Opinion
No. 33830
Decided December 8, 1954.
Taxation — Federal estate tax — Testator bequeathed specific legacies, with remainder to individual and charitable legatees — All residuary legatees, including charities, bear burden of tax.
APPEAL from the Court of Appeals for Stark County.
Susan Manning Ball died testate, leaving no surviving spouse. By her will, after directing that all her just debts and funeral expenses be paid out of her estate and making certain specific bequests, she provided that "all the rest, residue and remainder of my estate * * * I give, devise and bequeath to my executor to be disposed of in the following manner." Then follows a direction to her executor to convert her real and personal property into money and distribute the proceeds on a "percentage of remainder" basis, totaling one hundred percent, to a number of named individuals and charities.
The plaintiff, as executor of her estate, filed in the Probate Court a petition for a declaratory judgment as to his duties in the administration of the estate, as to the rights of the residuary legatees, both individuals and charities, in the distribution of the assets remaining after payment of federal estate taxes, and, particularly, as to whether any of the residuary legatees should be exonerated from the burden of the federal estate tax.
Answers were filed by charitable legatees claiming exoneration from the payment of any part of the federal estate tax.
The Probate Court held that all residuary legatees, including the charities, should bear the burden of the tax.
The Court of Appeals, on appeal on questions of law, reversed the judgment of the Probate Court and remanded the cause with instructions "that the federal estate tax should be deducted from the residuary bequests of the noncharitable legatees, after which the respective balances of the residuary bequests of the noncharitable legatees should be paid to the noncharitable legatees; and that the shares of the charitable legatees should be paid to them free of federal estate tax."
From that judgment the individual noncharitable residuary legatees appeal to this court.
Mr. Kenneth B. Cope, for plaintiff appellee.
Mr. Ian Bruce Hart, for defendant appellants.
Messrs. Amerman, McHenry, Jones Morgan, Mr. C.E. Hunter, Messrs. Black, McCuskey, Souers Arbaugh, Mr. Warren G. Smith, Messrs. Butler, Butler Werum, Mr. Sherwood Ake, Mr. Paul S. Knight, Mr. Samuel Krugliak and Mr. Harry C. Gahn, for defendant appellees.
The judgment of the Court of Appeals is reversed on authority of Campbell, Exr., v. Lloyd, ante, 203, and for the reasons therein expressed.
Judgment reversed.
WEYGANDT, C.J., TAFT, ZIMMERMAN and LAMNECK, JJ., concur.
MIDDLETON and STEWART, JJ., dissent.
HART, J., not participating.
I dissent for the same reasons which I expressed in my dissenting opinion in the case of Campbell, Exr., v. Lloyd, ante, 203. Since the Internal Revenue Department deducts the amount of charitable bequests from the amount of an estate before arriving at the amount upon which the federal estate tax is calculated, it seems just to me that the thrust of the tax should be upon that portion of the estate which generates the tax and not upon that portion of the estate which reduces it.
In McDougall, Admr., v. Central Natl. Bank of Cleveland, 157 Ohio St. 45, 104 N.E.2d 441, we held:
"Where assets outside of the probate estate are included in a decedent's taxable gross estate for estate tax purposes and such inclusion increases the federal estate tax and where the decedent has expressed no intention by will or otherwise as to the ultimate impact of that tax, an equitable portion of the burden of the federal estate tax should be apportioned against such assets outside of the probate estate, in the absence of a state statute requiring a different result."
If the existence of nonprobate assets which increase the federal estate tax justifies an apportionment so that those assets will bear an equitable share of the tax, it ought to logically follow that tax-exempt legacies which reduce the federal estate tax should not have to bear a share of the tax from which they are specifically exempt.
MIDDLETON, J., concurs in the foregoing dissenting opinion.