    OFFICE   OF THE ATTORNEY     GENERAL   OF TEXAS
                       AUSTIN




Honorable George H. Sheppard
Comptroller of Public Acoounts
Austin, Texas
                                     /

De8r Sir:




to time, ana-no complete record was kept of them.
          Several years before his death Edwards made s
will in which he provided that his wife, Mollie C. Edwards,
should receive 8 life income of $250.00 a month, and that
the balance of the property should go to his son. His wife
    Honorable George H. Sheppard, Page 2


    learned about this will and oonrulted with attorneys with
    the objeot of getting the will ohanged or of being pre-
    pared for a contest of the will upon the death of Edwards,
              Then Edwards exeauted a gene=1 power of attorney
    to his son, who lmmedlatelp began to dispose of Large amounts
    of the partnership property. It appears that this was con-
    trary to Edwarda vlrher and vlevs, and a suit vas filed by
    him against the son to restrain further disposition of ths
    partnership property and to can041 the power of attorney.
    The son filed a oross-aotlon reeking an accounting of part-
    nernhlp affairs from the date of his mother's death, some
    time prior to 1918.
              At this time, January 194:. Mrs. Edwards made a
    oontraot with a firm of attorneys, to represent me ln all
    matters relating to the interest I ovn ln the oommunlty es-
    tate of my.husband, C. 0. Iklvard8,and myself, and any and
    all other properties or right I may have by reason of oon-
    traots, oonveyanoes, villa or othervlae ln the property of
    c. 0. Edv8rds." Thlr oontraot further provIdedI
         "For such servloes to be rendered, I hereby
         transfer and assign unto said attorneys an un-
         dlvlded one-fourth interest ln any and all prop-
         artier I may obtain, whether by suit, oompromlse
         or oonv4yanas fr0m.C. 0. Edvardr or his estate,
         8nd from our oannrmnityestate."
              With affairs in this oondltlon, ~&Wards deolded to
    revoke his will referred to above, and to distribute his
    prop=rtr. On April 27, 1940, he executed an instrument oon-
    ve Lng to his wife, Mollle C. Edwards, property valued at
    &26.91,      and oonveylng the balanoe of hlu property to
              The ~onveyanoe reserved to &ivards all rents on
    the reai eatate during his lifetime. Thls oonvey8nee v8s
    ratified by the oourt ln the aooounting suit in August 1940.
    The separate property, and the oommunity property of Edwards
    and Hollle C. Edwards, were so Intermingled that It vs.8 lm-
    possible to separate them. This was further oompllosted by
    the withdrawals that had been made by gdvards and his son
    from the partnership bualneaa. The final result, the oon-
    veyanoe of Apr:l 27, 1940, seems to have been 811arbitrary




L
IionorableGeorge Ii.Sheppard, P8g4 3


dlvlslon of the properties regardless of whether they v4r4
54parat4 or octmnmlty.
          Edvmds died on April 10, 19'11. Mrs. Edwards
and her attorneys considered that the work of the attorney8
had been the oause of her reoeivlng the properties trans-
ferred to her, and, after the death of Edwards, she trans-
ferred to the attorneys one-fourth of the properties vhloh
she had reoelved.
          It is oonoeded by representatives of the estate
tit the transfer of April 1940 was made In oontemplation
of death, and 1s therefore taxable; and that It may be oon-
sldered 85 8 trensfer of Edwards' separate property.
               The question presented 1s:
          Should lnherltanoe  tax be ocuuputedupon the en-
tire   mountof property which    ssed to Mrs. Edwards under
the oonv4ynno4 of April 27, 19r 0, or should the attorneys*
fees be deduoted before oomputIng the tax?
          Artlole 7117, V.A.C.S., levies a 5uao45sion tax
upon property vhloh shall be oonveyed In oontemplatlon of
death as well as upon property which shall pans by will or
by the laws of desoent and distribution.
          Art1014 7125, V.A.C.S.  defines "the only dedua-
tlons permS.ssibLeunder this &vc ass    1   the debts due
by     est8te; (2) funeral expensesj 11 3 expenses inol-
dent to the last llln455 of the deoeased, vhIoh shall be
unpaid at the time of deathj (4) all taxes due at the time
of the death of the deoedent; (5) attorneg~a fees and Court
costs aoorulng ln conneatlon with the rss4~sing and 001144-
tlon of.lnherlta~e taxes; and (6) an amount equal to the
value of any property formlng a psrt of the gross 45t4te
situated in the United States reaelved from any person who
dies within 5 years prior to the death of the deaedent, etc.

          These deduatlona are quite speolflcally defined,
and the attorney's fees her&in question do not ~0514vlth-
In the term4 of any of them. The taxpa r, however, Is oon-
tendlng that ah6 did not reoeivs 4186,1 !?
                                         6&S worth of prop-
erty, but only Three-fourths of this amount; that her sltua-
tlon 15 analogous to r4041ving property encumbered by a
mortgage.
,




    Bonor8ble George xi.Sheppard, Page 4


              We are unable to find any ease authority In
    Tex55 direotly on the question presented, and there 544m
    to be but few suah 45s45 frcm other jurlsdlotlons. These,
    however, appear to establish the rule that amounts ex-
    pended by heirs or legatees or donees In an attempt to
    establish their alleged rights as.nnotbe deduoted in mak-
    lng an a55455m4nt for 5uoc4s5lon tax purpo545.
    A.L.R. 626, 61 C.J. 1705 Sea. 2593. So a150, th?%i?int
    paid to attorneys by the done8 of a gift oaus'eaortls, in
    protooting the gift against the claim of the administrator
    that the property belongs to the estate, IS not deductible
    from the amount subject tc lnherltanoe taxes agalnat the
    donee. People v. Estate of R41114 Klein, 359 Ill. 31, 193
    H.E. 460, 96 A.L.R. 622. The oourt there said:
         "t!hsattornay fee ~88 not incurred by the ad-
         mlnlstwtor and van not a part of the oosts and
         4xp4n545 of admlnl5tratlon. It may have de-
         pleted the gift vhioh the done4 vas entitled to
         r4041v4, but did not diminish Its mount et the
         time It van pvpde. The gift was estebllshe& by
         the facts shown to exist et the time It was smde,
         and If Xargaret Miller took iitall she took et
         that time, aad It necessarily follows that ihe
         took the whole amount of the gift. The m455ur4
         of the tax us5 dependent upon the value of the
         interest she reoelved by the gift r4gardl45s of
         whether or not she was subsequently oalled upon
         to inaur an expense in protooting her right to it."
              Llkevlse   It has been held that expenses of heirs in
    5uoc455fully ettaoking 8 will may not be deduated in deter-
    mlnlng the amount subject to lnherlt8nae   tax. 28 Am. Jur.
    123, Sec. 247.
              Ca54s of mmpromlse of a will contest are olos4ly
    analogous to the question herein oonsl.dered. Rote the lan-
    guage of the Illlnol5 Suprene Court in Re Qraves Estate, 242
    Ill. 212, 8g R.S. 978,   979:

         "The tax la not upon the estate of the deoedent,
         but upon the right of 5uoo455lon, and It aoorues
         at the ssme time the estate veeta -- that 15, upon
         the daath of the decessed. Queetlone may arl54
         as to the persons In whom the title vests, and
Honorable tIeorg4H. sheppsrd, Page 5


     suoh questions may affeot the asmunt of the
     tax and the perron whose estate sball be
     chargeable with it; but when those questiona
     me flnally determIned, their determlnatlon
     relates to the time of the deoedent's death.
     No ohang45 of title, transfers, or agr44~4nt5
     of those who suoceed to the estate, among them-
     841v45 or with strangers, oan affeot the tax.
     All questions oono4rnlng it must be detemLned
     as of the deoedent~s death.
     II      The statute r4qu.lr45all of ths prop-
     eriy*o; the estate to be appraised at its fair
     market value. 'theV81U4  of the estate vhloh
     pa5545 15 the value 50 ascertained 1455 the ln-
     debtedness of the deoedent and the expenses of
     admin15tratlonr Whatever lltlgatlon may ooour
     between tho54 who suooeed to the estate 85 to
     their respeotlve rights, or between different
     olalmants of interests, oannot affeat suoh
     velue. The fair market value 50 ascertained
     is the ba5i5 upon vhloh the amount of the tax
     must be fixed. Unjust claims may be made agblnst
     those suaoeedlng to the estate, and they may be
     put to great expense in defending their property,
     but the value of the property or of their re-
     speotive interests In the property Is not there-
     by affeoted."
          ~mne  v. bnn, 162 S.W. (2) 117 (writ of error re-
fused), is the only a&se ia Texas passing on the deduatlb&l-
ltg o: an smount paid in oompromlse of 8 will oontest.
refusing the deduotlon, the Court seldr
     I      R4gardl45s of ths agreement which brought
     ii ;b&t, the feat resA.ns that the will of the
     decedent was probated and by the term of it the
     appellant reoelved 811 of the estate. Without
     probatlng of the will she would have got no part
     of the estate. By sgreelng for the oontestant
     to take a part of the estate whioh the will gave
     her, she puroh854d her pea04 and t$ereby scoured
     unquestioned title to the bal8nos.
Honorable Qeorge Ii.Sheppard, Peg8 6


          in ~-4utmtburn's Eatate, ,152R.Y. 93, 46 I.E.
315, ooncerned a alaIm for deduotlon of sttorney’s fees
lnourred by the 5u4445sful contestants of the will. The
Court said:
     "It was not e olaim existing against the de-
     aedent or his property. The tax imposed by the
     statute 15 upon the interests transferred by
     will or under the intestate l&v of the state,
     The devolutlon of the property and the right
     of the state have their orl.gia et th4 54514
     moment of time. The asoertalnment of the vel-
     ue of the taxable interest and the fixing of
     the tax necessarily takes plaoe subsequent to
     the death. But the guide is the value at the
     time of the death, when the interests ver4 ao-
     qulred. The fk3Ot t&t  8~41&l.lt8  VGl’4 DUt t0
        en54 in 8504rt5ln their rlRht5, and ver4 45~
        iled in 4xp4n5lv4 llt&stlon to obtain thea,
     was their misfortune. It dld not dlmlnleh the
     viQu4 of the laterests vhloh devolved upon them
     on Uestburn’r death. It van 8 1055, but



           The attorneys fees ver4 not lnoumed by the ad-
ministrator end are not, therefore, allovable es an ex-
p4n54 and oost of admlnlstratlon. The obligation for
these fees was not ore&ted by the deoedent and 4annot be
4onsldered 8 oharge agelnst him or his estate. It in true
thatMrs.ZkWards ~45 put to anexpense, but thstvas an
43gens43s~ auoert&nlng her rlght to ~404ive 8ny psrt of
              She takes, if et all, under the oanveyanoe
of A rll 2j 1940     She aotually reaelved property worth
)&166.91:     and iltle to that property vested in her up-
an execution and delivery of the transfer by Edwards. She
exsrolsed dcminlon and oontrol over that entire amount,
and disposed of the part of it aonveyed to the sttorneya.
liad the matter been a will aontest, vhlah ah4 s8em3 to
hava oontempleted should it have beoome neoessbry, there
ts PO question that ah4 would not have been sntltled to
a deduatlon of attorney~s fO45. me fact    that the oonteet
took another form cannot alter the sltuatlon.
Honorable George IL Sheppard, page 7


          Therefore, it 15 our opinion th8t the attorney~s
~h;5~   question should not be deduoted before ocnnputlng
          The entire amount reoelved by Mrs. Edwards under
the oon;eyanoe is the basis of the tax. Any other rule
would p8mit litig8ting 8kIUGntS t0 oonsume an entire es-
tate, oompletely defeating the State's right to taxes.
          We return herewith your file on this estate.


                                       Very truly yours
                                ATTORNEY B         or   TEXAS


                                BY

                                                  Assistant



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