dissenting: I respectfully dissent. It is surprising that the Court finds it necessary to disturb at this late date a rule of law which most assumed had been well settled since at least 1950. Estate of Hinds v. Commissioner, 11 T.C. 314 (1948), affd. on another issue 180 F.2d 930 (5th Cir. 1950). For example, Stephens, Maxfield, and Lind, leading authorities on the Federal estate and gift tax, accept as a given that "'homestead’ or similar state-láw exemptions that may shield property from some state taxes or creditors’ claims do not keep the value of property out of the gross estate.” R. Stephens, G. Maxfield & S. Lind, Federal Estate and Gift Taxation, par. 4.05[3] (1978 ed.). These rights are included by the authors under the subsection entitled "Routine Inclusions [Under Section 2033].”
Furthermore, it seems to me highly inappropriate to reach a result, unless we are absolutely compelled to do so, which will now affect the reach of the estate tax on a State-by-State basis. Nevertheless, I do not base my objections simply upon a "'tain’t right” approach. There is substantial rationale for the result in Hinds, notwithstanding this Court’s somewhat con-clusory articulation thereof in Hinds.
Clearly, Texas homestead rights are not includable under section 2034, because they do not constitute an interest in property existing at the time of the decedent’s death "by virtue of a statute creating an estate in lieu of dower or curtesy.”1 Sec. 2034. The excellent explication of Texas law on homestead rights in the majority opinion makes this abundantly clear. However, for reasons hereinafter given, the existence of the homestead rights does not diminish the value of property includable in the decedent’s estate under section 2033, as the majority incorrectly concludes.
In another context, we have held that "the fact that transfers may be inchoate when originally made does not preclude them from being perfected at some later date”; i.e., at the date of death. Estate of.Pyle v. Commissioner, 36 T.C. 1017, 1020 (1961), affd. 313 F.2d 328 (3d Cir. 1963). The term "inchoate” is defined in Black’s Law Dictionary (5th ed.) as "imperfect; partial; unfinished; begun, but not completed.” Homestead rights, while not a statutory substitute for dower and curtesy, share the common characteristic with dower and curtesy of being initially inchoate. In Tait v. Safe Deposit & Trust Co., 3 F. Supp. 51, 58 (D. Md. 1933), affd. 70 F.2d 79 (4th Cir. 1934), the Court, in describing the thrust of section 2034 (emphasis supplied), referred to the inchoate nature of dower Itnd curtesy: "it was the legislative intent by [the predecessor o'f section 2034] to tax only the inchoate interest of the surviving spouse which existed during the decedent’s life, made consummate by the latter’s death.”
The fact that homestead rights are not a statutory substitute for dower or curtesy, as required for inclusion under section 2034, does not preclude inclusion under section 2033. This is true if, in fact, the homestead rights created by operation of law as an incident of the marital relationship are initially inchoate or incident to an incomplete transfer which is completed by the fact of the decedent’s death.
It seems to me that the creation of the homestead pursuant to the Texas Constitution, as described by the majority, is an incomplete transfer similar, in this respect to dower and curtesy. Both originate in the marital relationship and are subject to extinguishment if the marriage terminates or upon the prior death of the benefited spouse. True, "Generally neither spouse may convey, encumber, or sell the homestead without joinder of the other,” as the majority says, but if the property is sold under such conditions, the homestead is undoubtedly extinguished, although a new homestead may subsequently be established elsewhere. It is only upon the death of one spouse survived by the benefited spouse (or minor or unmarried surviving children) that the transfer is completed and therefore taxable under section 2001(a) (relating to the imposition of the estate tax on transfers of taxable estates). At this point, as stated by the majority, the homestead vests and descends like any other real property; however, the surviving spouse (or children) may continue to use and occupy the property so long as he or she elects to use and occupy it as the homestead. Tex. Const, art. 16, sec. 52. Thus, for purposes of section 2033, the taxable interest of the decedent includes the entire property, undiminished by the value of the homestead rights previously incompletely, but now completely, transferred.
For the above reasons, I would hold for the respondent.
Tannenwald, Wilbur, and Chabot, JJ., agree, with this dissenting opinion.As a matter of fact, R. Stephens, G. Maxfield & S. Lind, Federal Estate and Gift Taxations par. 4.06 (1978 ed.), opine that the present language of sec. 2033 would include the entire value of property owned by a decedent without reduction for a surviving spouse’s dower or curtesy interests in it which, they say, at most, impose conditionaLrestrictions on disposition of property and which restrictions, in turn, are not operative until he dies and never operate if his spouse predeceases him. In the authors’ words, "This reduces section 2034 to a cautious redundancy.” In a footnote, they point out that sec. 2034 was enacted at a time when the predecessor of sec. 2033 was far more restrictive in scope than it is today.