Opinion
Page __
__ Cal.App.2d __ 216 P.2d 908 In re THURSTON'S ESTATE. KUCHEL, Controller, v. TRAMMELL et al. Civ. 17429. California Court of Appeals, Second District, Second Division April 19, 1950.Hearing Granted June 12, 1950.
Subsequent opinion 223 P.2d 12.
James W. Hickey, Chief Inheritance Tax Attorney, Sacramento, Morton L. Barker, Deputy Inheritance Tax Attorney, Walter H. Miller, Assistant Inheritance Tax Attorney, Los Angeles, J. D. Lear, Assistant Inheritance Tax Attorney, Sacramento, for appellant.
Geo. W. Trammell, Long Beach, for respondents.
MOORE, Presiding Justice.
Appeal from order fixing inheritance tax.
October 3, 1941, decedent and his wife by grant deed conveyed to their three children portions of six lots in block 66, Long Beach Townsite, reserving to themselves a life interest. The transfer was without restriction and was not made in contemplation of death. On December 29, 1942, in consideration of $10,000 paid by his children decedent executed and delivered to them a quitclaim deed whereby he released and conveyed all his interest in the property, reasonably worth $134,000. This conveyance also was not made in contemplation of death. The price paid was a valuable and adequate consideration. After the quitclaim by decedent he never received any of the income from the property or enjoyed any beneficial interest therein, but the children collected the income, and the beneficial interest was enjoyed by them.
The foregoing facts were found after a trial of the objections by the executor to the Report of Inheritance Tax Appraiser which had included the portions of block 66 above mentioned with other property owned by decedent at the time of his decease. Upon finding the facts above recited, the court ordered that the transfer of the six lots is not taxable under the Inheritance Tax Law.
As grounds for reversal of that part of the order exempting the transfer of the six lots from such taxation, appellant contends that the tax was imposed upon the original transfer in pursuant of a strictly literal interpretation of the statute. Revenue and Taxation Code, Part 8, sections 13301-14901, in effect on May 19, 1946, the date of decedent's death. He admits that if the tax is imposed upon the shifting of possession and enjoyment brought about by the grantor's death respondent should prevail, [216 P.2d 909] since possession and enjoyment were transferred on the release of the life estate, but he argues that if it is the beneficial succession that is taxable, such beneficial succession is present; that the children succeeded to the enjoyment of the estate in remainder at the death of the grantor and that there was no merger of the interests; that while a merger at law follows immediately upon the union of a greater and a lesser estate in the same ownership, a merger does not so follow in equity; that in equity a merger does not follow automatically but is allowed or denied according to whether it will best subserve the intent of the parties, citing Ito v. Schiller, 213 Cal. 632, 635, 3 P.2d 1; Jameson v. Hayward, 106 Cal. 683, 688, 39 P. 1078, 46 Am.St.Rep. 268; Pacific States Savings & Loan Company v. Strobeck, 139 Cal.App. 427, 33 P.2d 1063; Newman v. Hye, 64 Cal.App.2d 296, 148 P.2d 910; In re Hollander's Estate, 123 N.J.Eq. 52, 195 A. 805.
In the first place, there could have been no beneficial succession for the reason that the children owned both the life estate and the remainder at decedent's death. As to the contention that a merger is allowed or denied according to the intention of the parties it is the law as enunciated by the cited cases that in the absence of an expression of intent, equity looks to the interest of the person in whom the estates have been united.
In order to justify the levy of an estate tax something must be transferred in view of death or by virtue of death. The tax is concerned with a shifting of economic benefits, Paul's Estate and Gift Taxation, Vol. I, sec. 7.04, p. 293, and to authorize it the decedent must have had, either at the time of transfer in contemplation of death or at the time of his death, an interest in the property whose transfer is to be taxed. From a view of the Inheritance Tax Act in its entirety, the legislative intent is that the tax shall be measured by beneficial succession and the tax to be levied is a succession tax, payable for the privilege of succeeding to property. In re Estate of Rath, 10 Cal.2d 399, 405, 75 P.2d 509, 115 A.L.R. 836. If the amount of the tax is proportionate to the benefit transferred by the death of the grantor, then, clearly, no tax should be levied on the six lots in block 66 which had belonged to the children more than three years prior to the decease of Johnson Thurston. If it had been intended that the tax should be on the transfer and not on a beneficial succession the act would have made it collectible at the time of the transfer. But it was made collectible at death because it is payable for the privilege of succeeding to property left by the deceased. Being ever on the alert for available revenues and diligent in the enforcement of payment thereof the State has provided for the prompt payment of all taxes on accrual. By reason of the fact that such custom is the copper lining of every taxing scheme, it is inconceivable that, in the development and enactment of the Inheritance Tax Act, the legislature would have provided for the levying of a tax on the transfer of property and at the same time have arranged for its payment three or thirty years after the transfer.
The order is affirmed.
McCOMB and WILSON, JJ., concur.