Untitled Texas Attorney General Opinion

.i -. . 22
F
9 OFFICE OF THE ATTORNEY GENERAL OF ‘TEXAS
1
P AUSTiN
iioaorablo 000. H. Sheppard
a~Dt?Oller Of Publio AoOOUata
Dear Sir:
septembar 7, 1943
the Bouaton Land
op$nioa or this
re ~sold in order
ebta of an estate,
ad suaoesaioa taxes, is
blo o thar than on the
011.
with ths sale? In
ax payable by vlrt!m or the
to benefiolsrles, althou&
e !Viill
under a Sill. Is a transfer tax
a able (1) on the trenstsr under the WI11 and
2 in oonneotion with the *alo trh’iehis neoeesarp
5f
to erieat division of the estate?
n . . . , * ::
Honorable Gee. R. Sheppard, pagv 2
In our Opinion No. O-G34 (Conference C-pinicn No.
jZO?l ‘19 held that VmumZers by operation of lawa are, by
nsoerr8ery implioatlan, exempt from the tax imposed by t!e
Texas Stoak Transrer Tax Aat (A&isle 7047111, V. A. 0. S.).
Proaeeding from this pr6o1se, m also ruled 13.said oplnica
that a tmnsrer rr0m an lntsstata to his heirs or next or
kin in a tranafrr wholly eireoted by operation or law and
hanae io tax sxompt, bat that a transfer imm a tertator
to hi8 legatcer 38 taxable aa e transfer etrected at leaart
in part bF the rat Of the parties thereto.
The Tmaa Stook !kawier Tax Aot follows almost
verbatim the Xew York TraMi6r Tar Aot, and it 18 oomnly
known that oar rtatote ua8 adopted frola and modeled after
Ohm Xew York Aot. Likewise, our aat la ldantloal in no&
.nspeots-iriththa Federal. Stook Transfer Tax Act and with
the rotlr-via Coossquently, in interpreting
btbar,etater. .~
oa.atatute vm.have -beelriooustomed te hollow the dealsions
and adminisitmtf~ Suzingo: or these other jurfadiotionr,
and pmtiarilsrly thoal) of ~Xer York, sinoe, as is aaid In
39 Tex. Jar. 264-2651
,*‘A phrase, provisign or statute adopted rroa
ths.Laua GS another state or ootantrywill ordi-
,muril be iron 2110 8wimioonstnt8ttism~in Teraa ,:...``~.
that I t ha 3 ruceltod fxths farisdiation from
uhiah it uar borroued. If it had been gi+t~ a
tixed and defiaite meanlag by the aoarts of that
jurisdiotlon, it will be given the acme meaning
In Texas. The rule rests upon the presumption
that the Legislature was aware oi the judioial
interpretation given in Me jurisdiotion rrca
rhioh the atatuts am tak%, and that ia adopt-
ina auah sfetute it intended also to aooept suoh
oon5traotlon.*
Under the HerrYork and federal acts, only one
treneSer tax aocruee Men stook psseiw by ~13.1 to 6 legate6
but la sold by the exsoutor to satisfy debts and expense8
of the e&ate. Axtiole 15(16) of the Be* York Rolsa and
m3gulations~ brtlole 34(n) 0r Treasury Regulations Ho. 71;
reprinted in Christy and 230L8an,Tb6 %h~Sre? Or t%OOk, pp.
683 sad 602, mapeatively. This is oocaaioned by the Paot
thet tbsee Jurisdictions adhere to the aomnoa law rule whem-
by title to perronclty paesce frowna test&or to his exe-
cutor and thence from.suah sxeuutor to legatesa, to areditore
0r the estete, or to posslbls vendees. Consequently, these
’
;
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Bonorebla C&o. R. Sheppard, page 3
juriadiotiona hold that the transfer m the teatstor to
hla itxeontor is tax exempt 813 8 trensfer by op&etion of
law and that the Odly tax8b.laevent ooaura when the 8XeCiutop
mkaa a further tmmrer 81th~ to a legates, to a Or8ditOr
Of the estett, or to a vendee to whoa th8 stook is sold ior
the ~ur>oa8 Or securing iunda to diaaharga the debts or ex-
enaea oi the estate. Weloh t. Kerokhoif, 84 F(2d) 2QS*
106 A. 1. R. l434; Christy and XoLean, op. oit. SUVM, 164.
Obvloaalywhen the atook la a01d by the exsautor to aatiaiy
dobta end expenses oi the estate, no tax ever arlaea on a
trenaier to a lagatee beoauae au& tranarar is never msde
by t& exaouter.
0-+3-jf Rower, as maa pointed out in our Opinion No.
~Artlela 3314 Y. A. C. 3. abrogatea the a~amon law
rule inthis State by prorIddiag,thattitle to peraoaalty
Teats in the lagataes upon the death of the
iarss4bit8l.y
t88tatQr, rubJ8ot to the power of~tha exaoutor,fo sell or
otherwlab appl aaeh peraonaltp to aatlaS .debtsof thb
estate, funera3 lx p ena a aiunily , ellowanoaa; and other
expenses oi administration. tiOrr811T. Hamhtt, 24 S.W.(2d)
531 Rlaherda0n t. Vaughan, 23 S.V. 640 (Sup. Ct.); Leal T.
Isa i 291 8.3. 340; 1) Ter. Jur.~S%; 15 Tex. Jw. 172-173.
Reoa$e oi t&i8 fe8tare oi our deaedants' ~estets law, mm-
osivably it would be poasibla to aar thet~trro:frana$er..,
tares aoarue In the situation above deaoribad--one when
tha title vests immediately in the lagatsaa~,8nd anothar
when the executor a8lla~tha atook in ths uoura8 ot adidnia-
tration. Traotiaally apeaiclng, suah a oonatruotioa of our
trenafer tax eot would result in taxing a tranarer in whloh
the tranaiarae never raosivea the us8 and enjoyment of th8
atook 8nd never reosivea an urknouzbered legal or equitabl8
title thereto. !uereel that such 8 result was Iwfer within
the oontaahplatlonor intention oi the legislature at the
time of the passage oi our stock transfer tax eot. Rather,
wa real, when OUF lagialatura adopted the New York set, it
must also be deeasd to heve adopted the oonstruotion plaoed
on auoh ect whereby but one tar accrues in tha altuatics
under diaousslon. This aonolualoa results both irom the
prinoipla of statutory ooonatruoticxn above set forth and from
the rollowIng sdditional oonalderationr Upon the death oi
a te&atOr, clay int%r8St aoqulred by a legstee ia SUbhOt
to a peer of sale in the executor whloh may be srerciaed
under presorlbed oonditioas. Until suoh the a9 it la known
ðer 07 not the executor lnust exeralse this peer, alI
rights of a legatee 8r6 contl.ngsnt. 11'the pcmr la ersrolsed,
i- .
X@lOrable 000. H. Shapprrd, pegs 4
ell rights OS a legates are extin&ulshsd. Consequently,
w&en stock pessas by will and it Is wocssarr for the
es8outor to diapoae Of ths atook in order to eatiafy
the debta and expenaoa OS the estate, wa feel that the
atook trenaier tax aocruea only when auoh diaposltloa
Is made, fOF the OOQtfn~enoy Milch prevents th8 oga-
platioo of tbe tFsnaSer to the 1ag8tSaa has ooouxred and
no oomplett transfer to them la ever aoooorpliahad. Con-
vera81f, whaa no auoh diagoritian is neoeaaary and &en
the powtr of ash ‘porraeased by 8n txtoutor is artin.&ahed
b0osua0 no neaesabty ror its txarois0 has d~isen, we itO1
that the tranaier iroa the testator to his lsgatata is
omplet0 and thst auoh.tranaSeF la then taxable under the
pFinOipl88 snuaoiated in our OpiaiOQ NO. w. o-+//y
These vrinoiplsar are ala0 applioabls to in-
stsnoes of intes@'oy. ahen it is n0o0aaarg SOPS8n ad-
ministrator of the estate Of 'any inteatclta.,,tO,~la~oae OS:
&oak to aatiaSy:~thedebts.arnitxpenses~.of,t&0 qatats,
8.taX 6OOFUeS U~U,SU4h'~S8bB~'f4~ th4 lJ4~6``U8BZl+,;bt
aeld tO be one In which the transstr is eSS,eotail by op-
eratlon of lsw. Contrarides, however, uhen no auoh
sale is neotiaaarJ,and when the pa;lrer OS sale in the ad-
ainlatretor~ia axtirrguiahs~, -the tranattr to ,the halra
or nert'oi kin~,is theo'awplttt Bad,,88 waa:~:crsLd.in our
OQinioB Ro. afadb adoh tzanaler: lti’
...affoeted ; :,
wholly by o&!%%%!& of la,w,
.',
" no tsx aosruea thiwetinP``‘ -~
Your aaaond question relates to a situation ia
whiah a trensisr OS atoOk is ntada to etieot or to faoil-
itate the dlvlaion ot an estate among the various legatees.
Ytaltiple18gat888 hold prO@rty i138 fOra Of OO-OwIleMhip
olossly 8kZn to, it not identioal with, oo-tenehoy. Any
divisicn efi6ctSd Smong suah tenants or eny sale made by
thea Sor the purgoa0 ot dividing the-prooeeda therm3
neosssorily is a transfer efseoted by the aot ot the parties
thereto rather than a transfer affsoted by operation of
law. Such tranaiera are tarable under the NearYork and fed-
8rd a0t8, Artioh3-15(19-22) or the taw York Rules and 3eg-
aatlcoa; Christy and YoLeSn, op. ait. auprs, 56.b565, and
tvtn without the aid aiiorded by the ooostruoti0m3 in these
Jurisdlotlona, xe would feel aonatrainad to hold auob trtlns-
iera taxSUe sin08 thay tell Within neith0F the express
erenptione aontained in our atetute AOS the tiplied SXSZP-
tfofi eoeorded transisr8 by oparttion of &5ii?.COnSo~U~tlY,
you are respectfully advised that in auoh 9 Situ&ion two
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7 26
Xonoreble Gea. A. Sheppard, psge 5
tren3fer terse eoorue--on6 when the trensiar to the mal- ,
tiple’lagatees becmies aoinglete,shd another when swh
leg&sea effect 6 division emong themelves by Ale or
otherwise. Xotioe, hovmer, What if the division ie
being eifected by fiultl?leheirs or next of ;tinwho have
taken by fnteetscy, 6 tax aocrues ohly upon the diviaicn
eaong thtunaelveaeinoe suoh hotis or next oi kin receive
the stock initielly bg operation of la**.
Moreover, should an axeeator or admMstr&or
uell stook for the purpose or effecting or recllit8ting
Q diV;aiOtlaPlOti6 th6 lQg@Xi#b, htiir8OF IieXt Of kin, and
not r0r the purpose of paying the debts and sxpensas or
the estate, the 88`` prinalplesare a?plfoable. Tha parer
of sale poeaessed by an exaoutor or admlnistrstor extendr,
aa has been said above, only to axles which are necessary
.to pay the debts and expenses of the estate. Unless tho
atook is aold for this purpoea, the transfer to the lagstess,
hsira or next of kin beoomes oomplete. If the ~stook8hould
be soEd for any gurpoae other than thla, the aituaticu is
tha Bane as lf the trensfer to *thelegatees, heirs or next
of kin had first Boone oca$ete, and euoh persons had then
aoted to effeot a division emong themselves. In mating auoh
a aale. an ereoutor or adviinistrator acts as a reprssentei-
tiva or the legatees, heirs or ,aext of kin rather than aa ,a
represantative of the estate, and, for purposes of the atook
transfer tax, hia aets bo this~respeot ere to be treated ae
if they wore the acte of the prties x%osnhe repreeents.
Consequently, in auoh a aituatim stook transfer taxes would
aoorue fn acoordanoe with th8 priaoipl~e dieaueaed in the
last preoeding paragraph.
~Trustlng that ths foregoing disoussion sstisfao-
torfly bnawers your Icquiries, ae are
Your3 very truly