1959 U.S. Tax Ct. LEXIS 258">*258 A widow's allowance in a lump sum, paid by petitioner estate pursuant to an order of a Michigan Probate Court,
31 T.C. 818">*818 SUPPLEMENTAL OPINION.
This case (in which our original Findings of Fact and Opinion are reported at
The above cause coming on to be heard upon the record, the briefs of the parties, and the arguments of counsel1959 U.S. Tax Ct. LEXIS 258">*260 in open court, and it appearing that petitioning executor claimed a marital deduction for a widow's allowance under
Now, Therefore, It Is Ordered, Adjudged, and Decreed That the case be and is hereby remanded to the Tax Court for its further consideration and for its decisions on the issue whether such allowance constituted a terminable interest within the meaning of
It is apparent that respondent has abandoned the position originally taken by him in this proceeding with regard to the question of whether a widow's allowance is an interest in property passing from the decedent within the meaning of
Advice is requested whether amounts allowed and paid pursuant to State law for the support of a surviving spouse during the period of settlement of the estate of the deceased spouse qualifies as a marital deduction for estate tax purposes under
Under the general rule of subparagraph (A) of
There are cases, however, where it appears that the provisions of State statutes providing for allowances for support during the period of settlement of an estate do not confer upon the surviving spouse of a decedent any vested indefeasible right of property which would constitute a deductible interest under
31 T.C. 818">*820 In view of the foregoing, it is held that the interest in an estate which passes to a surviving spouse pursuant to State law in the form of an allowance for support during the period of settlement of the deceased spouse's estate must constitute a vested right of property such as will, in the event of her death as of any moment or time following the decedent's death, survive as an asset of her estate, in order to qualify under
The facts in the instant case are not in dispute. They are fully set out in
Respondent on brief states that he "accepts the view that the critical consideration upon which the right to the deduction [of the widow's allowance] depends is whether the widow's interest was a terminable one within the meaning of
1959 U.S. Tax Ct. LEXIS 258">*267 In determining whether the widow's allowance here involved constituted a "terminable interest" within the meaning of
As of the decedent's death his widow was entitled to a widow's allowance for 1 year and her
The difficult question is whether the widow's right to a support allowance for 1 year, existing under the law of Michigan as of the decedent's death was subject as of that time to be terminated by her death or remarriage within the year so that the occurrence of either event must be considered "the occurrence of an event or contingency" upon which the "interest [represented by the widow's allowance] will terminate."
In
However, in the instant case the reasoning of the Michigan courts in the two Michigan cases1959 U.S. Tax Ct. LEXIS 258">*271 above cited and in others would indicate that the law of Michigan on this point is not like the law of California. See also McAvinchey, Michigan Probate Practice sec. 120.
The general rule on this question is stated by 3 Schouler, Wills, Executors and Administrators (6th ed.) sec. 2655, as follows:
Usually where, at the death of a widow, portions of an amount allowed to her as a widow's allowance remain unpaid, such amounts may be recovered by her representative [citing
31 T.C. 818">*823 The difficulty of formulating a general rule applicable to all jurisdictions is indicated by a consideration of
We limit the question, of course, to the precise facts here involved. It should be pointed out that in this case, unlike the
It is our opinion that under the law of Michigan a widow's allowance granted by the Michigan Probate Court for 1 year in a lump sum does not terminate or abate upon the death or remarriage of the widow prior to its payment.
We conclude that under the facts of the instant case (and limiting strictly our decision to these facts) the widow's allowance here in question did not constitute a terminable interest within the meaning of
We reach this conclusion in conformity with the mandate of the Court of Appeals, above quoted, and not because we have in any way receded from the views expressed in our original opinion herein, to the effect that the widow's allowance here involved was not an interest in property passing from the decedent as defined in
The Court of Appeals by its order which is quoted above calls for our further consideration and decision "on the issue whether1959 U.S. Tax Ct. LEXIS 258">*274 such allowance constituted a terminable interest within the meaning of
Petitioner's contention on this question is that the two conditions to the application of "the terminable interest rule" (
Petitioner's argument on this question is ingenious, but it is not supported by the language of the statute nor by any legislative history. In theory it is incompatible with administrative interpretation,
Pierce,
Because of the importance of this1959 U.S. Tax Ct. LEXIS 258">*276 case in the administration of the Federal estate tax, I believe it appropriate to set forth my views, not only with respect to the final result reached by the Court in this particular case, but also with respect to the answers made by the Court to the specific questions presented in the mandate of the Court of Appeals for the Sixth Circuit. Since this is the first case involving the qualification of widows' awards for the estate tax marital deduction, which has received consideration by any of the Courts of Appeals, and since in the proceedings above the Treasury Department and its counsel made important concessions which caused the case to be remanded for 31 T.C. 818">*825 decision on two crucial questions, I believe that the conclusions and reasoning employed by this Court in arriving at its answers to said questions have a bearing on the estate tax treatment of widows' awards, generally, that goes far beyond their application in the instant case.
I concur in the Court's holding that the particular widow's award here involved does not constitute a "terminable interest" within the meaning of
Such interpretation and application of
In answering the questions presented by the Court of Appeals, I would have given effect to the following considerations:
(1) The meaning and application of Federal tax statutes is a Federal question, which should be resolved by application of settled principles relating to the construction of Federal tax statutes.
In
Here we are concerned only with the meaning and application of a statute enacted by Congress, in the exercise of its plenary power under the Constitution, to tax income. The exertion of that power is not subject to state control. It is the will of Congress which controls, and the expression of its will in legislation, in the absence of language evidencing1959 U.S. Tax Ct. LEXIS 258">*280 a different purpose, is to be interpreted so as to give a uniform application to a nation-wide scheme of taxation. * * * State law may control only when the operation of the federal taxing act, by express language or necessary implication, makes its own operation dependent upon state law. * * *
See also
The question as to the construction of the exemption in the federal statute is not determined by local law. We are not concerned with the peculiarities and special incidences of state taxes or with the policies they reflect [relative to the administration of decedents' estates]. * * *
I think that such principles are applicable here.
(2)
When Congress first established the estate1959 U.S. Tax Ct. LEXIS 258">*281 tax marital deduction in 1948, the basic scheme was to permit the spouse who died first, to pass to his surviving spouse free from the burden of estate tax, up to one-half of his adjusted gross estate; provided that the interest so passed was of such character that it would qualify for taxation in the estate of the surviving spouse. See
31 T.C. 818">*827 (e) Bequests, Etc., to Surviving Spouse. -- (1) Allowance of marital deduction. -- (A) In General. -- An amount equal to the value of any interest in property which * * * * (H) Limitation On Aggregate Of Deductions. -- The aggregate amount of the deductions allowed under this paragraph1959 U.S. Tax Ct. LEXIS 258">*282 (computed without regard to this subparagraph) shall not exceed 50 per centum of the value of the adjusted gross estate, as defined in paragraph (2).
Included also in
In a statute of such fine mesh, I find no room for the inclusion of tests based on the peculiarities and policies of differing State laws, which are not specifically authorized.
(3) The Court's holdings and conclusions as to the application and effect of subparagraph (B) fail, in my view, to give recognition to the limited scope of said subparagraph, as indicated by its terms. The opening sentence of this subparagraph reads as follows: (B) Life Estate or Other Terminable Interest. -- Where, upon the lapse of time, upon the occurrence of an event or contingency, or upon the failure of an event or contingency 1959 U.S. Tax Ct. LEXIS 258">*284 to occur, 31 T.C. 818">*828 (i) (ii) (iii)
It will be observed that, in order for the marital deduction to be disallowed under this subparagraph, the conditions of clauses (i) and (ii), or of clause (iii), must be met. None of these clauses has the remotest relation to a widow's award; and hence, the condition precedent to the application of said subparagraph to such an award, is not met.
Moreover, it is obvious from the context of subparagraph (B), that the "terminable interests" intended to be controlled thereby, are interests passing to a surviving spouse, which are not of such character that they would qualify for taxation in the surviving spouse's estate -- as for example, a life estate, or an estate for a term of years, or a contingent interest that is subject to curtailment or extinguishment, and to which clauses (i) and (ii) or (iii) would pertain. The subparagraph has, in my view, no application whatever to interests which pass1959 U.S. Tax Ct. LEXIS 258">*285 to the widow,
Widows' awards simply do not fit into the pattern of subparagraph (B). They are allowances which an appropriate local court, acting under an empowering statute, may authorize the executor or administrator to expend and pay out of the decedent's gross estate for the temporary support of the surviving widow. Except in some States where a minimum allowance is provided, the local court usually has discretionary power to fix the amount or amounts to be paid, either in a single lump sum or in a series of monthly lump sums; and in addition, it has discretionary power to determine how long the payments shall run -- as for example, until the widow's interest in the estate is assigned to her; or for 1 year; or until further order of the court. Because such allowances are for the relief of the widow only, and because on the other hand they may operate against the interests of other persons, the local court usually has discretionary power also to stop the payments, or to increase or decrease their amounts, so as to give effect to their purpose. Neither the empowering local statute nor the discretionary orders of the local court1959 U.S. Tax Ct. LEXIS 258">*286 can, in any realistic sense, be regarded as creating interests in property which pass to the widow prior to the time or times when the particular support payments are actually or constructively received by her. There is no corpus represented by the award, in which the widow has only a limited or contingent use; there are no remainders; and there is no reverter.
I would have held that subparagraph (B) is in no way applicable to widows' awards.
31 T.C. 818">*829 (4) There is legislative history which indicates clearly an intention of Congress that support allowances actually paid to a widow out of her husband's gross estate, should qualify for the estate tax marital deduction.
Prior to the creation of the marital deduction in 1948, and continuing until 1950, amounts paid to a surviving spouse as a widow's award, were, to the extent "reasonably required and actually expended for the support during the settlement of the estate," expressly deductible for estate tax purposes, under
This deduction [allowed by
Section 502 of your committee's bill repeals this particular feature of the estate tax law. * * *
* * * *
Under existing law amounts expended in accordance with the local law for support of the surviving spouse of the decedent are, by reason of their deductibility under
The last of the above-quoted statements appears also, in identical words, in the report of the Ways and Means Committee1959 U.S. Tax Ct. LEXIS 258">*288 of the House (H. Rept. No. 2319, 81st
Thus it will be seen, that the intended effect of the repeal of said
In view of the above statements contained in the report of the Senate Finance Committee, to the effect that such action was motivated, at least in part, by a desire to eliminate discrimination among the States and to prevent delay in the settlement of estates, it cannot reasonably be inferred that Congress intended that the qualification of widows' awards for the marital deduction, should be subjected to the uncertainties and variations of local law.
I believe that the intention of Congress, as disclosed by the above quotations from the committee reports, should be given effect in respect of widows' support allowances, generally.
1.
For the purpose of the tax the value of the net estate shall be determined, in the case of a citizen or resident of the United States by deducting from the value of the gross estate -- * * * *
(e) Bequests, Etc., to Surviving Spouse. -- (1) Allowance of marital deduction. -- * * * * (B) Life Estate or Other Terminable Interest. -- Where, upon the lapse of time, upon the occurrence of an event or contingency, or upon the failure of an event or contingency to occur, such interest passing to the surviving spouse will terminate or fail, no deduction shall be allowed with respect to such interest -- (i) if an interest in such property passes or has passed (for less than an adequate and full consideration in money or money's worth) from the decedent to any person other than such surviving spouse (or the estate of such spouse); and (ii) if by reason of such passing such person (or his heirs or assigns) may possess or enjoy any part of such property after such termination or failure of the interest so passing to the surviving spouse; and no deduction shall be allowed with respect to such interest (even if such deduction is not disallowed under clauses (i) and (ii)) --↩