Court Opinion

ID: 9628622
Source: CourtListenerOpinion
Date Created: 2023-08-22 09:27:08.9471+00
Date Added: 2024-06-11T18:07:08.795646
License: Public Domain

Mr. Justice Day
dissenting:
I must dissent from the majority opinion as being a strained construction of the inheritance tax laws violative of a sound principle of law — “Where there is doubt as to the construction of a statute imposing an inheritance, succession, estate, or gift tax, it should be resolved in favor of the person taxed, and the statute construed strictly against the taxing power.” 85 C.J.S., page 881.
To understand what the majority opinion has condoned here, we must take a look at the record in the trial court. The inheritance tax commissioner filed his assessment of tax, and under “Miscellaneous Personal Property” listed $10,000 proceeds of the insurance policy which is in dispute here. An examination of the policy will clearly disclose that it was not payable to the estate, could not on the death of the decedent be paid into the estate, and never became an asset of the estate. The majority opinion upholds the action of the tax commissioner by semantics, interestingly playing upon the meaning of “claims” as used in the statute. C.R.S. ’53, 152-12-2. In that respect I pose the question: If this insurance policy, payable as provided herein, were to be found among the effects of a decedent who had no other tangible assets, could the proceeds of such a policy be made subject to the claims and priorities as provided by C.R.S. ’53, 152-12-2? In that section are listed five classes of “claims.” For the proceeds to be subject to the “claims” against an estate they would of necessity be also subject to the priorities provided by law. The proceeds of this policy are completely out of the reach of estate claimants, regardless of their priorities, because *161they are in fact not payable either to the estate or in a manner so as to be subject to claims.
The widespread and disastrous effects which can result from the holding of the majority opinion are incalculable. Lawyers and others planning estates so as to reduce as much as possible the inheritance tax — a legitimate function whether it be in the income tax or inheritance tax field — are confronted with the proposition that insurance earmarked to pay debts comes under the first paragraph rather than the second paragraph of the statute. This could conceivably now include policies pledged as collateral in banks. And what about loans made by insurance companies to their own policyholders? The same reasoning applied in the majority opinion could apply to the reduction of the debts in this particular category. Recently there has grown up a special type of insurance available to banks and loan companies on the life of their borrowers to the extent of the amount borrowed, and payable to the banks or loan companies. Under this opinion they now become taxable. And this despite the fact that these proceeds never come into or never become a part of the estate or subject to the laws thereunder. In Re Ferguson Estate, 113 Wash. 598, 194 Pac. 771, 13 A.L.R. 122. The court said, “ * * * inheritance taxes are imposed upon the succession rather than upon the property * * This is true of our statute as well as the Washington statute. And the court went on to say that the tax accrues upon the death of the decedent. Its amount depends upon the amount of the property passing by succession, determined as of the same date. See also In Re Bowers Estate, 196 Wash. 79, 81 P. (2d) 813. The equity value of the personal property in the case at bar, calculated according to the above rule, could not be determined along with the insurance.
A casual reading of this policy reveals that it is true life insurance, payable to a named beneficiary who, in law, had an insurable interest in the life of the decedent. The majority opinion brushes off as unimportant wheth*162er the policy contained incidents of ownership, and this despite the fact that the commissioner claimed in the trial court, and argued before this court, the very points enumerated in the majority opinion under Item No. 3, “The decedent owned the incidents of ownership which rendered the policy includable in his estate.” I have no quarrel with the commissioner on that point. I believe he was absolutely correct and that the incidents of ownership is an important facet of this decision. The commissioner argues here, and I believe it is true, that the ability of the insured to cancel the policy at will and to have refunded to him portions of the unearned premium, coupled with the fact that the insured paid the premiums, gives him a very necessary incident of ownership. Incidently this is an incident of ownership not found in the Hamilton case. So if that be true, and I reiterate that I believe the commissioner to be correct, then this was a life insurance policy, payable to a named beneficiary, containing incidents of ownership, and it brings the policy squarely within the second paragraph of C.R.S. ’53, 138-4-9, which is quoted verbatim in the majority opinion. In the record in the trial court the assessment of the tax commissioner reveals that there are no other insurance policies on the life of the decedent except this one, and although this one is in fact includable in the estate, it is not includable under “Miscellaneous Personal Property” but is includable under “Insurance Policies.” If it were listed there, standing alone at $10,000, it would reveal quite forcefully that it was not taxable because the total policies of insurance do not exceed $75,000.
Other portions of the majority opinion are alarming. It holds because a debt was reducible the estate was benefited and hence the estate is “unquestionably enriched to the extent of $10,000.” Of course if this were an estate tax like the federal tax, the view of the United States Tax Appeals might be applicable here, but I do not believe that Estate of Matthews, as cited in the ma*163jority opinion is in point when construing our tax laws. The inheritance tax of Colorado is a tax of succession and transfer of property of decedent. The estate may be enriched but the heir is not. He gets the same amount but loses the statutory exclusion of $75,000 in insurance. In the case of encumbered property, the tax is upon the equity and the equitable value of stocks and bonds and other types of securities. Under the majority opinion the commissioner is able to tax indirectly what he cannot tax directly — such things as Blue Cross payments made payable to member hospitals; Blue Shield payments made payable to member doctors; veterans burial benefits; burial benefits under the Social Security Law; fraternal benefits payable to funeral parlors, and a host of prepaid funeral contracts. The reason I envision all of these things being taxed individually is that every one of these payments go either to third parties who might or could be claimants of the third class. These benefits often provide, as did the policy in this case, that they are payable to relatives by blood or to persons equitably entitled thereto by reason of having incurred expenses occasioned by the maintenance or illness or burial of the decedent. Under the majority opinion, instead of the debts of the decedent being fixed at the time of his demise, which so far as he is concerned can neither be increased nor decreased, the commissioner, armed with this opinion, will be able to search outside of the estate to see whether someone, a fraternal society perhaps, or the federal government, will at sometime after the death, pay to someone a portion of the medical, burial or interment expenses. Having found such proceeds, he then disallows as an item of deduction against the estate a sum equal to the benefits paid by any of these agencies. Thus indirectly he can tax every dollar of the proceeds of such benefits. That, in my opinion, was never intended by the legislature.