Untitled Texas Attorney General Opinion

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426

OFFICE OF THE ATTORNEY GENERAL OF TEXAS
AUSTIN
GROVER
SELLERS
ATTOINW
GLNCIAL
lzz-zq

Eonorablr horgr 8. Shappnrd
Coaptrollar or Fublio Aoeountr
Anatln, Taxan

Dear Sir: opinionHo. o-6691
Boa Inolurlon of Srrlor 1, WaIted
St8t.8 Oorarnunt Bon

Of thr ao-own8r8hIp tfp8 pay8
oludabla In Inhrrltanor tax r
tlm Conptrollar’8
Department rrlatlr l b o nd8 in the
Inhoritanoo tax ro oror arr outllnmd.
Thr lrttrr atat. t bond h8 born 18-
8Urd it hb8 b@Il

aa a8 anondad, In that

such L@ndh are +nparable to a joint bank account of husband
and Wm. ‘, .‘~ ,~
J”
Xlth, tb.e above lrttrr, tharr 1s sabmlttrd a copy
of a lrt.t*$-4om thr attornry for thr rrtatr undrr oonsldrra-
tion in which it I8 oontrndad that no intrrrst in these bonds
pa8808 “on aoooant of thr will of thr drrrdrnt or thr law8
of do8Cont or dlrtrIbutIona. Tha attormy arguoa that in
ordrr for th.80 bond8 to br tarabla 8o!na Intrrrst must pas8
Hon0rabla GSorgr H. Sheppard, Papa 2

on acoourlt cf death; that thr United Statrs Treasury regula-
tions, whloh ware S part Of tb oontraot or purohesa, have the
OffrOt Of giving the rurvivin& 8pOUS@ownrrshlp under and by
vlrtua Of contraoturl right8 and thot no property rights paa8
on lOOOU.ntof death. The rroant oa8S of Bdds v. Mltohall
(184 9, W. 2nd 823) In rhloh thr owrt hold that the brnril-
olary typa of Unltod Stat.8 Govclrnmsnt Bonds were In rrrrot
OOntraOt8 for thr banefit of third por8on8, and illU8trCitOd
euoh holding by drawing an analogy or that typa or bonds to
an ill8llr6llOr POliOy, 18 oltrd. Thr a ttornry oontrnds that
thrrr 18 no aatorlal dirrOnn00 botwron thr theory and roa-
roning therrln and that to br usrd In a drtrrmlnatlon or tho
qur8tIon prrrankd. TO ovrroomo thr prrsumptlon of the Coap-
trollrr*r Department that th.80 bonds are community property
the attornry suggest8 an hypothe810 that thr Co-ownor named
was a prraon other than thr rlfo: and another, t&t the hus-
band had a minor 8on.

Thr aborr lattrrr,prrernt no issur a8 to faot8. Thr’
dooodrnt during
hi8 1ItrtImS purohasrd SorIr8 qip" 'Onitrd Stat08
GOvOr~mt Bond8 and had tham made payablr t0 hISI8Slf or Wit@
and it I8 agrard t&t the bond8 Wore puroha8rd with oDmnUity
rtULd8.
In tho applloetlon or the law, however, the lssurs
brtnrrn the Comptrollrr’s Department and thr attorney ibr the
rrtata do not appear dlreotly jolnrd. The Comptrollrr rmpha-
rIze8 that provlalon or Artlolr 7l17 rhloh inoludrs property
pasriag by *doad, grant, salr or gift oadr or Intrndrd to
take rrtrot In po8srsaIon or rnjoymrnt arttrr the death of
thr grantor or donor”. Tha attorney, however, lmphasizor
that pmvlslon whioh Inoluder proprrty passing by ‘*Ml1 or by
t& laws or dasornt and dlstrlbutlon or this or any other
State”.
Artic1r 7117, !?evised Civil .3t3tutss or Texas as
amended, under which the questicn herein arises, is quoted:
“ill croperty within tha ;urisdiction of this
State. rosl or :3r;onal, corDorate or incorporate,
and a& interest therein, Inhludinz=~property _ca3sL
of appointment exercised
in@ undrr a eenoral po’.::sr
by the dooadont by will, including the proceeds of
life Ineuranor to the extent or the amount reoolv-
ablr by the rrooutor or administrator as insuranor
Honorablr Oaorgr B. 3happard, Pago 3

UJldSrpOliOIa8 tSkon Out by tha daoadant upon hia
own llfa, and to tha lxtant or tha l x o ~a a ovar
Forty Thourand Dollara ($40,000) or tha amount
raoalvabla by all othar banarIoIarIaa aS Inrur-
anoa udar pOlIOia8 takan out by tha daoadant
upon hi8 0wn llra, whathar balonglng to Inhabl-
tantr or thir Stat0 or to parson8 who ara not In-
hSbltant8, ragardlasr Or whathar 8SOh prop8rty
I8 looatad within or without thir Stat., Whioh
8ball 0~88 lbaolutaly or In tra8t by wIllor6r
&a law8 Oi da8oant Or di8tributiOn Of thi8 Or
my otha Stats, or by drrd, iwant, 8818. Or gift
mad0 or Intandad to taka affaot In am88888Ion or
lnjomnant rrkr the daath or t&a m9ntor or donor,
ahall, upon parrin to or rcr tha PI@ or any par-
Ion, oorporatlon, or l88ooIation, ba rubjaot to a
tax ror tha banatlt or tha Stata' Ganaral Ravonua
Fund, In aooordanor with tha roirtnhg olarri.fl-
oatloa. Any trSn8fSr mnda by a grmtor, vandor,
or donor, whathar by drrd, grant, aala, or ulft,
rhall, anlarr rhown to tha oontrary, bo daamad to
hats barn mad8 In oontamplatlon of death and nub-
jaot to tha 8am tax a8 haraln provldad, It suoh
tran8iar 18 mad8 wlthln twc (2) yoarr prior to tha
daath or tha grantor, vandor, or donor, oi a nm-
tarlal part or his 88tata. or Ii tha tranrrrr aada
within auoh parlod la In tha nataro or a iinS1
dirtribution 0r propmty and without adaquata valuw
bla oonrldara tlon.* (mphS8i8 8ddOd)

Tho 8OOpS of thi8 Artlola I8 not llmitad by the
lagal davioa through whloh proprrty pa8888 on daath. It lm-
poSa8 a tax on the right to rroelva or sucoaad to the pOSSa8-
rion or l njoyment of proparty after the death of thr decadent
and proprrtg comes wlthln the purview of this statute if such
possaeaion or enjoynnent is mada contingent with or postponed
until the death of tha grantor or donor. (sar Bethea v. Shep-
pard, 143 S. 3. 2nd 997).
Tha primary question In the instant ~986, thererore,
IS whathar the wlfa raoalved or suooeadad to the possass~on or
lnjoymant or all or any part of these Sarlrs “3” United Ststas
Govarnmsnt Bonds on the drath of tha husband. Thrra 18 agrea-
ment that the bonda ware purchased v.ith omuaity fund8 @d
that, llnaa tha dasth of tha husband, tha wita 16 thr aola
Honors blr korgr H. Shrppard, Pagr L

wn8r or thorn. It roiiorr8 that at 10mm time thr lntrrrat 0r
tha hurband parrad bD tbr rlfr and Itmurt br drtrrmlnrd ah8n
and in what manna? thlr ohangr ooourrrd.
Thor8 bond8 raprarant a oontrrot with the Oovmi-
aunt or thr Unltrd Stats8 and thr rrgulationr or thr Troarurr
Ihpartmmt are mdr a part or ruoh oontraot by rrirranO8.
Th* rlrrt lpplloablr rrgulatlon provldrr:
9urIng thr 11~88 or both oo-owa8r8 tha bond
will ba paid to rlthrr oo-owner upon hi8 rrpratr
raquo8t, without roquirlag th r+aturr of thr
other ootwnrri and upon payment to llther oo-
wn8r the othrr parson rhall ooa8e to hara anl
int8?88t in th@ bondl.* (Treasury Dlp8rtmrnt Rag-
uiationr, gubpart I, 6eotlan 315.32. Departmoat
Qircolar Iio. 530, 5th R8virion. ha0 1, 1942. (a)).
Obrlouriy, thlr rrgulatlon 18 lntrndrd to fix tb, $zbi!Ey
Or th8 UlIitrdStator GOTrmunt in the oontmot.
pO88r8EiOa Of the bonds the inoidrat of th8 right to oarh
them and, on001th bond8 ar. Oalhed, 88rT48 to lWii8ta th8
Unltrd Stat.8 from any iurth8r llablilty. Howaver, it doe8
IlOt r8gUiRtr th8 right8 Of th8 00-OWUr8 88.ktW88n th8l888lT.8
t8Et; bond8 or in the prOO@Od8 from thr bond8 if they art
'Phi8rrguiatlon is not, thrrrfon, In oonfliot ,wr.th
fin ookunlty proprrty law or T8xa8.
It 18 W811 88tthd that property puroharrd with
oommunlty rundr, or property rxohangrd r0r oommunlty proprrty,
18 oommuaity property. (Sa8 23 Tex. Jur. p. 142, %O. 114
and 00888 olkd). Thl8 18 trUS lVSD ii thr pllrOha88Or lX-
change Is tBn8aCted in thr name or only one epousr end xkare
the trsnsaotlon IS In the mm8 of both spouses tho prssump-
tlon in favor of the OCeUUUIlty is diffloult to OYeroome. (Se*
23 Tex. Jur. pp. 355, 356, 357, Sot. 307). As 8tated, it has
bean agreed thflt the bonde in question w8re purchaesd with
comnunlty funds and were made payable to the husband or the
wire, and it follows that the bonds are c0imunlt.v property
during the existence of thr ooamucity. it 0180 fol?O*:S thRt,
had they been Oa8hrd prior t0 the OOUUWlity'8 diSSOhtiOn,
tha prOO8ed8 would rWOrt t0 CO-it7 fund8.
It is ham noteworthy that in tha administration
of tha iaW8 of thr radaral Gorrrnmant (partlouiariy tha tax
Honorable George H. Sheppard, Pago 5

law8) full or8dit ha8 boon girrn to the oommunlty property
law Or Taxa (8M HOpkin 1. BSOOn, 282 U. S. 122) J8 wrll
88 rlmllar law8 or other rtata8 (In Louirlana: hnd8r T.
Piart, 282 U. 9. 127). (In Wa8hix&tonl PoolT. Ssaburn, 282
u. s. 101.). In Lang T. Coamlrsloarr (304 U. S. 64) ihr oom-
uunlty proprrtl law 0rthb Stat0 or Wa8haton wf38reoognizrd
by thr Su mm@ OOlvt of thr.fJnit8dSt8t.8 and it wa8 held that
only on8-ia ii (l/2) or th8 proorrd8 rr00 lmuzanor p011oi88,
th8 wir0 bring th8 8018 bonorloiary and all pr8UIb88 ha+-
bern paid for with oanmunity finds, rhould be lnoludod In thr
drordent’r grO88 88t8t6J and ?rh18 0888 W88 rOliOwOd in regard
to the oammunltf property law of T8xar in E8t;atror Shram
Moody T. Oomml88loaor, 42 B. 1. A. 967,
ml8 88OOnd appl1oablr regulation providrrr

'If 8ith8r OO-owIi8?die8 . . . th8 rurViTiX@
oo-wn8r will br noogairrd a8 t& 8010 and abro-
lute owner or thr bond and payunt will bo mdr
only to him.' (marurr D8partuat R86ulrt1oa8,
Subpart K, Sootlon 315.32. Ikpartment Clrouiar lo.
530, 5th Rovlrlon, June 1, 1942. lb)).

In th88e 00-Ownarrrhiptypo Of bondr, thir regulation arrate8
i.l~
each OO-ownat thr right Of 8UrViTOr8h1p. ~48 ltatcd, the
mgulatlon 18 a part 0r thr ooatraot and it mU8t br praruaud
that th8 psrtir8 t0 tha OOntraOt intrndrd th8 lffrCt Of th8
rrgulatlon. It rOiiOW8 that in th8 pZ'888nt8088, th8 hurband
and wirr latmdbd to onatr br oontrrot the r-t or aurrlror-
rhip in raoh othrr. It 18 not brllrrrd that 8uch a aontraot
ViOlat th8 OO-ity PrOpOrty law Or Tax88 and it would ap-
p88r that it 8hOuld b8 giV.Il 8ff8Ot. '.

~8 8ugg6st6a, thr rsornt OaeI oi iM63 v. YitOh811
(supra) in whloh the court draws an enaiogy batxeen ths par-
ties to a benrilolary type of United States Covcrnment Bond
and an lnsuranoe pollog is not lrrelrvant but, lnasm.uch as
the bonds there In question are the co-ownership type and par-
ticularly since the oo-owkcrs ars hU8baUd and wife and tha
bonds were purchased with community funds, It must bc con-
sidered in oonjunctlon with the ca8a of Blaokmon v. Ilansen
Eonombla Goorgr Ii. Shrppard, Paga 6

(169 9. 'U.2nd 955 and affirmad 169 9. w. 2nd 962; and 8W
8180 Law Te h8d88iOMr~ 8Upm) & the Blaokmon 1, Canaan
Co80 thr daordrnt, after marriage took out polioi On hi8
wn lir8, makin& hi8 Wifa thr bm8fioiary and paid th8 pr8-
miLm8 with oommuaitf fuadr aad th8 oourt in holding that
only onr-halr (l/2) or th amount war taXabl8 a8 inruranoa
“tak8a out by thr deoadont upon hi8 own lii8' under the
abwr Artlol8 7ll7 raid:

"&A thi8 0088 th0 Or8OtiT8 ior Or On+half
or thlr rund wa8 thr fluid8 or apprllant. & t8ki.a6
Out tbr8@ PO110108 bar hurbaad, tbatOtiT.if at
18ll8t, g8T8 h.r hi8 OOmIlitlnit~ intW@rt. Thi8 gift
wa8 noTar rotokod. 9hr did 8njOJ tb priTii8&8
Or 8UOOWdiw t0 t&18 girt UpOn hi8 drath; but in-
8Ot8r a8 brr OOMlUlit~ iund8 Orrat8d 8M0, 8hr
did not, by h8r hurband'r drath, ruoo8od thrrato,
&r hu8band at all tim88 prior to hi8 death had
the pwlr, within limitr, to rka a 6lrporltion
of h8r 8ommunit~ intarrrt In th 8 lonay datotrd to
th8 pamIlt Oi th888 pr8tiUM8 t0 UlOthC. h
8hOt8d to rxpand ram fc0 h8r b8lwrit. *IA@, if
thOr8 wB8 S priTil868 illth@ pO11Oia8 t0 ObasO
thr brmfioiar~, it8 8X8rOi8. oould haT8 drrratod
her lntara8t. Rut @To11if thrra war ruch a power,
h8 did not ChOO88 to 8X8rOi8. it and i8ft h8r
8lOMy inT88t.d iOr h8r brnrfit. OM-hair Oi th
uount or thrra pollolr8 only rmprrrmtrd, within
tha munbg or our 8t8tUt88, 'pO1101a8 taken out
by thr daoadmt upOn hi8 own iii@.' Th18 18 What
apprllant 8uccrrdad to upon thr drath Oi her hnr-
band. . ..I)
That the status or tha part108 in these oo-ownrrrhlp
type bonds is analogous to tblr status in a bank acoount has
also been s%grsted. Such an analogy is clrar batwern thrso
bonds and a "joint tSnsncyW typS of bank sooount, vbSrsin
funds are dSpoSltSd in the name of both spouses each having
thS right to withdraw any part or all of the funds SOd SsSh
succeeding to full omrrshlp of the funds on the drath of thr
other, In faot, it 1s not impossiblr to thaorlzr that thr
status or m-owners in thrsr bonds is OM Of joint trnanol
which, although lmpoaaibla by Operation Of law (SOS Art. 2580,
V.A.C.S.) map ba orestad by oonPrsot (8oS Chamllrr ve KauntzS,
130 S. vi. 2nd 327).
Ronorabls G#orgr H. Sheppard, Fags ‘I

u iatsrsr
ths thsory or analogy hsra applioablr,
substantial ,y thr sams rssults will obtain. In hating thaso
bonds and. layabls to huskn4 or wlfs, thr dsosdsnt d1vs to
his wira, ” ;rntatlrrl~ st laast”, his oaemiinlty lntrrsst
thrrsln. A .thou6h ths girt was ratooabla or ths rl&ht bs-
stows4 thrr Iby wss asra~slbla through th8 d8084sut'~ oashlng
of thr bond L prior to his drath, ths bonds wsrs net 80 oashsd
and the wir I arsssl~sQ or suooradad to ths possra~~lon or an-
oyMnt”or ;hs dsosdsnt’s nn4irldad OM-half (l/d) intsrrst
in the bon: I*
A oatsgorloal lnswsr to ths hypp.?+ds Frsssntsd
(that ths socownar with ths husband WaI a parson other tlnn
ths rlfs or that thsrs ms a minor son) ooule br mlslsa4
and to ~lsouss thsm fully would rrqulrs further hypothsslz %
as to spsslflo fast sltuatlo~s. It would pa iar arlsld fr,cm
ths oass bare oonsi4srsil and ml&it even load to the lnrolrsd
subjrots o? frat4 03 th gmrt of tha husband In l so r o lsln8
hi, statutory right ci sontrol and dlsp~sltlon of ths. oommua-
lty proportl and sstopprl on ths Fart oi ths ulfs through
sllsnoa or fmllun to let.. This oplnlon should not, thsrs-
fors, ba snlardrd apon nor appllse anlsss tAs fasts lr s 14s~
tloal with thoss hors oonsl4srs4.
The rorsgoing oonsldrrrd, YOU 8m 8dViI38d that it
Is tha opinion of this on108 th8t OM-half (l/2) Or the valus
of thsss S8rl.s “BE”tbikd Stat88 Oorsmr8Ut Beads, payable
to hnsbane or wit8 and purohassd with oommunlty funds, Is tax-
lbls \udsr thr Inhsrltanos Tax Lawr of Texas and should br
bOlUd8d in th8 iUh~ritano8 ta1 r8pOrte

Yours rrry tr*ly
AT'T0FiWYGENERALOF ThXAS
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