Appeal from the Order of the Court of Common Pleas of Northampton County in the case of In Re: Estate of Cecelia L. Scott, No. 48-84-0003, dated August 12, 1987.
William P. Hogan, with him, Mary Ann Snell, for appellant.
Bart J. DeLuca, Jr., Deputy Attorney General, with him, LeRoy S. Zimmerman, Attorney General, for appellee, Commonwealth of Pennsylvania.
President Judge Crumlish, Jr., Judge McGinley, and Senior Judge Narick, sitting as a panel of three. Opinion by President Judge Crumlish, Jr.
[ 117 Pa. Commw. Page 423]
The Pennsylvania Department of Revenue (Department), Inheritance Tax Division, issued the estate of Cecelia L. Scott a notice disallowing an inheritance tax deduction. The Department's assessment was upheld by the Board of Appeals and the Northampton County Common Pleas Court, Orphans' Court Division. The estate appeals; we affirm.
Scott died intestate, the owner of unredeemed U.S. Savings Bonds Series E and Savings Notes.*fn1 The estate's inheritance tax return included a deduction -- which the Department disallowed -- for federal income taxes due on those bonds.*fn2
Generally, under the Inheritance and Estate Tax Act (Act),*fn3 an estate must pay taxes on all transfers of a decedent's property.*fn4 The estate is permitted deductions for estate expenses, certain taxes, and the decedent's liabilities.*fn5 The tax then imposed is based on the value of the transferred property. Value is defined as the price a willing seller would sell to a willing buyer, each knowing the relevant facts, and neither compelled to transact.*fn6
[ 117 Pa. Commw. Page 424]
The common pleas court, based on stipulated facts, upheld the Department's decision to disallow the tax deduction, ruling that the Act provided deductions only for taxes paid. 72 Pa. C. S. § 1728.
Our scope of review in a tax disallowance is limited to a determination of whether the common pleas court erred as a matter of law or abused its discretion. In re: Estate of Munro, 101 Pa. Commonwealth Ct. 450, 453, 516 A.2d 829, 831 (1986).
The estate initially argues that the bonds have no value because they are not marketable. We disagree.
U.S. savings bonds are clearly subject to inheritance tax. In Re: Graham's Estate, 358 Pa. 383, 57 A.2d 853 (1948).*fn7 As intangible property, they have no market value; however, they do have a "face value" which is readily converted into cash value at redemption. Thus, the estate's argument ...