Appeals from the Orders of the Court of Common Pleas of Philadelphia County in the case of Estate of Mary Shippen Butler, Deceased, No. 3658 of 1951, and in the case of Estate of Daniel T. V. Huntoon, Deceased, No. 1116 of 1944.
Catherine R. Barone, Deputy Attorney General, with her, John O. J. Shellenberger, 3rd, Deputy Attorney General, Eastern Regional Director, and LeRoy S. Zimmerman, Attorney General, for appellant.
Karen A. Fahrner, with her, Duffield Ashmead, III, Drinker, Biddle & Reath, for appellee, Estate of Mary Shippen Butler, deceased.
John F. Meigs, of counsel, Saul, Ewing, Remick and Saul, for appellee, Estate of Daniel T. V. Huntoon, deceased.
Judges Rogers, Colins and Senior Judge Kalish, sitting as a panel of three. Opinion by Judge Colins. Judge Kalish concurs in the result only.
[ 87 Pa. Commw. Page 224]
The Commonwealth of Pennsylvania, Department of Revenue (appellant) appeals two orders of the Orphans' Court of Philadelphia, sitting en banc, which dismissed its exceptions to two trial court decisions holding that adopted children are "lineal" rather than "collateral" descendants under the Inheritance Tax Act of 1919 (Act).*fn1 Pursuant to the Act, these "lineal descendants" would be eligible for the lower tax rate of two percent versus the ten percent rate applicable to collateral heirs.*fn2 These appeals have been consolidated before this Court. For the reasons hereinafter stated, we affirm the decisions of the lower court.
The pertinent facts of the two cases involved are as follows: Mary Shippen Butler died in 1949. Decedent left a will in which she created a trust for the benefit of her daughter, Marian F. Wood, to pay her the net income from a share of the principal for life and granted Wood a limited power to appoint by will, to her "lineal descendants", the principal of the
[ 87 Pa. Commw. Page 225]
trust. After Butler's death, inheritance taxes were paid on all interests in the Wood trust at the two percent rate applicable to lineal descendants under the Act. Appellant, however, reserved the right to assess additional taxes on any interest which may pass to collateral descendants.
Wood died in 1973, leaving a will in which she exercised her power of appointment. One of the provisions in this will left the principal of the trust to Wood's son, Edward, Jr., for life with a remainder in his adopted children. In case this first provision was invalid, however, Wood included another provision in which she left the principal to Edward, Jr., outright.
Litigation over the legality of the provision creating a remainder in the adopted children resulted in a family agreement creating a trust in favor of Edward, Jr., for life with a remainder in Edward, Jr.'s adopted children.
Upon Wood's death, appellant sought to tax the interests of Edward, Jr.'s, adopted children at a rate of eight percent in order to raise the original two percent tax paid on the property to the ten percent ...