IN RE ESTATE OF ROBERTS.
No. 00-2138
Supreme Court of Ohio
February 27, 2002
94 Ohio St.3d 311 | 2002-Ohio-791
Submitted October 17, 2001. APPEAL from the Court of Appeals for Miami County, No. 2000CA15.
SYLLABUS OF THE COURT
Under
COOK, J.
{¶ 1}
{¶ 2} In February 1993, Robert Lawrence Roberts retired from his employment with Pioneer Rural Electric Cooperative, Inc. (“Pioneer”).1 During Roberts’s employment, both Roberts and Pioneer had contributed to an employee retirement fund administered by the National Rural Electric Cooperative Association. When Roberts retired, his Pioneer retirement account contained $346,440.22, a sum composed of Roberts’s contributions ($9,463.50), interest on Roberts’s contributions ($12,813.45), ordinary income ($201,288.08), and capital gains ($122,875.19). Immediately upon his retirement, Roberts received a check for $9,463.50, the amount of his own after-tax contributions to his employee retirement account.
{¶ 3} Shortly after he retired from Pioneer, Roberts requested that the remainder of his employee retirement fund—$336,976.72—be transferred to an IRA he had previously opened with Edward D. Jones & Company. Of the amount rolled over to the IRA, $12,813.45 represented the interest earned on Roberts’s contributions to his Pioneer employee retirement fund. By the time that Roberts died in November 1997, the value of his IRA had grown to $597,347.
{¶ 4} In June 1998, Roxie L. Roberts, as administrator of the estate of Robert Lawrence Roberts, filed an Ohio estate tax return that reported no tax due. The estate listed among Roberts’s assets the value of the rollover IRA with Edward D. Jones & Company; the estate claimed, however, that the entire value of the IRA was excluded from the value of the gross estate by virtue of
{¶ 5} The estate and the commissioner submitted the matter to the probate court on briefs and joint stipulations. The estate conceded that $22,713.94—the amount representing earnings and appreciation traceable to Roberts’s contributions to his Pioneer employee retirement account before the rollover to his IRA—was “fully taxable under any reading of
{¶ 7} The cause is now before this court pursuant to the allowance of a discretionary appeal.
II
{¶ 8} The estate offers three propositions of law, all of which surround the proper interpretation of
“Except as provided in division (B) of this section, the value of the gross estate includes the value of an annuity or other payment receivable by a beneficiary by reason of surviving the decedent under any form of contract or agreement under which an annuity or similar payment was payable to the decedent, or the decedent possessed the right to receive such annuity or payment, either alone or in conjunction with another, for the decedent’s life or for any period not ascertainable without reference to the decedent’s death, or for any period which does not in fact end before the decedent’s death.
“However, the value of the gross estate includes only such part of the value of the annuity or other payment receivable under the contract or agreement as is proportionate to that part of the purchase price of the contract or agreement contributed by the decedent. The value of the gross estate does not include the part of the value of the annuity or other payment as is proportionate to the part of the purchase price of the contract or agreement contributed by the employer or former employer of the decedent, whether to an employee’s trust or fund forming part of a pension, annuity, retirement, bonus, or profit-sharing plan or otherwise, if the contributions were made by reason of the decedent’s employment.” (Emphasis added.)
{¶ 10} In support of its argument, the estate first asserts that
{¶ 11} When ascertaining the meaning of statutory language, we must give meaning to all portions of the statute. See Sims Bros., Inc. v. Tracy (1998), 83 Ohio St.3d 162, 166, 699 N.E.2d 50, 54. In this case, we must look to both paragraphs of
{¶ 12} The first paragraph of
{¶ 14} Regardless of how we characterize the second paragraph of
{¶ 15} The exclusion allowed by the second paragraph of
{¶ 17} In support of its interpretation, the estate first argues that nothing in the language of
{¶ 18} The estate also attempts to support its interpretation by emphasizing the phrase “or otherwise” in
{¶ 19} Admittedly, the phrase “or otherwise” in
Judgment affirmed.
MOYER, C.J., DOUGLAS and F.E. SWEENEY, JJ., concur.
RESNICK, PFEIFER and LUNDBERG STRATTON, JJ., dissent.
LUNDBERG STRATTON, J., dissenting.
{¶ 21} I respectfully dissent from the majority’s restrictive interpretation of
{¶ 22}
{¶ 23} The statute refers to “the purchase price of the contract or agreement” then provides qualifying examples. The majority contends that the only applicable contract is the IRA the decedent had with his brokerage company because that is where the funds are currently located and the decedent’s Pioneer account, into which the employer paid contributions, no longer exists. I do not agree with this narrow reading. The statute does not expressly require that the employer’s contribution be confined to a “contract or agreement” that is established or maintained by the employer. The statute enumerates certain applicable funds but also provides for an alternative by including the words “or otherwise.” The majority’s construction of the statute renders useless these words if “contract or agreement” must be one of the employer-established funds referred to in the statute.
{¶ 25} This is a taxing statute that the General Assembly has amended through the years. The statute initially excluded only public pensions from the value of the gross estate. 1967 Am.Sub.S.B. No. 326, 132 Ohio Laws, Part I, 1942. The General Assembly subsequently expanded this to include the armed services, police and firefighters, and later both public and private employer-funded retirement funds generally. 1970 H.B. No. 865, 133 Ohio Laws, Part III, 2706; 1975 Am.Sub.S.B. No. 145, 136 Ohio Laws, Part I, 396; 1976 Am.H.B. No. 1013, 136 Ohio Laws, Part II, 3467.
{¶ 26} I believe that the General Assembly has consistently focused on the source of the funds, not the name of the fund in which they exist at the time of death. If an employee is terminated and forced to withdraw or roll over a retirement fund, or the employee elects to move the funds out of an employer’s stock plan that is decreasing in value, the employee should not be penalized for moving the retirement assets from the employer-created fund into another fund, so long as the source of the funds is identified. I do not believe that the General Assembly intended to penalize such transfers.
{¶ 27} This decedent rolled his Pioneer retirement account directly into an IRA opened with Edward D. Jones & Company. This dispute concerns only the amount transferred that represents his employer’s contributions and interest earned on those contributions. It is undisputed that the amount representing earnings and appreciation attributable to the decedent’s contributions is fully taxable. In fact, the decedent withdrew the funds that he contributed and paid taxes on that amount. I believe that the mere transfer of funds from one account to another should not convert the employer’s contributions into assets valued as part of the decedent’s gross estate.
{¶ 28} I believe that a qualified rollover IRA falls within the contract or agreement referred to in
RESNICK and PFEIFER, JJ., concur in the foregoing dissenting opinion.
McCulloch, Felger, Fite & Gutmann Co., L.P.A., and William B. McNeil, for appellant, estate of Robert Lawrence Roberts.
Betty D. Montgomery, Attorney General, and Barbara L. Barber, Assistant Attorney General, for appellee, Thomas M. Zaino, Tax Commissioner of Ohio.