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F
9           OFFICE OF THE ATTORNEY GENERAL               OF ‘TEXAS
1
P                                        AUSTiN




    iioaorablo   000.       H. Sheppard
    a~Dt?Oller         Of Publio      AoOOUata

    Dear Sir:




    septembar    7, 1943
    the Bouaton Land
    op$nioa or this


                                                   re ~sold in order
                                                   ebta of an estate,
                                              ad suaoesaioa taxes, is
                                               blo o thar than on the
                                               011.
                                                  with ths sale? In
                                        ax payable by vlrt!m or the
                                             to benefiolsrles, althou&
                                      e !Viill


                        under a Sill. Is a transfer tax
           a able (1) on the trenstsr under the WI11 and
           2 in oonneotion with the *alo trh’iehis neoeesarp
          5f
          to erieat division of the estate?
                 n .    .   .   , *                        ::
Honorable Gee. R. Sheppard, pagv 2


              In our Opinion No. O-G34 (Conference C-pinicn No.
jZO?l ‘19 held    that VmumZers by operation of lawa are, by
nsoerr8ery implioatlan,    exempt from the tax imposed by t!e
Texas Stoak Transrer Tax Aat (A&isle 7047111, V. A. 0. S.).
Proaeeding from this pr6o1se, m also ruled 13.said oplnica
that a tmnsrer rr0m an lntsstata      to his heirs or next or
kin in a tranafrr     wholly eireoted by operation or law and
hanae io tax sxompt, bat that a transfer imm a tertator
to hi8 legatcer   38 taxable aa e transfer etrected at leaart
in part bF the rat Of the parties thereto.
          The Tmaa Stook !kawier Tax Aot follows almost
verbatim the Xew York TraMi6r Tar Aot, and it 18 oomnly
known that oar rtatote ua8 adopted frola and modeled after
Ohm Xew York Aot.      Likewise,   our aat la ldantloal in no&
.nspeots-iriththa     Federal. Stook Transfer Tax Act and with
the rotlr-via              Coossquently, in interpreting
            btbar,etater. .~
oa.atatute vm.have -beelriooustomed te hollow the dealsions
and adminisitmtf~ Suzingo: or these other jurfadiotionr,
and pmtiarilsrly  thoal) of ~Xer York, sinoe,   as is   aaid In
39 Tex. Jar. 264-2651
          ,*‘A phrase, provisign  or statute   adopted rroa
     ths.Laua GS another state or ootantrywill ordi-
     ,muril be iron 2110 8wimioonstnt8ttism~in     Teraa ,:...~~~.
     that I t ha 3 ruceltod fxths   farisdiation   from
      uhiah    it uar borroued.   If it had been gi+t~ a
      tixed and defiaite    meanlag by the aoarts of that
      jurisdiotlon,    it will be given the acme meaning
      In Texas. The rule rests upon the presumption
      that the Legislature    was aware oi the judioial
      interpretation given in Me jurisdiotion rrca
      rhioh the atatuts am tak%, and that ia adopt-
      ina auah sfetute    it intended also to aooept suoh
      oon5traotlon.*
              Under the HerrYork and federal acts, only one
treneSer tax aocruee Men stook psseiw  by ~13.1 to 6 legate6
but la sold by the exsoutor to satisfy debts and expense8
of the e&ate.   Axtiole 15(16) of the Be* York Rolsa and
m3gulations~ brtlole 34(n) 0r Treasury Regulations Ho. 71;
reprinted in Christy and 230L8an,Tb6 %h~Sre? Or t%OOk, pp.
683 sad 602, mapeatively. This is oocaaioned by the Paot
thet tbsee Jurisdictions adhere to the aomnoa law rule whem-
by title to perronclty paesce frowna test&or to his exe-
cutor and thence from.suah sxeuutor to legatesa, to areditore
0r the estete, or to posslbls vendees. Consequently, these
’
                                                                                            ;
                     i                                                                          -   24
    Bonorebla C&o. R. Sheppard,                 page 3


    juriadiotiona hold that the transfer    m   the teatstor to
    hla itxeontor is tax exempt 813 8 trensfer by op&etion of
    law and that the Odly tax8b.laevent ooaura when the 8XeCiutop
    mkaa a further tmmrer      81th~ to a legates, to a Or8ditOr
    Of the estett, or to a vendee to whoa th8 stook is sold ior
    the ~ur>oa8 Or securing iunda to diaaharga the debts or ex-
     enaea oi the estate. Weloh t. Kerokhoif, 84 F(2d) 2QS*
    106 A. 1. R. l434; Christy and XoLean, op. oit.   SUVM, 164.
    Obvloaalywhen the atook la a01d by the exsautor to aatiaiy
    dobta end expenses oi the estate, no tax ever arlaea on a
    trenaier to a lagatee beoauae au& tranarar is never msde
    by t& exaouter.
    0-+3-jf   Rower,   as maa pointed out in our Opinion No.
    ~Artlela        3314 Y. A. C. 3. abrogatea the a~amon law
    rule inthis State by prorIddiag,thattitle to peraoaalty
    Teats    in the lagataes                       upon the death of the
                                         iarss4bit8l.y
    t88tatQr,        rubJ8ot to the      power of~tha exaoutor,fo  sell or
    otherwlab appl              aaeh peraonaltp to aatlaS .debtsof thb
    estate, funera3 lx p ena a aiunily ,      ellowanoaa; and other
    expenses oi administration. tiOrr811T. Hamhtt, 24 S.W.(2d)
    531 Rlaherda0n t. Vaughan, 23 S.V. 640 (Sup. Ct.); Leal T.
    Isa i 291 8.3. 340; 1) Ter. Jur.~S%;             15 Tex. Jw. 172-173.
    Reoa$e oi t&i8 fe8tare oi our deaedants' ~estets law, mm-
    osivably it would be poasibla          to aar thet~trro:frana$er..,
    tares aoarue In the situation          above deaoribad--one when
    tha title vests immediately in the lagatsaa~,8nd anothar
    when the executor     a8lla~tha     atook   in  ths uoura8 ot adidnia-
    tration. Traotiaally apeaiclng, suah a oonatruotioa of our
    trenafer   tax  eot  would    result in taxing     a tranarer     in whloh
    the tranaiarae never raosivea the us8 and enjoyment of th8
    atook 8nd never reosivea an urknouzbered legal or equitabl8
    title thereto. !uereel that such 8 result was Iwfer within
    the oontaahplatlonor intention oi the legislature at the
    time of the passage oi our stock transfer tax eot. Rather,
    wa real, when OUF lagialatura adopted the New York set, it
    must also be deeasd to heve adopted the oonstruotion plaoed
    on auoh ect whereby but one tar accrues            in  tha altuatics
    under diaousslon. This aonolualoa results both irom the
    prinoipla    of statutory      ooonatruoticxn  above set forth and from
    the rollowIng sdditional oonalderationr Upon the death oi
    a te&atOr,     clay int%r8St aoqulred by a legstee ia SUbhOt
    to a peer of sale in the executor             whloh may be srerciaed
    under presorlbed oonditioas. Until suoh the a9 it la known
    &ether      07       not   the   executor   lnust    exeralse   this   peer,      alI
    rights    of     a    legatee     8r6 contl.ngsnt.         11'the pcmr         la ersrolsed,
                                  i-        .
X@lOrable 000. H. Shapprrd, pegs 4


ell rights OS a legates are extin&ulshsd. Consequently,
w&en stock pessas by will and it Is wocssarr for the
es8outor to diapoae Of ths atook in order to eatiafy
the debta and expenaoa OS the estate, wa feel that the
atook trenaier tax aocruea only when auoh diaposltloa
Is made, fOF the OOQtfn~enoy Milch prevents th8 oga-
platioo of tbe tFsnaSer to the 1ag8tSaa has ooouxred and
no oomplett transfer  to them la ever aoooorpliahad. Con-
vera81f, whaa no auoh diagoritian is neoeaaary and &en
the  powtr of ash ‘porraeased by 8n txtoutor is artin.&ahed
b0osua0 no neaesabty ror its txarois0 has d~isen, we itO1
that the tranaier iroa the testator to his lsgatata is
omplet0 and thst auoh.tranaSeF la then taxable under the
pFinOipl88 snuaoiated in our OpiaiOQ NO. w.            o-+//y
          These vrinoiplsar are    ala0 applioabls to in-
stsnoes of intes@'oy. ahen      it is n0o0aaarg SOPS8n ad-
ministrator of the estate Of 'any   inteatclta.,,tO,~la~oae    OS:
&oak to aatiaSy:~thedebts.arnitxpenses~.of,t&0 qatats,
8.taX 6OOFUeS U~U,SU4h'~S8bB~'f4~ th4 lJ4~6~~U8BZl+,;bt
aeld tO be one In which the transstr is eSS,eotail by op-
eratlon of lsw. Contrarides, however, uhen no auoh
sale is neotiaaarJ,and when the pa;lrer    OS sale in the ad-
ainlatretor~ia axtirrguiahs~,    -the tranattr to ,the halra
or nert'oi kin~,is theo'awplttt Bad,,88 waa:~:crsLd.in       our
OQinioB Ro.          afadb    adoh tzanaler: lti’
                                                ...affoeted  ; :,
wholly by o&!%%%!&   of  la,w,
                        .',
                          "     no tsx  aosruea   thiwetinP~~‘ -~
          Your aaaond question relates to a situation ia
whiah a trensisr OS atoOk is ntada to etieot or to faoil-
itate the dlvlaion   ot an estate among the various legatees.
Ytaltiple18gat888 hold prO@rty i138 fOra Of OO-OwIleMhip
olossly 8kZn to, it not identioal with, oo-tenehoy. Any
divisicn efi6ctSd Smong suah tenants or eny sale made by
thea Sor the purgoa0 ot dividing the-prooeeda therm3
neosssorily is a transfer efseoted by the aot ot the parties
thereto rather than a transfer affsoted by operation   of
law.  Such tranaiera   are tarable under the NearYork and fed-
8rd   a0t8,   Artioh3-15(19-22)        or the taw York Rules and   3eg-
aatlcoa;      Christy and YoLeSn, op. ait. auprs, 56.b565, and
tvtn  without    the aid aiiorded by the ooostruoti0m3 in these
Jurisdlotlona, xe would feel aonatrainad to hold auob trtlns-
iera taxSUe sin08 thay tell Within neith0F      the express
erenptione     aontained in our atetute AOS the tiplied SXSZP-
tfofi eoeorded transisr8    by oparttion of &5ii?.COnSo~U~tlY,
you are respectfully advised that in auoh 9 Situ&ion two
.   -                                                                 -.

         7                                                                   26
        Xonoreble Gea. A. Sheppard, psge 5


        tren3fer terse eoorue--on6 when the trensiar to the mal-             ,
        tiple’lagatees becmies aoinglete,shd another when swh
        leg&sea effect  6 division emong themelves by Ale or
        otherwise. Xotioe, hovmer, What if the division ie
        being eifected by fiultl?leheirs or next of ;tinwho have
        taken by fnteetscy, 6 tax aocrues ohly upon the diviaicn
        eaong thtunaelveaeinoe suoh hotis or next oi kin receive
        the stock initielly bg operation of la**.
                     Moreover, should an axeeator or admMstr&or
        uell stook for the purpose or effecting or recllit8ting
        Q diV;aiOtlaPlOti6    th6  lQg@Xi#b, htiir8OF IieXt Of kin, and
        not r0r the purpose of paying the debts and sxpensas or
        the estate, the 88~~ prinalplesare a?plfoable. Tha parer
        of sale poeaessed by an exaoutor or admlnistrstor         extendr,
        aa has been said above, only to axles which are necessary
        .to pay the debts and expenses of the estate. Unless tho
        atook is aold for this purpoea, the transfer to the lagstess,
        hsira or next of kin beoomes oomplete. If the ~stook8hould
        be soEd for any gurpoae other than thla, the aituaticu is
        tha Bane as lf the trensfer to *thelegatees, heirs or next
        of kin had first Boone oca$ete, and euoh persons had then
        aoted to effeot a division emong themselves. In mating auoh
        a aale. an ereoutor       or adviinistrator acts as a reprssentei-
        tiva or the legatees, heirs or ,aext of kin rather than aa ,a
        represantative      of the estate, and, for purposes of the atook
        transfer tax, hia aets bo this~respeot ere to be treated ae
        if they wore the acte of the prties         x%osnhe repreeents.
        Consequently,      in auoh a aituatim stook transfer taxes would
        aoorue  fn    acoordanoe with th8 priaoipl~e dieaueaed in the
        last preoeding paragraph.
                 ~Trustlng that ths foregoing disoussion sstisfao-
        torfly bnawers your Icquiries, ae are
                                                   Your3 very truly
