Appeal, No. 14, Jan. T., 1951, from decree of Orphans' Court of Delaware County, 1949, No. 492, in Estate of Pauline L. Zipperlein, Deceased. Decree reversed.
Francis J. Gafford, Deputy Attorney General, with him, Elgin E. Weest, and Charles J. Margiotti, Attorney General, for appellant.
R. Winfield Baile, with him George W. Thompson, for appellee.
Before Drew, C.j., Stern, Stearne, Jones, Bell and Ladner, JJ.
OPINION BY MR. JUSTICE HORACE STERN
Testatrix devised and bequeathed all of her estate, real and personal, to her stepson and his wife as "tenants by the entireties, their heirs and assigns forever in fee absolutely." At what rate is this testamentary gift taxable under the Transfer Inheritance Tax Law of June 20, 1919, P.L. 521, § 2, as amended? The court below decided this question in favor of the 2% rate on the entire bequest, -- a conclusion which, in our opinion, is erroneous.
The Act provides that the tax shall be at the rate of two per centum upon property passing "to or for the use of father, mother, husband, wife, children,... children of a former husband or wife, or the wife or widow of the son, of a person dying seized or possessed
thereof..."; and at the rate of ten per centum on property passing "to or for the use of any other person or persons, bodies corporate or politic." If, therefore, the gift in this case had been made to the stepson alone it would have been subject only to a 2% direct inheritance tax by virtue of the clause "children of a former husband or wife"; had it been made to the stepson's wife alone it would not have fallen within the 2% class, she being the wife, not of the son but of a stepson, and children and stepchildren are clearly distinguished in the Act.
It is well established that where an estate is held by the entireties the husband and the wife do not each own a one-half share or any divisible part of the property, but both own the whole of it; each is seized per tout et non per my: Madden v. Gosztonyi Savings & Trust Co., 331 Pa. 476, 200 A. 624; C.I.T. Corporation v. Flint, 333 Pa. 350, 5 A.2d 126; Gallagher Estate, 352 Pa. 476, 43 A.2d 132; Use of United States National Bank v. Penrod, 354 Pa. 170, 47 A.2d 249. But in considering, from a practical standpoint, the question as to the proper tax to be imposed under the 1919 Act, the stepson and his wife must be regarded as each having a one-half interest in the bequest, with the result that the tax on his half share will be at the rate of 2% and the tax on her half share at the rate of 10%.
It has been suggested that the stepson's wife could renounce her interest in the gift, thereby leaving the bequest to devolve entirely upon the stepson and thus bringing it wholly within the 2% group, and thereafter the stepson could re-create with his wife a tenancy by the entireties, -- an idea derived from the decision in Bute Estate, 355 Pa. 170, 49 A.2d 339. There it was held that, when a beneficiary renounces his legacy, ...