Robert P. Kane, Atty. Gen., Janet Moschetta, Vincent J. Dopko, Asst. Attys. Gen., Vincent X. Yakowicz, Sol. Gen., Harrisburg, for appellant.
James C. Larrimer, Dougherty, Larrimer & Lee, Pittsburgh, for appellee.
Jones, C. J., and Eagen, O'Brien, Roberts, Pomeroy, Nix and Manderino, JJ. Pomeroy, J., filed a dissenting opinion, in which Manderino, J., joins.
Helen C. Highberger, a resident of New Jersey, died on March 24, 1971. Decedent was the record title holder of real property in Washington County, Pennsylvania. By agreement dated July 30, 1970, decedent had agreed to sell that property to Mr. and Mrs. William R. Taylor for $25,500. The agreement provided that the Taylors would take immediate possession of the property, make a $5,500 down payment, and make monthly payments until September 1, 1973, at which time the balance of the proceeds were due and a deed was to be delivered. The issue presented is whether decedent's interest in the property is subject to the Pennsylvania Transfer Inheritance Tax.*fn1 The Orphans' Court held that the property was exempt from the tax. We reverse.*fn2
The Pennsylvania Inheritance and Estate Tax Act of 1961 provides:
"An inheritance tax for the use of the Commonwealth is hereby imposed upon every transfer subject to tax under this act at the rates hereinafter specified."*fn3
Section 212 of the Act provides: "All transfers of property, as defined in this act . . . are subject to tax under this act."*fn4
We must determine whether decedent's interest in the Washington County property was within the act's definition of "property." Section 102 of the Act defines property, in relevant part, as:
"(iv) All real property and all tangible personal property of a non-resident decedent or transferor having its situs in Pennsylvania, including such property held in trust;"*fn5
Appellant, the Commonwealth, argues that non-resident decedent had an interest in real property having its situs in Pennsylvania, that no exemption is applicable, and that the transfer of the property interest is therefore taxable. Appellee, the Estate of Helen C. Highberger, contends that the execution of the agreement to sell the Pennsylvania realty converted decedent's interest into tangible personalty, exempt from the tax.*fn6
It is settled law in Pennsylvania that the execution of an agreement of sale of real property converts, through the doctrine of equitable conversion, the seller's interest into personalty and the buyer's interest into
realty. The seller is said to hold legal title as trustee for the purchaser.*fn7
However useful the doctrine of equitable conversion may be as a theory of property law it is not necessarily applicable in tax matters. Subject, of course, to constitutional limitations the Legislature is free to tax what it will.*fn8 We must look to the intent of the Legislature, rather than to doctrines of property law, to determine whether decedent's interest in the property is within the definition of property set forth in the act. In so doing, we are mindful that exemptions ...