Case Information

*1 . ,;~. -- OFFICE OF THE ATTORNEY GENERAL OF TEXAS AUSTIN GROVER SELLERS ATTOINW GLNCIAL

lzz-zq Eonorablr horgr 8. Shappnrd

Coaptrollar or Fublio Aoeountr

Anatln, Taxan opinion Ho. o-6691

Dear Sir:

Boa Inolurlon of Srrlor 1, WaIted St8t.8 Oorarnunt Bon Of thr ao-own8r8hIp tfp8 pay8

oludabla In Inhrrltanor tax r

tlm Conptrollar’8 l b ond8 in the Department rrlatlr Inhoritanoo tax ro oror arr outllnmd. Thr lrttrr atat. bond h8 born 18- t 8Urd hb8 b@Il In that

aa a8 anondad, such L@ndh are +nparable to a joint bank account of husband Wm. ‘, .‘~ ,~ J” tharr 1s sabmlttrd copy

Xlth, tb.e above lrttrr, of a lrt.t*$-4om attornry for thr rrtatr undrr oonsldrra- tion in which I8 oontrndad that no intrrrst in these bonds it pa8808 “on aoooant of thr will of thr drrrdrnt or thr law8 Tha attormy in of do8Cont or dlrtrIbutIona. arguoa ordrr for th.80 bond8 to br tarabla 8o!na Intrrrst must pas8 *2 Hon0rabla GSorgr H. Sheppard, Papa 2

on acoourlt cf death; that thr United Statrs Treasury regula- oontraot purohesa, tions, whloh ware S part Of tb have the OffrOt Of giving the rurvivin& 8pOUS@ ownrrshlp under and by vlrtua Of contraoturl right8 and thot no property rights paa8 on OOOU.nt of death. The rroant oa8S of Bdds v. Mltohall (184 9, W. 2nd 823) In rhloh thr owrt hold that the brnril- olary typa of Unltod Stat.8 Govclrnmsnt Bonds were In rrrrot of third por8on8, and illU8trCitOd OOntraOt8 for thr banefit euoh holding by drawing an analogy or that typa or bonds to Thr a ttornry oontrnds an ill8llr6llOr POliOy, 18 oltrd. that thrrr 18 no aatorlal dirrOnn00 botwron thr theory and roa- to br usrd In a drtrrmlnatlon tho roning therrln that qur8tIon prrrankd. TO ovrroomo thr prrsumptlon of the Coap- trollrr*r Department that th.80 bonds are community property the attornry suggest8 an hypothe810 thr Co-ownor named was a prraon other than thr rlfo: and another, t&t the hus- band had a minor 8on.

Thr aborr lattrrr, prrernt no issur a8 to faot8. Thr’ dooodrnt during hi8 1ItrtImS purohasrd SorIr8 qip" 'Onitrd Stat08 GOvOr~mt Bond8 had tham made payablr t0 hISI8Slf Wit@ and it I8 agrard t&t the bond8 Wore puroha8rd with oDmnUity rtULd8. In tho applloetlon or the law, however, lssurs

brtnrrn the Comptrollrr’s Department and thr attorney ibr the rrtata do not appear dlreotly jolnrd. The Comptrollrr rmpha- rIze8 that provlalon or Artlolr 7l17 rhloh inoludrs pasriag by *doad, grant, salr or gift oadr or Intrndrd take rrtrot In po8srsaIon or rnjoymrnt arttrr the death of however, mphasizor Tha attorney, thr grantor or donor”.

that pmvlslon whioh Inoluder proprrty passing ‘*Ml1 or by t& laws or dasornt and dlstrlbutlon or this or any other State”.

Artic1r 7117, !?evised Civil .3t3tutss or Texas as amended, under which the questicn herein arises, is quoted:

“ill croperty within tha ;urisdiction of this State. rosl or :3r;onal, corDorate or incorporate, and a& interest therein, Inhludinz=~ property _ca3sL in@ undrr a eenoral po’.::sr of appointment exercised the dooadont by will, including proceeds of life Ineuranor to the extent or the amount reoolv- ablr by the rrooutor or administrator as insuranor *3 Honorablr Oaorgr B. 3happard, Pago 3

UJldSr pOliOIa8 tSkon Out by tha daoadant upon hia own llfa, to tha l xtant or tha l xo~a a ovar Forty Thourand Dollara ($40,000) or tha amount raoalvabla by all othar banarIoIarIaa aS Inrur- anoa udar pOlIOia8 takan out tha daoadant upon hi8 0wn llra, whathar balonglng to Inhabl- tantr or thir Stat0 or to parson8 who ara not In- hSbltant8, ragardlasr Or whathar 8SOh prop8rty I8 looatad within or without thir Stat., Whioh 8ball 0~88 l baolutaly or In tra8t by wIllor6r &a law8 Oi da8oant Or di8tributiOn Of thi8 Or my otha Stats, by drrd, iwant, 8818. Or gift mad0 or Intandad to taka affaot In am88888Ion or l njomnant rrkr the daath or t&a m9ntor or donor, ahall, upon parrin or rcr tha PI@ or any par- Ion, oorporatlon, l 88ooIation, ba rubjaot to a tax ror tha banatlt or tha Stata' Ganaral Ravonua Fund, In aooordanor with tha roirtnhg olarri.fl- oatloa. Any trSn8fSr mnda by a grmtor, vandor, donor, whathar by drrd, grant, aala, or ulft, rhall, anlarr rhown tha oontrary, bo daamad hats barn mad8 In oontamplatlon of death and nub- to tha 8am tax a8 haraln provldad, jaot It suoh 18 mad8 wlthln twc (2) yoarr prior to tha tran8iar daath or tha grantor, vandor, or donor, oi a nm- tarlal part or his 88tata. or Ii tha tranrrrr aada within auoh parlod la In tha nataro a iinS1 dirtribution 0r propmty without adaquata valuw bla oonrldara tlon. * (mphS8i8 8ddOd) Tho 8OOpS of thi8 Artlola I8 not llmitad lagal davioa through whloh proprrty pa8888 on daath. It lm- poSa8 a tax on the right to rroelva or sucoaad to the pOSSa8- rion or l njoyment of proparty after the death of thr decadent and proprrtg comes wlthln the purview of this statute if such possaeaion until or enjoynnent is mada contingent with or postponed (sar Bethea v. Shep-

the death of tha grantor or donor. pard, 143 S. 3. 2nd 997).

Tha primary question In the instant ~986, thererore, IS whathar wlfa raoalved or suooeadad to the possass~on or njoymant or all or any part of these Sarlrs “3” United Ststas Thrra 18 agrea- Govarnmsnt Bonds on the drath of tha husband. ment that the bonda ware purchased v.ith omuaity fund8 @d that, lnaa tha dasth of tha husband, tha wita 16 thr aola *4 Honors blr korgr H. Shrppard, Pagr L

wn8r thorn. It roiiorr8 that at 10mm time thr lntrrrat 0r tha hurband parrad bD tbr rlfr Itmurt br drtrrmlnrd ah8n and in what manna? thlr ohangr ooourrrd.

Thor8 bond8 raprarant oontrrot with Oovmi- aunt thr Unltrd Stats8 and thr rrgulationr thr Troarurr Ihpartmmt are mdr a part or ruoh oontraot by rrirranO8.

Th* rlrrt l pplloablr rrgulatlon provldrr: 9urIng thr 11~88 or both oo-owa8r8 tha bond will ba paid rlthrr oo-owner upon hi8 rrpratr raquo8t, without roquirlag th r+aturr of thr other ootwnrri and upon payment to l lther oo- wn8r the othrr parson rhall ooa8e to hara anl int8?88t in th@ bondl.* (Treasury Dlp8rtmrnt Rag- uiationr, gubpart I, 6eotlan 315.32. Departmoat Iio. 530, 5th R8virion. ha0 1, 1942. (a) ). Qircolar Obrlouriy, thlr rrgulatlon 18 lntrndrd to fix tb, $zbi!Ey Or th8 UlIitrd Stator GOTrmunt in the oontmot.

pO88r8EiOa Of the bonds the inoidrat of th8 right to oarh them and, on001 th bond8 ar. Oalhed, 88rT48 to lWii8ta th8 Unltrd Stat.8 llablilty. Howaver, it doe8 from any iurth8r IlOt r8gUiRtr th8 right8 Of th8 00-OWUr8 88.ktW88n th8l888lT.8 t8Et; bond8 or in the prOO@Od8 from bond8 if they art

'Phi8 rrguiatlon is not, thrrrfon, In oonfliot ,wr.th fin ookunlty proprrty law or T8xa8.

It 18 W811 88tthd that property puroharrd with oommunlty rundr, property rxohangrd r0r oommunlty proprrty, 18 oommuaity property. (Sa8 23 Tex. Jur. p. 142, %O. and 00888 olkd). Thl8 18 trUS VSD ii thr pllrOha88 Or X- change Is tBn8aCted in thr name or only one epousr end xkare the trsnsaotlon IS In the mm8 of both spouses tho prssump- tlon in favor of the OCeUUUIlty is diffloult to OYeroome. (Se* 23 Tex. Jur. pp. 355, 356, 357, Sot. 307). As 8tated, it has bean agreed thflt bonde in question w8re purchaesd with comnunlty funds and were made payable to the husband or the wire, it follows that the bonds are c0imunlt.v during the existence of thr ooamucity. 0180 fol?O*:S thRt, had they been Oa8hrd prior t0 the OOUUWlity'8 diSSOhtiOn, tha prOO8ed8 would rWOrt t0 CO-it7 fund8.

It is ham noteworthy in tha administration of tha iaW8 of thr radaral Gorrrnmant (partlouiariy tha tax *5 Honorable George H. Sheppard, Pago

law8) full or8dit ha8 boon girrn to the oommunlty law Or Taxa (8M HOpkin 1. BSOOn, 282 U. S. 122) J8 wrll 88 rlmllar law8 or other rtata8 (In Louirlana: hnd8r T.

Piart, 282 U. 9. 127). (In Wa8hix&tonl Pool T. Ssaburn, 282 u. s. 101.). In Lang T. Coamlrsloarr (304 U. S. 64) ihr oom- uunlty proprrtl law 0rthb Stat0 or Wa8haton wf38 reoognizrd thr Su mm@ OOlvt of thr.fJnit8d St8t.8 and it wa8 held only on8- ia ii (l/2) or th8 proorrd8 rr00 lmuzanor p011oi88, th8 wir0 bring th8 8018 bonorloiary and all pr8UIb88 ha+- bern paid for with oanmunity finds, rhould be lnoludod In thr grO88 88t8t6J ?rh18 0888 W88 rOliOwOd in regard drordent’r the oammunltf property law of T8xar in E8t;atr Shram Moody T. Oomml88loaor, 42 B. 1. A. 967,

ml8 88OOnd appl1oablr regulation providrrr 'If 8ith8r OO-owIi8? die8 . . . th8 rurViTiX@ oo-wn8r will br noogairrd a8 t& 8010 and abro- lute owner or thr bond and payunt will bo mdr only to him.' (marurr D8partuat R86ulrt1oa8, Subpart K, Sootlon 315.32. Ikpartment Clrouiar lo.

530, 5th Rovlrlon, June 1, 1942. lb)). In th88e 00-Ownarrrhip typo Of bondr, thir regulation arrate8 i.l~ each OO-ownat thr right Of 8UrViTOr8h1p. ~48 ltatcd, mgulatlon 18 a part 0r ooatraot it mU8t br praruaud that th8 psrtir8 t0 tha OOntraOt intrndrd th8 ffrCt Of th8 rrgulatlon. It rOiiOW8 that in th8 pZ'888nt 8088, th8 hurband wirr latmdbd to onatr br oontrrot the r-t aurrlror- rhip in raoh othrr. It 18 not brllrrrd that 8uch a aontraot ViOlat th8 OO-ity PrOpOrty law Or Tax88 and would ap- p88r that it 8hOuld b8 giV.Il 8ff8Ot. '.

~8 8ugg6st6a, thr rsornt OaeI oi iM63 v. YitOh811 (supra) in whloh the court draws an enaiogy batxeen ths par- ties to a benrilolary type of United States Covcrnment Bond and an lnsuranoe pollog is not lrrelrvant but, lnasm.uch as bonds there In question are the co-ownership type and par- ticularly since the oo-owkcrs ars hU8baUd and wife and tha bonds were purchased with community funds, It must bc con- sidered in oonjunctlon with the ca8a of Blaokmon v. Ilansen

Eonombla Goorgr Ii. Shrppard, Paga 6

(169 9. 'U. 2nd 955 and affirmad 169 9. w. 2nd 962; and 8W 8180 Law Te h8d88iOMr~ 8Upm) & the Blaokmon 1, Canaan Co80 thr daordrnt, after marriage took out polioi On hi8 wn lir8, makin& hi8 Wifa thr bm8fioiary and paid th8 pr8- miLm8 with oommuaitf fuadr aad th8 oourt in holding that only onr-halr (l/2) or th amount war taXabl8 a8 inruranoa “tak8a out by thr deoadont upon hi8 own lii8' under Artlol8 7ll7 raid: abwr Or8OtiT8

"&A thi8 0088 th0 ior Or On+half or thlr rund wa8 fluid8 apprllant. & t8ki.a6 Out tbr8@ PO110108 bar hurbaad, tbatOtiT.if at 18ll8t, g8T8 h.r hi8 OOmIlitlnit~ intW@rt. Thi8 gift wa8 noTar rotokod. 9hr did 8njOJ tb priTii8&8 t0 t&18 girt UpOn hi8 drath; but in- Or 8UOOWdiw iund8 Orrat8d 8M0, 8hr 8Ot8r a8 brr OOMlUlit~ did not, by h8r hurband'r drath, ruoo8od thrrato, &r hu8band at all tim88 prior to hi8 death had pwlr, within limitr, rka 6lrporltion of h8r 8ommunit~ intarrrt In th8 l onay datotrd th8 pamIlt Oi th888 pr8tiUM8 t0 UlOthC. h rxpand ram 8hOt8d fc0 h8r b8lwrit. *IA@, if ill th@ pO11Oia8 t0 ObasO thOr8 wB8 S priTil868 thr brmfioiar~, oould haT8 drrratod it8 8X8rOi8. her lntara8t. Rut @To11 if thrra war ruch a power, h8 did not ChOO88 to 8X8rOi8. it and i8ft h8r 8lOMy inT88t.d iOr h8r brnrfit. OM-hair Oi th thrra pollolr8 only rmprrrmtrd, within uount tha munbg our 8t8tUt88, 'pO1101a8 taken out by thr daoadmt upOn hi8 own iii@.' Th18 18 What apprllant 8uccrrdad to upon thr drath Oi her hnr- band. . ..I)

That the status or tha part108 in these oo-ownrrrhlp type bonds is analogous to tblr status in a bank acoount has Such an analogy is clrar batwern thrso also been s%grsted. bonds and a "joint tSnsncyW typS of bank sooount, vbSrsin funds are dSpoSltSd in the name of both spouses each having thS right to withdraw any part or all of the funds SOd SsSh succeeding to full omrrshlp of the funds on the drath of thr other, In faot, it 1s not impossiblr to thaorlzr that thr status or m-owners in thrsr bonds is OM Of joint trnanol which, although lmpoaaibla Operation Of law (SOS Art. 2580, V.A.C.S.) map ba orestad oonPrsot (8oS Chamllrr ve KauntzS, 130 S. vi. 2nd 327).

Ronorabls G#orgr H. Sheppard, Fags ‘I

u iatsrsr ths thsory or analogy hsra applioablr, substantial ,y thr sams rssults will obtain. In hating thaso bonds and. layabls to huskn4 or wlfs, thr dsosdsnt d1vs to his wira, ” ;rntatlrrl~ his oaemiinlty lntrrsst st laast”, thrrsln. A .thou6h ths girt was ratooabla ths rl&ht bs- stows4 thrr Iby wss asra~slbla through th8 d8084sut'~ oashlng of thr bond L prior his drath, ths bonds wsrs net 80 oashsd the wir I arsssl~sQ suooradad to ths possra~~lon or an-

oyMnt”or ;hs dsosdsnt’s intsrrst nn4irldad OM-half (l/d) bon: I* in

A oatsgorloal nswsr to ths hypp.?+ds Frsssntsd ths socownar with ths husband WaI a parson other tlnn (that thsrs ms a minor son) ooule br mlslsa4 ths rlfs or that and to ~lsouss thsm fully would rrqulrs further hypothsslz % It would pa iar arlsld fr,cm as to spsslflo fast sltuatlo~s. ths oass bare oonsi4srsil even load to lnrolrsd and ml&it subjrots o? frat4 03 th gmrt of tha husband In l so r olsln8 hi, statutory right ci sontrol dlsp~sltlon of ths. oommua- lty proportl and sstopprl on ths Fart oi ths ulfs through fmllun to l et.. This oplnlon should not, thsrs- sllsnoa fors, ba snlardrd apon nor appllse anlsss tAs fasts l rs 14s~ tloal with thoss hors oonsl4srs4. The rorsgoing oonsldrrrd, that it YOU 8m 8dViI38d

Is tha opinion of this on108 th8t OM-half (l/2) Or the valus of thsss S8rl.s “BE” tbikd Stat88 Oorsmr8Ut Beads, payable hnsbane wit8 and purohassd with oommunlty funds, Is tax- Inhsrltanos bls Tax Lawr of Texas and should br \udsr bOlUd8d in th8 iUh~ritano8 ta1 r8pOrte

Yours rrry tr*ly AT'T0FiWY GENERAL OF ThXAS ,/-