the value of the estate, and an estate exceeding $10,000,000 would be taxed at the rate of 25 per cent on that part of the estate above this amount. § 328. Exempt Estates The tax is imposed on the estate of "every decedent" who is a resident, where the net value of the estate exceeds $50,000. The estates of persons dying while actually serving in the military or naval forces of the United States in the late war with Germany are exempt from tax. The date of the termination of the war, for the purpose of this tax, is that fixed by proclamation of the president. An exception is also provided in the case of the estate of a person who, after leaving the service, dies from injuries received or disease contracted while in the service. Whenever exemption is claimed, the right to it must be proved by the executor. $329. Estates of Non-Residents Taxed The federal estate tax is applied differently to the estates of residents and non-residents. A person is a "resident" of the United States, for the purposes of this tax, only in case he had a domicile therein at the time of his death. A person acquires a domicile in a place by living there, for even a brief period of time, with no definite present intention of later removing therefrom.' The estate of a non-resident decedent, however, is taxable if any part of it is situated in the United States. The statute takes no account of the citizenship of the decedent, but prescribes different rules according to whether the decedent was a "resident" or a "nonresident" of the United States. . . . A "resident" is one who at the time of his death resided in the States, the Territories of Alaska or Hawaii, or the District of Columbia. All other persons are "nonresidents." Article 5 of Regulations 37. The proposed revenue act before Congress as this book goes to press provides in regard to non-residents that money received from life insurance and money on deposit in this country, where the non-resident was not engaged in business therein, shall not be regarded as a part of his estate; further, a person commissioned as a foreign missionary and dying while in service shall not for that reason be deemed a non-resident. The estates of non-residents are not allowed any part of the deduction of $50,000 allowed in the case of residents. § 330. Transfers That Are Taxable The tax is imposed on: 1. Transfers by will or by virtue of intestate laws, including dower, curtesy, and like interests not taxable under state laws. (See § 249.) 2. Transfers made or trusts created inter vivos but in contemplation of death or intended to take effect at or after death. (See § 333.) 3. Joint estates broken up by reason of the death of a joint tenant or tenant of the entirety. (See § 336.) 4. Property passed under a general power of appointment. 5. Insurance taken out by the decedent, becoming payable to his estate in any amount or to one or more named beneficiaries in an amount in excess of $40,000. (See § 334.) § 331. Life Tenancies and Remainders Life estates, estates for years, annuities, and remainder interests created by the decedent are not taxable as such under the federal transfer tax, the tax being levied only on the principal of the trust as a part of the estate as a whole. But if the decedent was entitled to a remainder upon the expiration of a tenancy not yet ended, and his estate will ultimately benefit thereby, or if he was the recipient of income from a tenancy or annuity which did not lapse at his death, so that there is a value which passes to his heirs, such an asset is to be included in the amount of the taxable estate. The value of a vested remainder should be included in the gross estate. Nothing should be included, however, on account of a contingent remainder where the contingency does not happen in the lifetime of the decedent, and the interest consequently lapses at his death. Nor should anything be included on account of a life estate in the decedent. There should be included, however, the value of an annuity payable to the decedent upon the life of a third person who survives him, and the value of an estate for the life of a person other than the decedent." The manner of using mortality and annuity tables is described in §§ 322 and 323. The United States Bureau of Internal Revenue has for its own use, however, a set of tables which apply to all cases which come under its jurisdiction. These tables are at 4 per cent, whereas many of the states use 5 and 6 per cent for their purposes. 6 Typical examples of cases which come under the federal law are suggested below, with the methods of determining values: If the decedent was the recipient of an annuity for the life of another person, the annuity not lapsing on his own death, the taxable value is the present worth of the annuity based on the expectancy of life of the other person at the time of the decedent's death. If a decedent was to receive an annuity for a period of years, part of which had expired at the time of his death, the taxable value would be the value for the unexpired portion of the period. If a decedent was entitled to receive the entire income of a Article 12 of Regulations 37. Published in Regulations 37. See page 324 of this book. certain property during the life of another or for a term of years, such income not lapsing upon his death, the present worth at that time should be computed as explained above in the case of annuities upon the valuation determined from the tables. If the rate of annual income is not determinable, or the decedent was entitled merely to the personal use of non-incomebearing property, and a hypothetical annuity has to be made the basis of the calculation, the federal government uses 4 per cent of the value of the property. If a remainder interest was held by a decedent subject to the life estate of another or an estate for a term of years, such interest constituting an asset of his estate, its present worth at the time of his death may be obtained by deducting the value of the life estate or of the unexpired term as shown by this table. $332. Gross Estate The gross estate includes everything that is included in the corpus of the estate, and much more, as in it there must be listed the various items shown above, some of which never come into the hands of the executor or the administrator-a few of them, things over which a probate court would have no jurisdiction. While the gross estate includes some items the title to which did not rest in the decedent at the time of his death, it does not necessarily include everything the title to which was in his name. There must be an actual, beneficial ownership in the decedent, not a bare legal title, or one held in trust. Thus, property actually devoted to religious or charitable purposes, and placed in the name of an individual solely for convenience in administration, is not included in his gross estate. See Chapter XXXV, "Corpus and Income." The statute also includes only property rights existing in the From the amount of the gross estate all debts and claims must be paid, and certain deductions and specific exemptions may be taken in determining the amount of the taxable estate. § 333. Transfers by Decedent in His Lifetime 9 The value of the gross estate must include the value of any interest of the decedent's: To the extent of any interest therein of which the decedent has at any time made a transfer, or with respect to which he has at any time created a trust, in contemplation of or intended to take effect in possession or enjoyment at or after his death . . . except in case of a bona fide sale for a fair consideration in money or money's worth. Any transfer of a material part of his property in the nature of a final disposition or distribution thereof, made by the decedent within two years prior to his death without such a consideration, shall, unless shown to the contrary, be deemed to have been made in contemplation of death." The regulations define and explain the various stipulations of this section, but until the courts have passed on it the public will not be sure of its scope. Until that time every case to which it might apply must be considered separately, and the separate provisions of the law (and possibly of the Constitution itself) weighed against the facts in the particular case. § 334. Taxable Insurance The new federal inheritance law taxes all life insurance in excess of $40,000 whether in favor of dependents or of the Article 12 of Regulations 37. See Chapter XXXVIII, "Deductions Under the Federal Law." 30 Revenue Act of 1918, § 402. |