Court Opinion

ID: 4472854
Source: CourtListenerOpinion
Date Created: 2020-01-14 19:34:58.315559+00
Date Added: 2024-06-11T12:02:27.391661
License: Public Domain

Hum, J., dissenting: In the majority opinion, under the heading “Findings of Fact,” appears the following conclusion of law: “The property of the decedent and his wife had been held in community prior thereto.” I accept this conclusion as correct, whether it be called one of fact or of law. Also under the heading “Findings of Fact” in the majority opinion appears the following: The agreement of December 2, 1942, dividing the property into tenancy in common did not constitute a bona fide sale for full and adequate consideration in money or money’s worth. In view of my concurrence with the dissent of Judge Johnson entered herein, I shall confine my discussion to that phase of the majority opinion indicated in the above two quoted statements therefrom and shall be content with pointing out little more than what to me appears to be a fundamental misconception of the character of title to community property. Such misconception is manifest from the following excerpt from the majority opinion: * * * First, under section 812 (b) (5) of the Internal Revenue Code, relinquishment of marital rights in the decedent’s property shall not be considered to any extent a consideration in money or money’s worth. We have found as a fact that the property had been held in' community. Therefore, the agreement of division of property rights on the part of the wife was an agreement to relinquish “marital rights in the decedent’s property,” since the right to community property arises under California law because of the marital estate. The majority opinion proceeds to its conclusion on the incorrect theory that the property right of decedent’s wife in the community property was a “marital right in decedent’s property.” The community property here in question derived its community character from the law of California applicable to the fact that it was acquired by decedent and his wife while resident in that state. But under the law of California neither the decedent ñor his wife had any interest, title or ownership, marital or otherwise, in the other’s interest in the community property. While the community character of the property arose from the marriage relationship of decedent and his wife, their respective interests in such property were individually wholly owned. The wife had no interest whatsoever in decedent’s interest in the community property and decedent had no interest whatsoever in his wife’s interest in such property. In the instant case there were living two children of the spouses. Therefore, neither decedent nor his wife had an inheritable interest in the other’s interest in the community property. Certainly there were no common law marital rights of either the decedent or his wife in the other’s property. The foregoing statements are so fundamental in the concept of rights in community property that they are axiomatic and need no citation of authorities in their support. Since decedent’s wife had no interest whatsoever in his interest in the community property, marital or otherwise, there was and could be r¡o “relinquishment of marital rights in decedent’s property” by his wife in the transfers whereby the rights of decedent and his wife in the community property were converted to rights held by them as tenants in -common. This being true, we have no question here of whether there was a relinquishment of marital rights for an adequate and full consideration in money or money’s worth. It has been uniformly recognized by the courts, including this Court, that spouses in a community property state may by contract between them convert their separate property into community property and convert their community property into separate property. In the case of Samuel Friedman, 10 T. C. 1145, we held that the right to convert separate property into community property was supported “by an array of authority that neither writing nor consideration is necessary to support such a transfer.” Specific cases cited in support of that text were Kenney v. Kenney, 30 Pac. (2d) 398, and Estate of Joe Crail, 46 B. T. A. 658. If, however, the argument in the majority opinion to the effect that the transfers were not made for an adequate and full consideration in money or money’s worth should still be deemed to merit attention, it is only necessary in refutation thereof to recite the fact that each of the spouses transferred to the other an undivided one-half interest in the community property to be held by him as a tenant in common. Whatever was the money’s worth of such transfer by each spouse, it was adequately and fully met by a like transfer to him. It will be borne in mind that before the transfers each of the spouses owned a moiety of the entire property in community, and after the transfers each of the spouses owned a moiety of the entire property as tenants in common. Both before and after the transfers each spouse had an undivided one-half interest in the entire property and the only effect of the transfers was to change the character of the title in each from that of a community interest to that of an interest of a tenant in common. It can not, therefore,' be properly said that adequate and full consideration in money or money’s worth for the transfer by each spouse to the other must be measured by the market value of one-half of the property involved, for no such transfer was made, since after the transfer each spouse had the same quantum of property he had before the transfers. The consideration for the change of the character of the title by which each spouse held such quantum lies4n the transfer from each to the other. It was an adequate and full consideration in money or money’s worth. The fundamental misconception by the majority of the character of the interest of decedent’s wife in the community property led to its conclusion which, in my opinion, is basically incorrect. Leech and Johnson, JJ., agree with this dissent.