Appeal from decree of Orphans' Court of Allegheny County, No. 899 of 1962, in re estate of Anna S. Purnell, deceased.
James C. Larrimer, with him Dougherty, Larrimer & Lee, for appellant.
Stanley W. Greenfield, Assistant United States Attorney, with him Gustave Diamond, United States Attorney, for United States of America, appellee.
Bell, C. J., Musmanno, Jones, Eagen, O'Brien and Roberts, JJ. Opinion by Mr. Chief Justice Bell. Mr. Justice Eagen is of the opinion that the Court below lacked jurisdiction to entertain declaratory judgment proceedings and therefore the decree should be vacated and the proceedings dismissed.
Ansby V. Purnell died April 12, 1941 leaving a will dated September 21, 1939. He was possessed of a substantial estate. In his will he left his residuary estate "to my wife, Anna S. Purnell, for . . . her natural life, with remainder upon her death to my son, Verner S. Purnell." Ansby further provided: "I direct that my personal estate be distributed to my wife, Anna S. Purnell, as life tenant without requiring her to give bond therefore." Verner survived his mother, who died February 5, 1962. Anna left all her residuary estate to their son Verner S. Purnell, who was not only her executor but, as above mentioned, was also the remainderman under his father's will.
Upon Anna's death, Verner brought a declaratory judgment proceeding*fn* against the District Director of Internal Revenue. The District Director filed an answer to the executor's petition, the averments of which will
hereinafter appear. As the question involved is the determination of the liability of Anna's estate for a tax claimed by the United States of America, which rarely ever appears at the audit of an account but assesses the tax or brings a separate proceeding to collect the tax it believes to be due, we hold that a declaratory judgment proceeding will lie.
Ansby's executors -- his son, Verner, and Anna's brother, S. H. Smith -- filed an account in 1943 showing a residuary estate available for distribution of approximately $98,000, which was awarded by the Orphans' Court "to Anna S. Purnell, life tenant." At the audit of that account, the Court did not decide or even consider the questions which are raised in this declaratory judgment proceeding.
Exactly what property Anna took at her husband's death and in what capacity is important, because between 1941 and 1962, Ansby's property had very greatly enhanced in value as a result of stock dividends, stock splits and the increase in the market value of the stocks and securities which Anna received from her husband's estate. The District Director of Internal Revenue claimed an estate tax on the increase in the value of the stocks and securities which had been part of Ansby's residuary estate, under the theory or legal proposition (a) that Anna was the owner of her husband's entire residuary estate and (b) was merely a debtor to Ansby's remainderman, and (c) as such, a debtor only in the amount she actually received at the time of distribution of Ansby's estate. Ansby's remainderman contended that his mother took his father's residuary estate as a trustee, and consequently no tax was due the Government on the increased value of Ansby's securities.
At the time Ansby (a) made his will and (b) when he died, the Fiduciaries Act of 1917 (P. L. 447, 20 P.S. § 635) was in ...