Appeal from the Order of the Court of Common Pleas of Allegheny County in the case of In Re: Estate of Steve Manolakos, Deceased, No. 3144 of 1984.
Arthur F. McNulty, Assistant Counsel, for appellant.
George C. Diamantopulos, for appellee.
Judges Craig and Doyle, and Senior Judge Kalish, sitting as a panel of three. Opinion by Judge Craig. Dissenting Opinion by Judge Doyle.
[ 112 Pa. Commw. Page 174]
The Department of Revenue appeals from a decision of an en banc panel of the Court of Common Pleas of Allegheny County reversing a decision of the Department of Revenue's Board of Appeals, and allowing an inheritance tax exemption under 72 Pa. C.S. § 1711(c)(1) for the decedent's residual trust.
This appeal presents a question of first impression. Does a residual trust established for the use and benefit of the people of municipalities in a foreign country, to improve their public schools, qualify for the exemptions from inheritance taxes, contained in 72 Pa. C.S. § 1711?
The facts are not in dispute. Mr. Manolakos died on April 28, 1984 and his will contained the following provisions:
B. 1. Following the death of the aforementioned individuals, the then remaining principal of the Trust Estate, shall be held in a charitable trust for the use and benefits of the people of the communities of Thafnion, Sparta, Greece and Lefkohoma, Sparta, Greece, and my Trustee shall pay to or for the benefit of each of the aforementioned communities so much of the net income from the Trust Estate, together with so much of the principal thereof, as my Trustee, in its sole discretion shall deem advisable; . . . . Any income not so distributed will be capitalized.
2. While it is my general purpose to provide funds for the improvement of each of these communities, it is my desire that the funds be used primarily for the improvement of the public
[ 112 Pa. Commw. Page 175]
schools of each community. The specific charitable purposes for which funds shall be applied for the use and benefit of Thafnion shall be be determined by a Managing Committee of that community composed of my nephew, George N. Fousketakis, all local teachers, and the Governor of Sparta, and the Burgess of Thafnion; and the specific purpose for which funds shall be applied for the use and benefit of Lefkohoma shall be determined by a Managing Committee of that community, composed of my nephew, George N. Fousketakis, all local teachers, the Governor of Sparta, and the Burgess of Lefkohoma.
In the event there should be a disagreement among the members of either of the above Committees, the opinion of my nephew George N. Fousketakis, shall prevail.
3. This trust shall continue in perpetuity or until such time as my Trustee, in its sole discretion but after consultation with the Managing Committees of the communities, deems it advisable to terminate the trust, at which time the then remaining principal, together with any income accumulated thereon be distributed equally between the communities of Thafnion and Lefkohoma, in Sparta, Greece.
The estate filed an inheritance tax return with the Allegheny County Register of Wills and claimed a deduction of $173,158.35 for the residual trust.
The Department of Revenue issued an appraisement and assessment denying the deduction. The estate filed a timely protest and the Department of Revenue issued an order and opinion affirming its previous determination. The department found the residual trust did not qualify for the exemptions to inheritance taxes contained in 72 Pa. C.S. §§ 1711(b), 1711(c)(2).
[ 112 Pa. Commw. Page 176]
The Estate filed a Petition for Citation Sur Appeal of Determination of the Department of Revenue in the Court of Common Pleas of Allegheny County. Judge Nathan Schwartz scheduled a hearing for August 27, 1986 and despite being given notice of the hearing, the Department of Revenue failed to appear. The hearing proceeded ex parte and on August 29, 1987 Judge Schwartz entered an order reversing the determination of the Department of Revenue.
The Department of Revenue filed timely exceptions to the order of Judge Schwartz. After argument, an en banc panel of the Court of Common Pleas of Allegheny County affirmed the decision of the trial court and, in so doing, adopted the trial court's conclusion that the residual trust qualified ...