No. 96-064
IN THE SUPREME COURT 0~ THE STATE OF MONTANA
1996
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IN THE MATTER OF THE ESTATE OF p j, '! ,~~F,~../ f;;~
tj
EMIL10 TONY PARINI, Deceased, &
Plaintiff and Respondent,
Respondent and Appellant.
APPEAL FROM: District Court of the Fifth Judicial District,
In and for the County of Jefferson,
The Honorable Frank M. Davis, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Deborah Harten, Tax Counsel, Department of Revenue,
Office of Legal Affairs, Helena, Montana
For Respondent:
Leonard J. Haxby; Haxby & Somers, Butte, Montana
Carl M. Davis, Attorney at Law, Dillon, Montana
Submitted on Briefs: July 11, 1996
Decided: November 7, 1996
Filed:
Justice W. William Leaphart delivered the Opinion of the Court
The Montana Department of Revenue (DOR) appeals from the
findings of fact, conclusions of law and order of the Fifth
Judicial District Court, Jefferson County, concluding that tax
liability calculations made by the Estate of Emelio Tony Parini
(the Estate) were correct. We reverse.
The following issue is raised on appeal:
Did the District Court err in characterizing various
joint tenancies as "gifts" made by the decedent to his
relatives?
BACKGROUND
The material facts of this case are undisputed. Emelio T.
Parini (Emelio), died on December 21, 1991. Emelio never married
and died without children. During his lifetime, Emelio placed
title in certain personal property in himself and his various
brothers, sisters, nieces and nephews as joint tenants with right
of survivorship. All but one of the nineteen joint tenancies were
created more than three years before the death of Emelio. As a
joint tenant, Emelio retained all rights to possession of the
property associated with joint tenancy.
Upon Emelio's death, all property was transferred to the joint
tenants. The DOR requested proof of contribution to the joint
tenancies by the surviving joint tenants. The DOR maintained that
inheritance taxes owed by the surviving joint tenants' estate
should be based upon the full value of each of the joint tenants.
2
The Estate challenged the DORIS calculations, arguing that the tax
on the joint tenancies should be limited to 50% of each joint
tenancy. The Estate paid over $30,000 of taxes on the full value
of the joint tenancies, which had a combined value of $427,736.
The District Court agreed with the Estate and concluded that
inheritance taxes only apply to 50% of the value of each joint
tenancy. The District Court came to this conclusion without fully
considering the amount of contribution by each surviving joint
tenant. The DOR appeals from the District Court's conclusion.
STANDARD OF REVIEW
The standard of review of a district court's findings of fact
is whether they are clearly erroneous. Daines v. Knight (1995),
269 Mont. 320, 324, 888 P.2d 904, 906. Here, the District Court
found that four of the joint tenants may have contributed to their
respective joint tenancies. The standard of review of a district
court's conclusions of law is whether the court's interpretation of
the law was correct. Stratemeyer v. Lincoln County (Mont. 1996),
915 P.2d 175, 182, 53 St.Rep. 245, 250. In its conclusion, the
District Court found that the DORIS position on taxing joint
tenancies at their full value was contrary to the intent and
purpose of §§ 72-16-301(2) et seq., MCA, and also found that a
surviving joint tenant should only be taxed upon 50% of the value
of the joint tenancy. The District Court based its decision on
this Court's holding in Department of Revenue v. Dwyer (1989), 236
Mont. 405, 771 P.2d 93.
DISCUSSION
The statute applied by this Court in Dwver (5 72-16-303, MCA
(1987)) allowed the state of Montana to tax in an amount equal to
Emelio's interest in the joint tenancy. Prior to the changes
enacted by the 1989 Legislature, the statute read as follows:
(1) Whenever any property, however acquired, real
or personal, tangible or intangible, including government
bonds of the United States, is inscribed in co-ownership
form, held by two or more persons in joint tenancy or as
tenants by the entirety, or is deposited in any bank or
other depositary in the joint names of two or more
persons and payable to the survivor or survivors of them
upon the death of one of them, the right of the survivor
or survivors to the immediate possession or ownership is
a taxable transfer.
(2) The tax is upon the transfer of decedent's
interest, one-half or other proper fraction, as evidenced
by the written instrument creating the same, as though
the property to which the transfer relates belonged to
the joint tenants, tenants by the entirety, joint
depositors, holders in co-ownership form, or persons, as
tenants in common and had been, for inheritance tax
purposes, bequeathed or devised to the survivor or
survivors by will, except such part thereof as may be
shown to have originally belonged to the survivor and
never to have belonged to the decedent when the surviving
joint tenant is a spouse or issue of the decedent. In
all other cases, the full value of the property shall be
taxable, except the portion thereof that originally
belonged to the survivor and as to which the decedent had
made no contribution; if the decedent had made a
contribution to the ownership of the property, the amount
of the contribution shall be taxable.
(3) This section shall not be construed to repeal
or modify the provisions of 72-16-301(3).
Section 72-16-303, MCA (1987), did not require the surviving joint
tenant to provide evidence of contribution toward the joint
tenancy. Section 72-16-303, MCA (1989), contains two significant
changes to § 72-16-303, MCA (1987), applied by this Court in Dwver.
First, it requires a surviving joint tenant to prove either
previous ownership or payment of consideration before tax exemption
4
applies. Second, the 1989 Legislature repealed § 72-16-303(3), MCA
(1987)) which specifically referred to transfers in contemplation
of death under § 72-16-301, MCA (1987). Section 72-16-301(3), MCA
(1987), provided:
Every transfer by deed, grant, bargain, sale, or gift
made within 3 years prior to the death of the grantor,
vendor, or donor of a material part of his estate or in
the nature of a final disposition or distribution thereof
and without a fair consideration in money or money's
worth shall, unless shown to the contrary, be deemed to
have been made in contemplation of death within the
meaning of this section, but no such transfer by deed,
grant, bargain, sale, or gift made before such 3-year
period shall be treated as having been made in
contemplation of death. . .
However, application of the 1987 statute was inappropriate because
all questions regarding inheritance tax must be determined as of
the date of the decedent's death. Burr v. Department of Revenue
(1978), 175 Mont. 473, 476, 575 P.2d 45, 47. Here, Emelio passed
away in 1991, subsequent to these statutory changes; this made the
District Court's application of Dwver to the analysis of this case
erroneous.
In this case, as in Dwver, Emelio was a joint tenant with
right of survivorship with one other person in each of the nineteen
joint tenancies. In Dwver, we held that the taxation of joint
tenancies with right of survivorship not made in contemplation of
death was based upon the decedent's portion of ownership. Dwver,
771 P.2d at 96. However, modifications to § 72-16-303, MCA, made
by the Legislature in 1989, have changed the way this Court must
analyze transfers of joint tenancies.
Although a 50% taxation of the joint tenancies would have been
5
appropriate pursuant to this Court's holding in Dwyer, the statute
now requires joint tenants to pay tax on the full value of the
property they receive upon the death of the other joint tenant
unless they are able to prove that they either provided adequate
consideration or previously owned the property
As of 1989, § 72-16-303, MCA, states:
(1) Whenever any property is held by two or more
persons in joint tenancy with right of survivorship, the
right of the survivor or survivors to the immediate
possession or ownership is a taxable transfer.
(2) The tax is on the full value of the property
held as joint tenants with right of survivorship, except
a part of the property as may be shown to have originally
belonged to the survivor or survivors and never to have
been received or acquired by the latter from the decedent
for less than adequate and full consideration in money or
money's worth. When the property or any part of the
property, or part of the consideration with which the
property was acquired, is shown to have been at any time
acquired by the other person from the decedent for less
than an adequate and full consideration in money or
money's worth, only the part of the value of the property
as is proportionate to the consideration furnished by the
other person may be excepted. When any property has been
acquired by gift, bequest, devise, or inheritance as
joint tenants with right of survivorship and their
interests are not otherwise specified or fixed by law,
the tax is on the value of a fractional part to be
determined by dividing the value of the property by the
number of joint tenants with right of survivorship.
As stated above, the 1989 changes to this statute were significant.
It is clear from the above language that the burden now lies on a
surviving joint tenant to prove that he or she has contributed to
the joint tenancy. What is not so clear is when the gift provision
set forth in § 72-16-303(2), MCA, is applicable.
In its findings of fact, the District Court stated:
(4) . . The Court finds that the State's
position would require the imposition of a gift tax on
property transferred not in contemplation of death, but
6
on tenancies created in the normal estate planning
procedure. Neither the legislature nor the Supreme Court
contemplated such a position.
(5) . Accordingly these funds and accounts
were not being transferred in contemplation of death, and
as such the gift of those portions of the accounts not
contributed to by the surviving joint tenant cannot be
taxed as such. . . .
(6) The Court further finds that although current
Code Section 72-16-303, has deleted the specific
reference to the three year rule found in 72-16-301, MCA,
the three year rule is still set forth as part of the
amended 72-16-301, MCA, and the Montana Legislature has
still not imposed a gift tax on inter vivos gifts not
made in contemplation of death and therefore without a
clear mandate from the Legislature of their intent to do
so, this Court can do no more than the Dwyer Court before
it did and therefore finds, without regard to
contribution, the joint tenancies in this matter can only
be taxed upon the fair value of the fractional part of
the joint tenancy to be determined by dividing the value
of the property by the number of joint tenants with right
of survivorship.
(Emphasis added.) Here, the District Court, without regard to
contribution, simply treated all joint tenancy estates created
three years prior to death as gifts. Section 72-16-303, MCA, does
not lend itself to this interpretation. The statute, as amended in
1989, clearly mandates that contribution be considered.
Furthermore, as a consequence of the 1989 amendments to 5 72-16-
303, MCA, there is now in Montana inheritance tax law, as in
federal estate tax law, a separation of gift tax from inheritance
tax on joint tenancies. See § 26 U.S.C. 2040 involving inheritance
tax on joint tenancies, and §§ 2501, 2012, and 6019 involving
taxation of gifts. In light of this distinction, the District
Court erred by treating the joint tenancies as gifts.
Although the last sentence in § 72-16-303(2), MCA, still
7
contains a reference to property acquired by gift as joint tenants,
that sentence pertains to situations in which a person creates a
joint tenancy estate in others and relinquishes ownership of the
property. For example, if a father transfers all property interest
in a farm to his son and daughter as joint tenants, he no longer
has a property interest in that farm. Thus, his transfer satisfies
the requirements of a gift. Under the tax formula set forth in the
last sentence of § 72-16-303(2), MCA, "the tax is on the value of
a fractional part to be determined by dividing the value of the
property by the number of joint tenants with right of
survivorship." This formula only refers to the inheritance tax
imposed when one of several joint tenants who received his or her
interest as a gift dies. The formula does not, as the District
Court interpreted, create a gift tax upon the death of the original
owner. Thus, because each of the children in the above
hypothetical received their interest in the joint tenancy as a
gift, upon the death of one child, the surviving child is
responsible for the tax on one-half of the value of the property.
That is, a fractional part to be determined by dividing the value
of the property by two, the number of joint tenants.
In contrast to this hypothetical, Emelio created a joint
tenancy between himself and others. Here, Emelio remained a joint
owner and did not divest himself of ownership or control.
Therefore, the joint tenancies created by Emelio did not qualify as
gifts for purposes of taxation on joint tenancies. To be a gift,
a transfer of property must be irrevocable, complete, without
8
adequate consideration or full consideration, and unmistakably
intended to divest the donor of the title, dominion and control
over the property. Tagle v. United States (W.D. MO. 1964), 229
F.Supp. 836, 848. Although the nineteen joint tenancies created by
Emelio contained some of the attributes of a gift, Emelio failed to
completely divest himself of interest in the property. Indeed, a
joint tenancy involves the dual control of property by the joint
tenants. Seman v. Lewis (1992), 252 Mont. 508, 510, 830 P.2d 1294,
1296; 55 70-l-306, and 70-l-307, MCA. Because Emelio remained a
joint tenant, he did not relinquish control of the property until
the time of his death.
The District Court found that, "without regard to
contribution," the DOR could only tax 50% of total value of any one
joint tenancy estate. However, earlier in its decision, the court
also found that the "various joint tenants may have made some
contribution to the accounts and property, particularly Sherlee,
Ted, Tom and Dana Parini. The evidence was somewhat suspect, but
was not rebutted by the Department of Revenue." The DOR challenges
the District Court's finding that there may have been contribution
by these four joint tenants. Regardless of whether this evidence
was rebutted or not, the burden was on the Estate to prove
contribution and thus the question posed is whether the evidence
presented by the Estate met this burden or whether the court's
finding is clearly erroneous. After reviewing the record, we find
that the District Court's determination that some of the joint
tenants contributed to the joint tenancies was clearly erroneous.
9
The affidavits and the depositions of the surviving joint tenants
merely reiterate the fact that a joint tenancy was created. None
of the four parties claiming that they contributed to their
respective joint tenancies were able to present evidence as to the
amount of the alleged contribution. Section 72-16-303(2), MCA,
clearly requires proof of contribution or prior ownership. Without
proof of contribution in specific amounts, the DOR would have no
way to ascertain what part of the joint tenancy to tax. Therefore,
we hold that the vague and "suspect" evidence presented by the
Estate did not satisfy its burden of proving contribution under 5
72-16-303(2), MCA, and, thus, the full value of the joint tenancies
are to be taxed.
Accordingly, we reverse the decision of the District Court.
L&i/* Justice
We concur:
Chief JustiN\
Justices
10
Justice Terry N. Trieweiler dissenting.
I dissent from the majority opinion.
Although the basis for the majority's decision is not quite
clear to me, I conclude that, for all practical purposes, the facts
in this case are identical to those in Department ofRevenue v. Dwyer
(1989), 236 Mont. 405, 771 P.2d 93, and that the District Court's
judgment should therefore be affirmed on the basis of that
decision.
At one point the majority concludes that, but for changes in
§ 72-16-303, MCA, which were made in 1989, fifty percent taxation
of the joint tenancies created by Emelio Parini would have been
appropriate. The majority then concludes that two significant
changes were made to § 72-16-303, MCA, which preclude the
application of Dwyw. Finally, the majority concludes that Parini's
transfers of his assets to joint accounts with his relatives were
not gifts in the first place, which would presumably also preclude
the application of the principles established in Dwyev. I disagree
with both conclusions.
In Dwyer, the decedent had, more than three years prior to his
death, created joint tenancies with his nephew which included
interests in real estate and, as in this case, bank accounts. Both
the decedent and his nephew were authorized to withdraw funds from
the accounts, but at no time did his nephew deposit or withdraw any
funds from the accounts prior to the decedent's death.
11
Following the decedent's death, the Department of Revenue, as
in this case, issued a certificate showing a tax due on the full
value of the jointly held property. The DOR took the position that
it was entitled to do so based on language in the 1979 version of
§ 72-16-303, MCA, which has the same effect as the language in the
1989 version of the statute, which is now relied on by the
majority. That language provided that:
In all other cases, the full value of the property shall
be taxable, except the portion thereof that originally
belonged to the survivor and as to which the decedent had
made no contribution; if the decedent had made a
contribution to the ownership of the property, the amount
of the contribution shall be taxable.
Section 72-16-303(2), MCA (1979). We held that the DOR could not
tax 100 percent of the property held in joint tenancy, in spite of
the aforementioned language, for the following reasons:
In the case before us, the joint tenancies were
established by the decedent more than three years prior
to his death. "No such transfer of ownership made before
such three year period shall be treated as having been
made in contemplation of death." Section 72-16-301(3),
MCA. Since there is a specific statutory direction in
§ 72-l&303(3), MCA, that the section shall not be
construed to repeal or modify the provisions of
5 72-16-301(3), the latter section must be given force
and effect. The position of the Department robs that
latter section of any force and effect.
We hold it is our plain duty when interpreting
statutes relating to the same subject to give effect to
all, if possible, consonant with the intent of the
legislature. Section l-2-101, MCA. Montana's statutes
do not provide a gift tax upon transfers of property made
by a person during his lifetime except such gifts as are
made in contemplation of death. The effect of the
Department's interpretation of the statutes is to impose
a tax upon such transfers although not levied until the
grantor's or donor's death, whether or not made in
contemplation of death. We do not agree with the
Department that under 5 72-l&303(2), MCA, only wives and
12
issue of the decedent may take advantage of the
provisions of 5 72-16-301(3), MCA, which excludes from
taxation transfers not made in contemplation of death, or
made more than three years before the death of the
grantor. We hold in this case that one-half of the
values of the joint tenancy estate only is taxable. The
regulations of the Department which would require a
contrary conclusion are inconsistent with statutory law,
and thus have no effect. Section Z-4-305(6) (a), MCA.
Dwyer, 236 Mont. at 410-11, 771 P.2d at 96-97
The majority concludes that our decision in Dwyer is no longer
applicable because of two changes made to § 72-16-303, MCA (1979).
They state that:
First, it requires a surviving joint tenant to prove
either previous ownership or payment of consideration
before tax exemption applies. Second, the 1989
Legislature repealed 5 72-16-303(3), MCA (1987), which
specifically referred to transfers in contemplation of
death under § 72-16-301, MCA (1987).
However, the first change referred to by the majority is not really
a change at all. The language referred to in the 1989 statute, by
which the majority concludes a joint tenant is required to prove
previous ownership or payment, has the same practical effect as the
language relied on by the DOR in Dwyer. The 1979 language provided:
In all other cases, the full value of the property shall
be taxable, except the portion thereof that originally
belonged to the survivor and as to which the decedent had
made no contribution; if the decedent had made a
contribution to the ownership of the property, the amount
of the contribution shall be taxable.
The language in the 1989 statute, which is relied on by the
majority to distinguish Dwyer, provides in part as follows:
(2) The tax is on the full value of the property
held as joint tenants with right of survivorship, except
a part of the property as may be shown to have originally
belonged to the survivor or survivors and never to have
13
been received or acquired by the latter from the decedent
for less than adequate and full consideration in money or
money's worth.
Section 72-16-302(2), MCA (1989).
The second change relied on by the majority, the deletion of
the reference to § 72-16-301, MCA, found in subparagraph (3) of the
1979 version of 5 72-16-303, MCA, is irrelevant. That language was
superfluous and added nothing to the duty we already had to
construe all parts of the same chapter in a way that gave effect to
all of those provisions. As we pointed out in Dwyer, § l-Z-101,
MCA, requires that "it is our plain duty when interpreting statutes
relating to the same subject to give effect to all, if possible,
consonant with the intent of the legislature." Dwyer , 236 Mont. at
411, 771 P.2d at 96-97.
Therefore, we are no less compelled, when interpreting
5 72-16-303, MCA (1989), to consider § 72-16-301, MCA (1989), than
we were compelled to consider both statutes when we decided Dwyer.
Since 5 72-16-301, MCA (1989), still provides that transfers made
by a decedent more than three years prior to death are not in
contemplation of death, our rationale and holding in Dwyer is as
applicable today as it was when it was decided.
Montana's statutes still do not provide a gift tax upon
transfers of property unless made in contemplation of death, and
the effect of the Department's argument in this case, as in Du~yer,
is to impose a tax on those transfers, although not levied until
the time of the donor's death. The majority now accepts the
14
argument that it rejected in Dwyer without any basis for changing
its prior conclusion.
For these reasons, I dissent from the majority opinion. I
would affirm the judgment of the District Court.
15
.-
November7, 1996
CERTIFICATEOF SERVICE
I herebycertify that the following certified order was sentby United Statesmail, prepaid,to the
following named:
DeborahHarten, Tax Counsel
Departmentof Revenue,Office of LegalAffairs
P.O. Box 202701
Helena,MT 59620-2701
LeonardJ. Haxby
Haxby & Somers
P.O. Box 3008
Butte, MT 59702-3008
W.G. Gilbert, III
Attorney at Law
15 SouthIdaho
Dillon, MT 59725
‘Carl M. Davis
Attorney at Law
122E. Glendale
Dillon, MT 59725
ED SMITH
CLERK OF THE SUPREMECOURT
STATE OF MONTANA
BY?4
Deputy