189 P. 579 | Utah | 1920
Harry S. Harkness, a resident of New York City, died there January 23, 1919. According to the complaint herein a portion of the personal property of the deceased consisted of 2,000 shares of common stock of the Union Pacific Railroad Company, a Utah corporation, the market value of which on the date of decedent’s death was $254,250. It is to collect the amount plaintiff claims to be due to the state of Utah as an inheritance tax on this stock that this action was brought.
The defendants, who are the executors of the estate of said Harkness, have answered, and denied that the deceased owned stock in th Union Pacific Railroad Company of the market value, of $254,250, or that he had any interest in any such stock at that time in any value in excess of $121,722.66; but it is admitted that the deceased at the time of his death was the owner of an equity of redemption in 2,000 shares of the common stock of the Union Pacific Railroad Company, the said deceased in his lifetime having pledged the 2,000 shares of stock, being all the shares of stock in the Union Pacific Railroad in which the deceased at the time of his death had any interest, to Jessup & Lamont, copartners resident and doing business in the state and city of New York. It is further admitted in the answer that there is due the state of Utah, as an inheritance tax upon the interest owned in such stock by deceased at the time of his death, the sum of $3,366.36 and no more. Defendants offered to submit to entry of judgment against the estate of said Harkness for the last-named sum.
The facts necessary to reach a decision in this case were mutually agreed upon in a stipulation of facts. These facts are incorporated in the court’s findings as follows:
“(1) That the total amount of the estate of said Harry S. Harkness, deceased, at the time of his death, was $15,111,106.40.
“(2) That the total indebtedness of the said deceased at the time of his death, including the amount owing Jessup & Lamont, was $4,740,169.40.
“(3) That at the date of his death the said deceased was indebted to the firm of Jessup & Lamont, of New York City, in the sum of $2,051,835.93, which is a part 'of the indebtedness of said*87 estate, and that to secure the said indebtedness the said deceased in his lifetime had pledged to the said Jessup & Lamont securities amounting in value at the time of his death to the sum of $3,936,-087.62, which securities were a part of the assets of said estate at the time of decedent’s death.
“(4) That amongst the securities so pledged were 2,000 shares of the common stock of the Union Pacific Railroad, Company, being all of the shares of the said company in which the deceased at the time of his death had any interest or estate, and that said Union Pacific stock was by the terms of said pledge subject to sale upon default of payment for the discharge of said indebtedness; that such default had not occurred and said stock was not sold at the time of decedent’s death;- that the said stock at the date of the death of said decedent was of the market value of $254,250; and that the excess value of said stock, over and above the indebtedness secured by it, was $121,722.66.”
From tbe above facts tbe court found as conclusions of law:
“That the defendants are liable for the inheritance tax provided by the Laws of Utah upon the sum of $121,722.66 only, that being the value of the interest owned by the deceased at the date of his death in the said 2,000 shares of the common stock of the Union Pacific Railroad Company.
“That said sum is subject to the deductions provided by the Inheritance Tax Law, to wit, $10,000 provided by section 3185 of the Compiled Laws of Utah 1917, and the further sum of $38,395.37 authorized by the provisions of section 3212 of said Compiled Laws, leaving a balance upon which the said tax is to be computed of $73,327.29; and that the tax, under the Statutes of Utah, upon said sums amounts to $3,366.36.
“That the said plaintiff is entitled to judgment against the said defendants for the said sum of $3,366.36 and costs to be taxed.”
From the judgment in accordance with tbe conclusions of law plaintiff appeals.
Tbe following succinct statement of the issues in this ease is taken from respondent’s brief:
“The one difference, then, between the parties to this action is as to the application of the provisions of the Inheritance Tax Law of the state of Utah to the facts existing in this case as they have been agreed upon by and between the parties.
“The position taken by the State Treasurer is that under that law the estate of Harry S. Harkness should pay an inheritance tax upon the full market value (after deducting the proportion of debts as provided in section 3212, C. L. of Utah 1917) of the 2,000 shares of Union Pacific Railroad Company stock, free from all incumbrances,*88 and regardless of tlie fact that at the time of the decedent’s death it was subject to a pledge to secure certain indebtedness contracted by said deceased in his lifetime; the excess value of said stock over and above the indebtedness secured by it being, according to the stipulation, $121,722.66.
“The position of the defendants and respondents, executors of the estate of Harry S. Harkness, is that the estate is subject to pay an inheritance tax to the state of Utah only upon the amount or value of the said stock over and above the amount of the indebtedness for which it was given as security (after deducting the proportion of debts as provided in the said section 3212, C. L. of Utah 1917), which amount is, according to the respondents, the value of the interest owned by Harkness at his death in and to all the property owned by him and subject to inheritance taxation in Utah.”
When considering tbe subject of inheritance taxes, it is necessary to keep in mind that such taxes are not levied upon property, but are taxes upon the succession (Dixon v. Ricketts, 26 Utah 215, 72 Pac. 947), and that, in order to obtain a basis for the succession or inheritance tax,
One of the questions in this case is whether Hardness owned all this stock at the time of his death or only part of it. It is conceded that ownership was in Harkness, but it is insisted that the brokers, because of their possession as pledgees, had an ‘‘interest” in the stock and owned part of it. Their “interest” certainly was not in Utah, and it is the property that has its situs in Utah that must be taken as the basis for estimating the transfer or inheritance tax. All of the stock is here on.the books of the Union Pacific Railroad Company. All of it was in the name of Harkness at the time of his death — he owned it all. If Harkness did not own it within the purview of the inheritance tax law, who did? If one of the firm of Jessup & Lamont, the brokers, had died, leaving a one-half interest in a note for which this stock had been hypothecated as collateral, would his interest in a debt for which the stock was security be subject to the payment of an inheritance tax in Utah? Why not, if he in fact owned an interest in the stock? But owning no interest in the stock,
“Whenever any real estate of a decedent shall be subject to such tax, and there be a life estate or interest for a term of years given to one party or parties, and the remainder to another party or parties, the court shall direct the interest of the life estate, or term of years, to be appraised at its market value, in the ordinary course of trade, and, upon the approval of such appraisement by the court, the party entitled to such life estate, or term of years, shall, within sixty days thereafter, pay such tax, and in default thereof the court shall order such interest in said estate, or so much thereof as shall be necessary to pay such tax, to be sold. * * * Whenever any personal estate of a decedent shall be subject to such tax and there be a life estate or interest for a term of years given to one party or parties, and the remainder to another party or parties, the court shall inquire into and determine the market value in the ordinary course of trade of the life estate, or interest for the term of years, and order and direct the amount of the tax thereon to be paid by the prior estate and that to be paid by the remainderman, each of whom shall pay his proportion of the tax within sixty days from such determination. * * *”
Nowhere in the inheritance tax law is there any intimation that the owner of incumbered property owns less than all of
Section 3212 of the Inheritance Tax Law is as follows:
“"Where any property belonging to a foreign estate is subject to the payment of an inheritance tax in this state, such tax shall be assessed upon the market value of such property remaining after the payment of such debts and expenses as are chargeable to the property under the laws of this state, and in the event that the executor, administrator, or trustee of such foreign estate files with the clerk of the court having ancillary jurisdiction, statements in writing exhibiting the true market value of the entire estate of the decedent owner, and the indebtedness for which the said estate has been adjudged liable, which statements shall be in affidavit form and sworn to by such executor, administrator, or trustee, the beneficiaries of said estate shall then be entitled to have deducted such proportion of the said indebtedness of the decedent from the value of the property within this state as the value of the property within this state bears to the value of the entire estate; provided, that in all such cases where the property within this state consists of personal property only, the statements hereinbefore provided for shall be filed with the attorney-general.”
The tax is to be measured by tbe market value of sueb property remaining after the payment of snch debts and expenses “as are chargeable to the property,” and the debts chargeable to the property are those chargeable “under the laws of this state.” And what are the debts chargeable to the property under the inheritance tax law of this state? The answer is contained in section 3186 of the Inheritance Tax Law, which reads:
“The term ‘debts,’ as used- in this chapter, shall include, in addition to debts owing by decedent at the time of his death, the local or state taxes due from the estate prior to his death, a reasonable sum for funeral expenses, the court costs, the statutory fees of executors, administrators, or trustees, and no other sum. * * *”
The total assets of the ITarkness estate are valued at $15.-111.106.40. The assets in Utah, amounting to $254,250, bear to this total a ratio represented by the decimal .0168, and this factor multiplied by the total debts, amounting to $4,740,-167.40, equals $78,634.85, the proportionate deduction of debts from Utah assets. In addition there should be deducted $2,692.50 as executor’s commissions, or a total deduction of $82,327.34, leaving $171,922.66 as the assets in Utah on which the tax is to be figured. 'When computed according to Comp. Laws Utah 1917, section 3185, the tax owing will be found to be $7,796.13.
The statutes of the various states relating to inheritance taxes are so divergent that we have not found adjudicated cases very helpful in arriving at a conclusion in this case. We have carefully examined the authorities cited by respondents, and while the cases relied upon by them seem, when cursorily read, to fully sustain their position, an examination of the statutes of New Jersey and Massachusetts demonstrates that cases from those states are of doubtful value when applied to the inheritance tax law of this state and the questions here
Counsel call attention to the universally recognized rule that statutes imposing taxes are not to be given a liberal construction in favor of 'the state, but, on the contrary, if there is any doubt as to the exact scope or meaning of such act every intendment is to be regarded as favorable
The judgment is reversed, with costs to appellant. As appellant in his complaint did not correctly state the amount of the tax due, the district court is directed to permit him to allege and demand the proper amount by amendment of the complaint, if he so desires, and that conclusions of law and judgment be entered in harmony with the views herein expressed.