DocketNumber: Docket No. 5594.
Citation Numbers: 9 B.T.A. 450, 1927 BTA LEXIS 2585
Judges: Love, Littleton, Tkussell, Smith
Filed Date: 12/1/1927
Status: Precedential
Modified Date: 1/12/2023
*2585 TRANSFER OR INHERITANCE TAXES. - Taxes paid by the executors to the States of New York, Connecticut, West Virginia, New Jersey, Michigan, Colorado, Illinois, Kansas, and Wisconsin under their respective transfer, inheritance or legacy-tax statutes are legal deduction for the year 1922 from gross income of the estate of Harriet M. Don, which was in the process of administration.
*450 The Commissioner determined a deficiency in the amount of $4,788.23 in income tax of the estate of Harriet M. Don for the year 1922. The deficiency arises from the respondent's disallowance of a deduction from the gross income of the estate for 1922 of amounts aggregating $27,328.48 representing taxes paid in that year by the executors to nine different States under their respective transfer or inheritance-tax statutes. The facts are admitted in the pleadings and by stipulation.
FINDINGS OF FACT.
The taxpayer is an estate of the County of Saratoga, New York, whose address is in care of Manufacturers National Bank of Troy, *2586 Troy, N.Y., and the petitioners herein were duly appointed as executors thereof.
During the year 1922 the estate was in the process of administration and the executors paid transfer or inheritance taxes to the following States in the amounts named:
New York | $23,866.13 |
Connecticut | 103.14 |
West Virginia | 19.60 |
New Jersey | 2,881.30 |
Michigan | 87.77 |
Colorado | 21.38 |
Illinois | 71.75 |
Kansas | 181.42 |
Wisconsin | 95.99 |
Total | 27,328.48 |
*451 Under the terms of the will of Harriet M. Don the residue of the estate is left in trust for the benefit of her two children. The eleventh paragraph of the will provides: "that all transfer, inheritance and estate taxes be paid out of my estate generally as an expense of administration," and the above-mentioned taxes were so paid by the executors during 1922.
It is agreed that the Revenue Act of 1921 is applicable to this proceeding.
The income of the estate of Harriet M. Don accumulated and was not paid out during the year 1922, for the reason that legal questions arose and the executors of the estate would not make payments until directed to do so by the surrogate. Distribution was not made until February, 1923.
*2587 In the income-tax return for the estate for the year 1922, the executors deducted from gross income the amount of $27,328.48, representing the transfer or inheritance taxes paid out of the corpus of the estate and the Commissioner disallowed such deduction resulting in the deficiency in question.
OPINION.
TRUSSELL: The issue in this case is whether the respondent erred in refusing the petitioners the right to deduct from the gross income of the estate of Harriet M. Don the amount of inheritance or transfer taxes paid by the executors during the taxable year to the nine States named in the findings of fact.
Section 214(a)(3) of the Revenue Act of 1921, with certain exceptions not pertinent to this proceeding, permits an individual for the purpose of ascertaining his net income to deduct from his gross income "taxes paid or accrued during the taxable year."
Section 219 of the same act provides:
(a) That the tax imposed by sections 210 and 211 shall apply to the income of estates or of any kind of property held in trust, including -
(1) Income received by estates of deceased persons during the period of administration or settlement of the estate.
Subdivision (b) of*2588 said section 219, in effect provides, with exceptions not material here, that the net income of an estate shall be computed *452 in the same manner as that of an individual. The question then is whether the inheritance or transfer taxes paid by the executors are deductible from the gross income of the estate or are deductible by the distributees. We must be guided by the nature of the tax as imposed by the state statutes as construed by their courts. .
Under authority of the Board's decision in the case of , the taxes paid by the executors to the States of New York, Connecticut, West Virginia, New Jersey, and Michigan under their respective transfer or inheritance-tax statutes are legal deductions from the 1922 gross income of the estate of Harriet M. Don, which was in the process of administration.
There remains to be decided the question of the deductibility of the taxes paid by the executors to the States of Colorado, Illinois, Kansas, and Wisconsin. Neither counsel has referred us to any decisions by the highest courts of these*2589 States nor have we been able to ascertain that there are any such decisions involving the precise question here involved.
The Colorado inheritance-tax law, Compiled Laws of Colorado, 1921, Chapter 156, imposes "upon the transfer of any property" from the deceased to any beneficiary, a tax graduated in proportion to the amount of the inheritance and with respect to the degree of relationship of the beneficiary. The said act further provides:
7489.
7490.
7491.
The Illinois inheritance-tax law, Callaghan's Illinois Statutes Annotated, 1924, vol. 7, ch. 120, P396, imposes "upon the transfer of any property" from the deceased to any beneficiary, a tax graduated in proportion to the amount of the inheritance and with respect to *453 the degree of relationship of the beneficiary. The said act further provides:
P398.
P399.
P400.
The Kansas succession-tax law, Revised Statutes of Kansas, 1923, ch. 79 - Taxation, art. 15 - Taxation*2592 of Legacies and Successions, imposes a tax upon "All property * * * which shall pass by will or by the laws regulating intestate succession," at rates graduated in proportion to the amount of the inheritance and with respect to the degree of relationship of the beneficiary. The said act further provides:
79-1502.
79-1506.
The Wisconsin Inheritance Tax Act, Wisconsin Statutes, vol. 1, 1925, sec. 72.01, imposes "upon the transfer of any property" from a deceased to any beneficiary, taxes graduated in proportion to the amount of the inheritance and with respect to the degree of relationship of the distributees. The said act further provides:
72.05
(2) Payment; Receipt. * * *
(3) Bond or Receipt Necessary. But no executor, administrator or trustee shall be entitled to a final accounting of an estate, in settlement of which a tax is due * * *.
72.07.
In the case of
224.
A comparison of each of the transfer or inheritance-tax laws of the States of Colorado, Illinois, Kansas, and Wisconsin, with the New York transfer-tax law shows that they are not distinguishable in any material aspect. In each instance the State looks primarily to the decedent's personal representative and to the estate for the payment of the transfer or inheritance taxes.
*455 Under authority of
Considered by SMITH, LOVE, and LITTLETON.