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STEVENS ESTATE (05/09/69)

decided: May 9, 1969.

STEVENS ESTATE


Appeal from decree of Orphans' Court of Crawford County, No. 105 of 1968, in re estate of Irene Stevens, deceased.

COUNSEL

George Gershenfeld, Counsel, with him Bertram H. Kenyon, Assistant Attorney General, and William C. Sennett, Attorney General, for Commonwealth, appellant.

Robert L. Walker, with him Thomas, Shafer, Walker, Dornhaffer & Swick, for appellee.

Bell, C. J., Jones, Cohen, Eagen, O'Brien, Roberts and Pomeroy, JJ. Opinion by Mr. Justice Jones. Dissenting Opinion by Mr. Chief Justice Bell. Dissenting Opinion by Mr. Justice Roberts. Mr. Justice Eagen joins in this dissent.

Author: Jones

[ 434 Pa. Page 260]

This appeal presents a very narrow question of statutory interpretation: may the family exemption be

[ 434 Pa. Page 261]

    deducted for inheritance tax purposes when there are no assets in the decedent's estate but when there are assets owned in joint tenancy with someone entitled to claim the exemption?

Irene Stevens [decedent] died intestate on February 22, 1968, a resident of Crawford County. At the time of her death there were no assets in her estate; the only asset subject to inheritance tax was an undivided one-half interest in property held jointly with her son, Alton G. Stevens. The son was a member of decedent's household and the decedent was not survived by a spouse; therefore, the son was a person who could properly claim the family exemption (Act of June 11, 1963, P. L. 124, § 1, 20 P.S. § 320.211 (pp)). After the decedent's death, Alton Stevens filed the requisite inheritance tax forms and claimed the statutory family exemption as a deduction. His theory was that he paid the exemption to himself out of his own funds since there were no assets in the estate from which to pay the exemption and he was, therefore, entitled to the deduction. The Register of Wills refused to allow a deduction for the family exemption. The Orphans' Court of Crawford County reversed. The Commonwealth has taken this appeal.

There are two statutes which are controlling in this case. The first is § 601 of the Inheritance and Estate Tax Act which sets up the general framework for all deductions from the inheritance tax (Act of June 15, 1961, P. L. 373, art. VI, § 601, 72 P.S. § 2485-601). That section reads as follows: "The only deductions from the value of the property transferred shall be those set forth in this Article. [The family exemption is included among the allowable deductions under § 613]. Except as otherwise expressly provided in this Act, they shall be deductible regardless of whether or not assets comprising the decedent's taxable estate are employed in the payment or discharge of the

[ 434 Pa. Page 262]

    deductible items: Provided, That when a tax is imposed upon a transfer described in sections 221-241 [§ 241 applies to joint tenancies], such deductions shall be allowed to the transferee only to the extent that the transferee has actually paid the deductible items and either (1) the transferee was legally obligated to pay the deductible items, or (2) the estate subject to administration by a personal representative is insufficient to pay the deductible items." The court below concentrated its analysis on whether the transferee, Alton Stevens, had fulfilled all the requirements following the word "Provided." We think this emphasis is misplaced. Before these requirements become at all relevant, the first sentence of § 601 requires the transferee to establish that he is entitled to one of the allowable deductions. Therefore, the initial question in this case is whether Alton Stevens is entitled to a family exemption as a matter of estate law. If the answer to this question is affirmative, then the requirements of § 601 become relevant.

In order to answer this question, we must turn to the second statute involved in this appeal -- § 211 of the Fiduciaries Act which establishes the family exemption. This section states: ". . . such children as are members of the same household as the decedent . . . may retain or claim as an exemption, either real or personal property, or both, not theretofore sold by the personal representative, to the value of one thousand dollars. . . ." (Emphasis added) In this case there were no assets in the estate so that Alton Stevens paid the exemption to himself from his own money. Even the court below admits this action was a legal fiction. The italicized portion of the statute quoted above would seem to require that there be ...


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