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                       -E        ATTORNEY       GENERAL
                                    OFTEXAS



                                     March 8, 1961

             Honorable Robert S. Calvert      Opinion No. wW-1000
             Comptroller of Public Accounts
             Capitol Station                  Re:   Deduzctlbilityof the
             Austin, Texas                          comn&sions of sn
                                                    executor or an adminis-
                                                    trator for inheritance
             Dear Mr. Calvert:                      tax purposes.
                  We quote the following excerpt from your letter requesting
             our opinion on the above captioned matter.
                        "We desire the opinion of your office
                      with respect to the proper handling of
                      claimed deductions for the fees of an
                      executor/administrator for inheritance.
                      tax purposes.
                        "For the past twenty-five years, this
                      department has disallowed fees claimed
                      by an executor or administrator when the
                      executor or administrator was the sole
                      heir or legatee of an estate, because
                      these fees did not pass out of the estate.
                      However, it has been our policy to allow
                      these fees when either the executor or
                      administrator was not an heir or legatee
                      of an estate, because the heirs or legatees
                      received the estate minus the fees of the
                      executor/administrator.
                        "Since Article 14.10, Chapter 14, Tile
                      122A, does not provide for a deduction of
                      this nature, we wish to be advised whether
                      or not our policy is correct."
                  The pertinent provisions of Article 14.10, Chapter 14,
             Title 122A, 20A, Taxation-General, Vernon's Annotated Texas
             Statutes, are the following:
                        "The only deductions permissible under
                      this law are the debts due by the estate,
                      fun&expenses,   expenses incident to the
                      last illness of the deceased, which shall
                                                                -   .   ..,




Honorable Robert S. Calvert, Page 2     Opinion No. WW-1000


        be due and unpaid at the time of death,
        all Federal, State, County, and Municipal
        taxes due at the time of the death of the
        decedent, attorney's fees and Court costs
        accruing in connection with the assessing
        and collecting of the taxes provided for
        under this Chapter, . . . A full state-
        ment of facts authorizing deductions must
        be made in duplicate under oath by the
        executor, administrator, or trustee, and
        one copy filed with the county clerk and
        the other with the Comptroller, before any
        deductions will be allowed."
     We think that Article 14.09, Ch. 14, Tit. 122A, 20A,
Tax.-Gen., V.A.T.S., must also be considered in determining
sn answer to the question presented. This article reads as
follows:
           "If a testator bequeaths or devises to
         his executor or trustee, property In lieu
         of commission, the value of such property
         in excess of reasonable compensation, as
         determined by the county judge and the
         Comptroller, shall be subject to taxation
         under this Chapter."
     We recognize at the outset that Article 14.10, formerly
Article 7125, Vernon's Annotated Civil Statutes, listing
permissible deductions in determining the amount due the
State as inheritance taxes is one of limitation and that our
courts have so held. Walker v. Mann, 143 S.W.2d 152 (Civ.App.
1940, error ref.). Clearly the fees or commissions of an
executor or administrator are not among the enumerated allow-
able deductions, However, we think that your policy in
allowing these fees as a deduction when either the executor
or administrator was not an heir or legatee of the estate
has been correct. We quote the following excerpt from an
snnotation in 92A.L.R. entitled "Deduction of Commissions
of Executors, Auministrators or Trustees in Computing Succes-
sion or Estate Tax" at pages 537, 538:
           "One of the items universally recognized
         as a proper deduction In the computation of
         succession and estate taxes is the expense
         of administering on the estate. Ordinarily,
         the statute imposing the tax expressly pro-
         vides for this deduction. Where not expressly
         provided for--as under some of the earlier
         New York statutes--the deduction has been
Honorable Robert S. Calvert, Page 3               Opinion No. WW-1000


         allowed by the courts upon the ground
         that the tax is only upon the amount of
         the assets actually passing to the heir
         or legatee, and therefore necessarily
         excludes such of the assets as are used
         to pay administration expenses.
           "That commissions of an executor or
         administrator are an 'expense of adminis-
         tration' is too obvious to require citation
         of authority. As said in the reported case
          SCOTT V. COMMISSIONER OF INTERNAL REVENUE
         IC.C.A. 8th) ante, 531): *Obviously,
         commissions allowable and paid to executors
         under the laws of the state of administration
         are administration expenses.'
           "It follows, therefore, that commissions
         of an executor or administrator must be
         allowed as a deduction in determing the net
         estate subject to a succession or estate
         tax. This rule may be said to be supported
         by all of the cases cited in the present
         annotation. The rule being universally
         recognized, it remains only to discuss such
         questions as arise out of its application
         in particular cases, such as questions relating
         to the computation of the commissions, the
         particular kind of commissions Included with-
         in the rule, etc. . .w
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conclusion, and we think there is none, all doubts would be
resolved by the provisions of Article 14.09 above quoted. In
expressly providing that in those instances in which a testator
bequeathed or devised to his executor or trustee property in
lieu of a commission only the value of such property in excess
of reasonable compensation would be subject to an inheritance
tax, the Legislature, by Implication, has recognized that in
other cases such commissions will be deducted before computing
the inheritance taxes due the State. See cases cited in 92
A.L.R., supra, 549..
     We pass now to a consideration of whether your department
has been correct In disallowing commissions claimed by an
executor or administrator when the executor or administrator
was the sole legatee or heir of an estate. We have concluded
that the fact that an executor or an administrator is the sole
beneficiary or heir doesnot, of itself, constitute a reason
                                                                    ---




Honorable Robert S. Calvert, Page 4           Opinion No. WW-1000


for refusing to allow a deduction for commissions. In such cases,
the commissions are allowed as compensation for services rendered
and are received as such, rather than as a devise or bequest or
an inheritance from the decedent.
     Numerous problems may arise in connection with the allowance
of an executorls or administrator's commissions as deductions.
Although you have not specifically requested our opinion as to
these problems, we think that we should call a few of them to your
attention since, although the result we have reached may be said
to be the general rule and that usually ~the full amount of such
commissions are deductibile, this rule cannot be universally
applied. For example, since in Texas the entire community estate
is liable for the debts of the husband and is subject to adminis-
tration by his executor, the amount of commissions which may be
deducted will vary with the facts of each case. Another case
presenting special problems would be that in which the debts and
expenses exceed the probate estate as, for example, where the
decedent has exercised a power of appointment or made a transfer
in trust reserving a life interest, or made a transfer in con-
templation of death. Special deduction problems might arise in
thosecases in which Texas is the domiciliary state but adminis-
tration expenses are incurred, not only in connection with the
Texas estate, but also in connection with assets located and
administered in another state or states.
     The foregoing examples do not encompass all the possible
situations in which the general rule as to the deductibility
of the commissions of an executor or an administrator would not
be followed. We mention them as an example of the questions which
may arise in the administration of our inheritance tax statutes.
If and when such questions do arise, you may properly request an
opinion of this office on the particular fact situation involved.
                              SUMMARY
                     The general rule is that the com-
                missions of an executor or sn adminis-
                trator should be allowed as a deduction in
                computing the inheritance taxes due the
                State even if the executor or administrator
                is the sole heir or legatee; however, this
                general rule is subject to qualification
                under various fact situations,
                                    Yours very truly,
  -_._   .--.
  INION COMMITTEE:                  WILL WILSON
W. V. Geppert, Chairman             Attorney General of Texas
Grundy Willisms
Martin Destefano
W. Ray Scruggs

R&VIgWED FOR THEAT'I'ORNEYGENERAL
By: Morgan i$esbitt
