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Miller v. Commonwealth

April 8, 2010

CHARLES O. MILLER, JR., AND DOROTHY M. MILLER, PETITIONERS
v.
COMMONWEALTH OF PENNSYLVANIA, RESPONDENT



The opinion of the court was delivered by: Judge Leavitt

Argued: December 8, 2009

BEFORE: HONORABLE ROBERT SIMPSON, Judge, HONORABLE MARY HANNAH LEAVITT, Judge, HONORABLE JAMES R. KELLEY, Senior Judge.

OPINION

Charles and Dorothy Miller petition for review of an adjudication of the Board of Finance and Revenue imposing a realty transfer tax on the Millers' conveyance of realty to a living trust. The Board held that the statutory exclusion for the transfer of real property to a living trust did not apply to the Millers' trust because it was an irrevocable living trust. Concluding that the Tax Reform Code of 1971 (Realty Transfer Tax Act)*fn1 does not require a living trust to be revocable in order to qualify for exclusion from tax, we reverse the Board of Finance and Revenue.

The stipulated facts are as follows. Charles and Dorothy Miller, husband and wife, created The Dorothy M. Miller Family Irrevocable Trust (Miller Trust) in October 2005. The Miller Trust Agreement names Dorothy Miller as settlor, and Charles and Dorothy Miller as co-trustees. The sole beneficiaries of the trust are Mr. and Mrs. Miller and their only child, Sharon M. Gregg. In pertinent part, Section 2.01 of the Trust Agreement states:

2.01. Initial Principal. Settlor, desiring to establish an irrevocable trust, does hereby irrevocably transfer, assign and deliver to the Trustees and their successors and assigns the assets listed on Schedule "A", attached hereto and made a part hereof.

Respondent's Brief, Appendix A, Exhibit A, at 2. Section 10.01 of the Trust Agreement states:

10.01. Irrevocability. Settlor has been advised of the consequences of an irrevocable trust and hereby declares that this Trust shall be irrevocable and shall not be altered, amended, revoked, or terminated by Settlor or any other person or persons.

Id. at 12.

By deed recorded November 30, 2005, Mr. and Mrs. Miller transferred title to their house and farm located in Carlisle to the Miller Trust.*fn2 The Millers did not pay realty transfer tax on the transfer, claiming that it was an excluded transaction under the Realty Transfer Tax Act because it was a transfer to the trustee of a "living trust."

On April 12, 2006, the Department of Revenue issued a Realty Transfer Tax Notice of Determination providing that the transfer of the Millers' realty, valued at $218,540, was subject to $4,370.80 in state and local realty transfer taxes, plus applicable interest and fees. The Department advised the Millers that their claimed exclusion was disallowed because the Miller Trust did not "qualify as an ordinary or living trust." Respondent's Brief, Appendix A, Exhibit D, at 2.

The Millers filed a petition for redetermination with the Department's Board of Appeals. On February 16, 2007, the Board of Appeals issued its decision, holding that the transaction was not excluded from realty transfer tax. The Board reasoned that because the Miller Trust is irrevocable, it is not a "will substitute" and, therefore, is not a living trust for purposes of the Realty Transfer Tax Act. On further appeal, the Board of Finance and Revenue affirmed the imposition of the realty transfer tax on the same grounds. The Millers now petition for this Court's review.

On appeal,*fn3 the Millers argue that the Board of Finance and Revenue erred in determining that the transfer of their farmstead to the Miller Trust was a taxable transaction. The Realty Transfer Tax Act provides an exclusion for the transfer of realty to the trustee of a "living trust," and the Millers argue that their transaction falls into that category. They note that a living trust addresses a future event, i.e., what happens to property upon the death of the settlor, regardless of whether the trust is revocable or irrevocable. The Department counters that an irrevocable trust like the Miller Trust is not a substitute for a will and, therefore, does not constitute a "living trust" for purposes of the statutory exclusion.

The issue presented in this case poses a question of statutory construction, for which our review is plenary. Malt Beverages Distributors Association v. Pennsylvania Liquor Control Board, 918 A.2d 171, 175 (Pa. Cmwlth. 2007). The object of all statutory interpretation and construction is to ascertain and effectuate the intention of the General Assembly. 1 Pa. C.S. §1921(a). In pursuing that end, we are mindful that the plain language of a statute generally provides the best indication of legislative intent. Malt Beverages Distributors, 918 A.2d at 175. Further, in reviewing the plain language of a statute, "[w]ords and phrases shall be construed according to rules of grammar and according to their common and approved usage." 1 Pa. C.S. §1903(a). Every statute must be construed to give effect to all its provisions so that ...


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