Citation Numbers: 6 Or. Tax 559
Judges: CARLISLE B. ROBERTS, Judge.
Filed Date: 7/25/1975
Status: Precedential
Modified Date: 1/13/2023
Decision for plaintiff rendered July 25, 1975.
Plaintiff, the widow of Oliver W. Bryant, an interested party within the purview of ORS
The personal property of a decedent held in joint tenancy is taxable under the provisions of ORS
"(2) (a) Whenever property, other than real property held by the entirety, is held in the joint names of two or more persons, or deposited in banks or other institutions or depositories in the joint names of two or more persons and payable to either or the survivor, upon the death of one of such persons the right of the surviving joint tenant or tenants, person or persons to the immediate ownership or possession and enjoyment of such property shall be deemed a taxable transfer in *Page 562 the same manner as though the whole property to which such transfer relates belonged absolutely to the deceased joint tenant or depositor * * *."
The plaintiff asserts that one-half of such property in the present case is not taxable under the statutory exception provided by ORS
"* * * excepting therefrom such parts thereof as may be shown to have originally belonged to such surviving joint tenant or person, and never to have been acquired from the decedent for less than a fair consideration in money or money's worth, * * *."
It is plaintiff's contention that she provided consideration for at least half of the joint property, it being provable that, at a minimum, she performed half of the work, services and skills that resulted in the accumulation of the property found in the estate for which refund is claimed, such one-half of its value being excludable from tax as having been acquired for a "fair consideration in money or money's worth, * * *."
The testimony concerning plaintiff's contribution to the family enterprise of time, effort and skills was abundant. The facts to which she and her daughter, Mrs. Orem, testified, although self-serving, were not contested. Numerous other witnesses testified without contradiction as to the initiative, long hours and hard labor contributed by plaintiff and as to the authority exercised by her in the grocery store.
On May 12, 1923, the plaintiff, age 16, married Oliver W. Bryant, age 18. Four months after their marriage, the couple moved from Wichita, Kansas, to Portland, Oregon, where the husband's parents resided. Mr. Bryant's parents made a loan to the young couple which enabled them to purchase a small grocery store in Portland. They lived in the rear of the store and worked seven days a week from approximately *Page 563 7 a.m. to 11 p.m. In this first venture, some personal services were rendered by the parents.
The original loan was repaid; the store was profitably sold in 1929. The couple made successive purchases of stores located at 6010 S.E. Foster Road, which was owned for approximately a year, and a store located at S.E. Clinton Street and S.E. 33d Avenue, which was owned for approximately six years until 1936. In each of the stores, the business was built up and operated through the joint efforts of the claimant and her husband and the title to each was held jointly. In addition, between 1936 and 1938, the couple purchased store inventories from several bankrupt grocery stores, which were resold at a profit. The goods had to be moved, cleaned up, and prepared for sale. In all these transactions, the testimony was that the couple again shared equally in the planning and in the physical labor required and, in addition, the plaintiff was responsible for most of the bookwork that was necessary for these transactions.
In 1938, the plaintiff and her husband purchased in their joint names a grocery store located at 800 N.E. Broadway, which was operated under the assumed name of Broadway Thrifty Market until 1959, when it was sold. The couple lived in a small house located at the rear of the store. The uncontradicted testimony of several witnesses was that, from 1938 until approximately 1948, the couple worked side-by-side in operating the store, which was open from 7 a.m. to 11 p.m., seven days a week. During the 1950s, the decedent's health began to deteriorate, severely restricting his activities in the operation of the grocery store. During this time, the plaintiff put in substantially more hours at the store than did the deceased, who was hampered by an allergy condition, an ulcer which required removal of 85 percent of his *Page 564 stomach in 1954, a hernia, several eye operations, and the development of emphysema in 1957.
After the sale of the store in 1959 and until the death of Mr. Bryant on April 15, 1972, the plaintiff handled most of the couple's financial transactions, in addition to the bookkeeping, including writing all of the checks for their expenditures, as well as caring for the ailing Mr. Bryant. All assets that were acquired by the Bryants' joint efforts during this time as well as throughout their marriage were held in their joint names in conformity with their understanding of a de facto partnership.
The facts are such that there can be no question that the plaintiff contributed one-half or more of the mental and physical efforts which led to the accumulation of the jointly held personal property included in the decedent's estate which is the subject matter of this suit. All property that was referred to in the testimony consistently was held in joint tenancy and no testimony was provided that any of the assets acquired by the couple were attributable to any source other than their joint efforts, such as assets brought into the marriage, gifts, or inheritance, except for some Kansas realty inherited by decedent and his sister. The parties have stipulated that decedent's receipt of $10,000 in 1971, on sale of this property, is not a part of the joint assets of the estate here in dispute.
Other than the Kansas account, the defendant disputed the plaintiff's position on the ground that the plaintiff has not in fact established the presence of a partnership between herself and the deceased.
The defendant rests its assertion upon the following facts and the inferences derivable therefrom: (a) the absence of any demonstrable formalized agreement *Page 565 between husband and wife; (b) the fact that no yearly division of the profits of the allegedly joint enterprise was reflected in the books (which were kept by the plaintiff); (c) the stores' successive municipal business licenses named the decedent as the sole proprietor; (d) the truck used in the business was licensed, and the casualty insurance thereon was issued, in the decedent's name only; (e) the joint federal and state income tax returns regularly filed by the decedent and plaintiff listed the plaintiff as "housewife"; (e) no partnership returns, federal or state, were ever filed by the decedent and plaintiff; and (f) social security self-employment tax was paid on the income tax returns on behalf of the husband but not for the wife.
In the absence of a partnership, it is the defendant's assertion that, even though the plaintiff provided half or more of the efforts that resulted in the couple's income, there can be no exclusion of this portion under the provisions of ORS
In the defendant's assertion as to the requirement of a formal partnership before assets can be exempted under ORS
"[o]ne of the manifold duties imposed on a wife by the marital relationship is that she shall assist her husband, and that services rendered in such *Page 566 assistance are presumed to be gratuitous. This doctrine emanates from the common law and is a salutary rule. * * *"
The Supreme Court further stated, at 689, that
"* * * the law is well-settled that a wife may not recover, in the absence of an express contract or statutory provision, from her husband for her personal services rendered him, whether in the household or in his business. * * *"
Defendant contends that these conclusions require that this court declare the property in question fully taxable under ORS
In reviewing defendant's position, it must be noted that inJennings, supra, plaintiff was seeking to have a trust declared rather than attempting to determine the taxability of an estate under the inheritance laws. In that case, the actual ownership of the contested property was in the deceased's sole name rather than being held in any form of joint ownership, and, furthermore, the plaintiff-wife therein asserted, at 689:
" '* * * That the said C. W. E. Jennings believed in the husband controlling everything and plaintiff submitted to his demands.' * * *"
While this court has no power, as the plaintiff suggests, to overrule the general statements necessary to the decision made by the Supreme Court in that case, it also must interpret those statements within the confines of the facts presented in the case.
[1.] The ownership of the contested property in theJennings case was held solely by the husband; there were no joint accounts. Evidence of the husband and wife as working in common ventures is lacking. The intent of the parties to engage in a joint venture cannot be found. The Supreme Court's reluctance to find a one-half trust ownership in the wife (which would, in effect, endorse a community-property-law position) *Page 567
is understandable. Those principles, together with statements that a wife must have a contract to recover on her services even in her husband's business activities, are not necessarily applicable in determining the taxability of transfers under ORS
The exemption provisions of ORS
[2.] In interpreting the exemption provision in the federal estate tax, several courts have talked in terms of the existence of a partnership, which in turn allows for the division of profits. The case of United States v. Neel,
In United States v. Neel, supra, the court stated that a partnership would be assumed to have been created where there was a joining together of money, goods, labor or skill for the purpose of conducting a trade, business or profession where a community of interest in the profits and losses exists. The reasoning expressed in that case is supported by Berkowitz v.Commissioner,
[3, 4, 5.] The exemption provisions on joint property ownership, as found in ORS
The cases of Richardson v. Helvering,
[6, 7.] In interpreting the exemption provisions of ORS
The court's decision takes into account the holding inEstate of Joseph A. Brudermann,
The court's holding must also be distinguished from results which might occur in a community property state, where different rights attach to income which is the sole result of the spouse's labors (as was held in Sullivan's Estate v.Commissioner,
[8.] The spouse's claim for exemption in Oregon must be based upon either her efforts or other monetary type contributions which directly result in the acquisition of the joint personal property. This interpretation is in conformity with the Oregon Supreme Court's decision in Holman v. Mays,
[9.] While the defendant has cited a number of cases on partnerships and the necessary requirements that must be met in the formation of such partnerships, the federal and Wisconsin3 cases supportive of its position involve a division of personal income for tax purposes and are found to deal with attempts at proving the existence of a legal partnership as a tax-saving device. The establishment of a legal partnership in order to prove consideration is not required for inheritance tax purposes under the exemption provision of ORS
It is also true that in many cases interpreting the facts necessary to prove a contribution under a similar exemption provision of Int Rev Code of 1954, § 2040, where the courts have found facts which establish a "nominal partnership," which summarily decides the case, the courts have not consistently demanded the presence of the elements necessary to form a legal *Page 572 partnership.5 In addition, some cases, as previously stated, do not demand the presence of even the nominal type of partnership, but rather turn upon the parties' treatment of their contributions and the presence of contributions which can objectively be found to have resulted in the direct acquisition by the surviving tenant of the claimed portion of the acquired joint property.
The record in this case shows that Mrs. Bryant kept the books of the husband and wife. She was familiar with income tax reporting and met the requirements for filing joint returns, federal self-employment tax for her husband, social security and withholding requirements for employees, but she never filed federal or state partnership returns.
The record also shows that plaintiff and her husband had a very close relationship and this was manifested in several ways, not the least of which was the business relationship. This stemmed from their marriage and was chiefly evidenced by their joint work contributions, capital contributions from joint earnings and their holding all property jointly.
As the plaintiff testified: "* * * We paid no wages [to ourselves]. * * * We took no salary. What was left was — we knew was ours." *Page 573
The fact that plaintiff received no salary for her substantial contributions (and consequently, as bookkeeper, she withheld no taxes on wages or for social security) is consistent with her position as a joint owner. The business accounts and the couple's personal accounts were merged in the bookkeeping records. All deposits were made jointly. In the case of a claim against the husband, on account of the business, the wife's interest in the joint deposit was equally vulnerable, even if they were not formal partners. C. A.Babcock Co. v. Katz et al.,
The court finds, from the uncontradicted evidence, that Mrs. Bryant contributed an equal or greater share of each and every activity which culminated in the acquisition of the joint property in question. The plaintiff has proved that she has a one-half interest in such property which was acquired for a "fair consideration in money or money's worth" and, as such, is exempt from inheritance tax under ORS
[10.] As to the plaintiff's contention that the provisions of ORS
A second issue in this suit is raised by plaintiff's claim for eight percent interest, to be paid by the state on any inheritance tax refund which may be due her.
There is a decided split of authority as to whether, in the absence of specific statutory provisions therefor, a taxpayer is entitled to interest on taxes improperly assessed or charged. 72 Am Jur2d State and Local Taxation § 1068 (1974).See also Case v. Chambers et al,
"* * * Many cases are collected in annotations in 57 ALR 357, 76 ALR 1012, and 112 ALR 1183. The editors of those annotations state that the weight of authority favors the allowance of interest, although the contrary view has been asserted somewhat more frequently in recent cases."
In Oregon, an early case, Seton v. Hoyt,
The Seton case was considered in Case v. Chambers et al,supra, in connection with a plea for interest payments *Page 575
on property tax refunds, where no specific provision related to the payment of interest. The court, in granting the requested refund, relied upon a statute, ORS
[11.] Following the decision in Case v. Chambers et al,supra, decided July 3, 1957, the question was considered by the Legislative Assembly at its next legislative session and a specific provision for the payment of refunds in specific property tax situations was enacted in ORS
An examination of the present status of the revenue-raising measures under the direction or supervision of the Department of Revenue shows sufficient variety in the rules to cause a judge to hesitate to conclude that the present law "expresses the public policy of the state that interest is allowable on tax *Page 576 refunds generally * * *," as stated in Case v. Chambers, at 713. Consider the following:
ORS chapter 311, relating to the collection of property taxes, contains ORS
"(1) Except as provided in subsection (2) of this section, no interest shall be paid upon any tax refunds made under ORS
311.806 ."
Subsection (2) then provides for interest payments on refunds in four particularly described circumstances and subsection (3) provides that such interest shall be paid at the rate of two-thirds of one percent per month or major fraction of a month. ORS
ORS chapter 118, providing for inheritance taxes, provides in ORS
ORS chapter 119, pertaining to gift taxes, contains a number of sections relating to the payment of interest at the rate of two-thirds of one percent or at the rate of one percent per month if time for payment is extended, if extension of time is granted and no payment is made, etc. (ORS
In contrast, ORS chapters 316, 317 and 318 relating to the various income taxes imposed upon individuals, *Page 577
trusts, and corporations, uniformly provide for interest at the rate of two-thirds of one percent per month on unpaid taxes (ORS
ORS chapter 320, the amusement device tax, makes provision for the imposition of penalties but does not refer to interest, either with regard to tax deficiencies or to tax refunds (and, in fact, no provision is made for a tax refund).
ORS chapter 323, the cigarette tax, provides in ORS
[12.] In consideration of this assortment of rules,7 *Page 578 the court is forced to conclude that when some statutes expressly provide for interest on refunds of certain taxes, the absence of such a provision in other tax statutes shows the legislature intended to deny interest in those cases. Any other conclusion would simply constitute judge-made law.
However, the plaintiff is entitled to a refund in this case and, since the statute does not include the peculiar restriction quoted above from ORS
Defendant's denial of refund, received by plaintiff on or about February 18, 1974, is held to be void. Defendant shall refund to plaintiff the sum of $3,151.54, without interest, but interest on account of late payment, paid by plaintiff to defendant and allocable to the principal sum of $3,151.54, shall be refunded to plaintiff. Plaintiff is entitled to her lawful costs and to reasonable attorney fees in the sum of $2,000.
The Bryants may well have had a partnership but, because of their failure to file partnership income tax reports and the use of the husband's name alone as proprietor, truck owner, and the like, the court prefers to base its decision on the joint tenancy and the clear proof of consideration.
The court has not overlooked the decision relating to interest payments by the state in State Hwy. Comm. v. CarmelEstates,
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United States v. Olive M. Neel, of the Estate of Alfred C. ... , 235 F.2d 395 ( 1956 )
Singer v. Shaughnessy, Collector of Internal Revenue , 198 F.2d 178 ( 1952 )
Berkowitz v. Commissioner of Internal Revenue , 108 F.2d 319 ( 1939 )
Weizer v. Commissioner of Internal Revenue , 165 F.2d 772 ( 1948 )
Richardson v. Helvering , 80 F.2d 548 ( 1935 )
Sullivan's Estate v. Commissioner of Internal Rev. , 175 F.2d 657 ( 1949 )
Morey v. Doud , 77 S. Ct. 1344 ( 1957 )
Stern v. Department of Revenue , 63 Wis. 2d 506 ( 1974 )
Skaar v. Department of Revenue , 61 Wis. 2d 93 ( 1973 )
Jennings v. CONN, AS ADMINISTRATOR , 194 Or. 686 ( 1952 )
Babcock Co. v. Katz , 121 Or. 64 ( 1927 )
Holman v. Mays , 154 Or. 241 ( 1936 )
Hayes v. Killinger , 235 Or. 465 ( 1963 )