion we stated that the outcome of any appeal in the Mendenhall case would not affect our decision. Is that conclusion justified?
Pursuant to § 811(a) Internal Revenue Code of 1939, 26 U.S.C.A. § 811(a), the value of the gross estate of the decedent for federal estate tax purposes is determined by including the value of all property (except real property outside of the United States) “to the extent of the interest therein of the decedent at the time of his death * * Testamentary disposition is not required, and the tax is not imposed upon the right of receiving property by inheritance. On the other hand, the state inheritance tax of California is imposed “either on the transmission or the exercise of the legal power of transmission of property by will or descent, or on the legal privilege of taking property by will or descent.”1
The Mendenhall decision emphasizes many times the distinction between the federal estate tax and state inheritance tax. The basis for holding that the wife’s interest in her husband’s insurance policies was not subject to inheritance tax was summarized as follows; “It is the Court’s view that no interest in the cash surrender value of the insurance policies involved in this case passed by will or inheritance; that a tax imposed on Mrs. Mendenhall’s legatees, based on the assumption that something of value passed to them, is completely unjustified; that the interest therein received by Mr. Mendenhall was by reason of the contract of insurance. The Court does not deny that Mr. Mendenhall’s position has been improved. The Court does, however, deny that the California inheritance tax statute covers such an interest as he has received, and whether it does or does not should be the prime issue in this case. * * * >>
Judge Thomas, in his opinion in the Mendenhall case, found the reasoning of Chief Justice Hill in his dissenting opinion in the Leuthold case 2 “most cogent and most persuasive”. A portion of Chief Justice Hill’s opinion, quoted in the Mendenhall decision, points up even more precisely the distinction between the federal estate tax and state inheritance tax. The Washington Court had held in the Knight case 3 that no part of the tax surrender value of the husband’s life insurance policies was includable in the wife’s estate, and this holding was expressly overruled by the majority opinion in the Leuthold case. Chief Justice Hill had participated in the Knight case. In his dissenting opinion in the Leuthold case, he said in part:
*904*****
“The Knight case did not hold that a wife had no community interest in the cash surrender value of life insurance policies. It held, and I believe properly, that the interest, whatever its character, did not pass by will or by the statute of inheritance, but that it passed to her husband by the contract of insurance; and there was nothing in our inheritance tax law that made such a transfer of interest taxable.”
Appellee’s petition for rehearing relies strongly upon the opinion of the trial judge in the Waechter case,4 which in turn was predicated largely upon the holding of the Washington Court in the Knight case. The decedent in the Waechter case died when the Revenue Act of 1942 was in effect. Section 811(e) (2) relating to community interest contained the following provision: “In no case shall such interest included in the gross estate of the decedent be less than the value of such part of the community property as was subject to the decedent’s power of testamentary disposition.” The community property provisions of the 1942 Act were repealed by Section 351 of the Revenue Act of 1948, c. 168, 62 Stat. 110, effective with respect to estates of decedent dying after December 31, 1947. The decedent in this case died in 1951. Any requirement of testamentary disposition under the 1942 Act accordingly would not be applicable in this case.
We find nothing in the Mendenhall decision or other California cases to justify a conclusion that the decedent did not have a property interest in her husband’s insurance policies at the time of her death. This interest was taxable as a transfer to her husband. In other words, there was a transfer to the husband within the meaning of Section 810 of the Internal Revenue Code of 1939, 26 U.S.C.A. §§ 810, even though it was not effected by will or inheritance.5
We see no reason accordingly for deferring action on appellee’s petition for rehearing pending appellate review of Estate of Mendenhall. The petition for rehearing is denied.

. See article dealing with inheritance and gift taxes in 26 Cal.Jur.2d at page 691, quoted in the Mendenhall decision.

. In re Leuthold’s Estate, 1958, 52 Wash.2d 299, 324 P.2d 1103, 1111.

. In re Knight’s Estate, 1948, 31 Wash.2d 813, 199 P.2d 89.

. Waechter v. United States, D.C.W.D. Wash.1951, 98 F.Supp. 960.

. Both the Mendenhall opinion and the dissenting opinion in the Leuthold ease expressly recognize that the husband’s “position has been improved”, without calling the change in position a “transfer”. Both of these opinions, however, were concerned with a transfer by will or inheritance.