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1979 OK 62
594 P.2d 1210
Case Number: 50743
Decided: 05/08/1979
Supreme Court of Oklahoma


Appeal from the District Court of Oklahoma County; Raymond Naifeh, Judge.

¶0 Action by appellee, the Executor of the Estate of Charles Wilson, Deceased, to recover additional estate tax assessed by the Oklahoma Tax Commission, appellant, pursuant to 68 O.S. 1971 § 226 (b). Judgment was rendered for the appellee. AFFIRMED.

Curtis & McCue by C.D. Curtis, Fairview, for appellee.

Marjorie Patmon, Gen. Counsel, Oklahoma Tax Commission and Edward A. Reed, Oklahoma City, for appellant.

HODGES, Justice.

[594 P.2d 1211]

¶1 This is an appeal by the Oklahoma Tax Commission [Commission] from the judgment of the district court, allowing recovery of $2,478.09, which was paid under protest, to the Commission as an additional assessment against the Estate of Charles Wilson, Deceased.

¶2 On March 29, 1972, the deceased deeded two quarter sections of land to his son, Melvin Wilson, appellee, and his daughter-in-law, Dorothy Wilson. Three months later, he executed a will deleting the devise of this property to his son. Charles Wilson died on February 20, 1975. The estate tax return was filed and the tax paid. However, the Commission assessed an additional tax based on the assertion that the gifts to appellee and his wife were made in contemplation of death. The appellee paid the additional assessment and brought this action for recovery pursuant to 68 O.S. 1971 § 226 (b).

¶3 At the time Charles Wilson made the gift, there was a rebuttable statutory presumption that the transfer was in contemplation of death if the deceased died within two years of the gift.

¶4 The dispositive issue on appeal is whether the two year statute, 68 O.S. 1971 § 807 (A)(2), or the amended statute, 68 O.S.Supp. 1974 § 807 (A)(2), the three year statute, is applicable to the decedent's gifts.


¶5 The legislative purpose of the statute is to encompass within its terms transfers which are donative in nature. It represents a legislative scheme to prevent inheritance tax evasion by imposing certain criteria on inter vivos transfers. Contemplation of death statutes promote equality of taxation and prevent avoidance of estate taxes. Tax statutes should be strictly construed against the state. Any ambiguity or doubt as to two possible constructions must be resolved in favor of the taxpayer.

¶6 There is nothing in the amended statute to suggest that the legislature intended it to apply to gifts previously made. The general rule is that statutes are presumed to operate prospectively only. A clear expression of legislative purpose is required to justify a retroactive application. In the case of doubt, the doubt must be resolved against retrospective effect.

¶7 The identical question was considered in State v. District Court of Eighth Judicial District, 109 Mont. 331, 96 P.2d 936 (1939). The Montana Supreme Court cited Shwab v. Doyle, 258 U.S. 529, 42 S. Ct. 391, 393, 66 [594 P.2d 1213] L.Ed. 747, 26 A.L.R. 1454 (1922)

¶8 The Commission asserts that, should this Court decide the two year statute relating to gifts in contemplation of death is applicable, the only effect is to shift the burden of proof to the Commission. We do not agree. It is axiomatic that an estate tax can be imposed only if the decedent did not effectively complete a transfer of the property which complies with the statute.


¶10 All the Justices concur.


1 Title 68 O.S. 1971 § 226 (b) provides in pertinent part:

"Any such taxpayer shall pay the tax to the Tax Commission, and at the time of making such payment shall give notice to the Tax Commission of his intention to file suit for recovery of such tax . . ."

2 It is provided by 68 O.S. 1971 § 807 (A)(2):

"The value of the gross estate, used as a basis for a determination of the value of the net estate, shall be determined by including:

The value of any real or personal property, including the homestead to the extent hereinabove set forth, passing by deed, grant, bargain, sale or gift made in contemplation of death of the grantor, vendor, or donor, or intended to take effect in possession or enjoyment at or after his death; provided, that any transfer made by the decedent of a material part of his estate within two (2) years prior to death, without an equivalent in monetary consideration, shall, unless shown to the contrary, be deemed to have been in contemplation of death, and such transfers shall be included at their net value at the date of decedent's death."

3 The amended statute, 68 O.S.Supp. 1974 § 807 (A)(2), provides in pertinent part:

". . . Any transfer made by the decedent of the material part of his estate within three years prior to death without an equivalent in monetary consideration, shall, unless shown to the contrary, be deemed to have been in contemplation of death, . . ."

4 Shwab v. Doyle, 258 U.S. 259, 42 S. Ct. 391, 393, 66 L. Ed. 747, 753, 26 A.L.R. 1454 (1922); C.H. Leavell & Co. v. Okla. Tax Comm'n., 450 P.2d 211 (Okl. 1968); Campbell v. Cornish, 163 Okl. 213, 22 P.2d 63 (1933).

5 Affiliated Management Corp. v. Okl. Tax Comm'n., 570 P.2d 335 (1977).

6 Reitler v. Harris, 223 U.S. 437, 32 S. Ct. 248, 56 L. Ed. 497 (1912).

7 See State v. Bailey, 305 P.2d 548 (Okl. 1956).

8 Branz v. Hutchison, 128 Neb. 698, 260 N.W. 198, 200, 201 (1935). See Federal Broadcasting System, Inc. v. F.C.C., 239 F.2d 941, 944 (D.C. 1956); and Beechwood Coal Co. v. Lucas, 215 Md. 248, 137 A.2d 680, 683 (1958) for the premise that purely remedial and procedural remedies operate retroactively.

Retroactive rates have been applied under amendatory statutes to interests previously created where the interests were taxable under the statute in force at the time of their creation, and the decedent died after the passage of the superseding act. The rationale for retrospective application of increased rates is that there is no element of surprise because the interest was created with the knowledge of an established system of taxation, and subject to possible subsequent changes in the rate or form of tax. The Commission cites Milliken v. United States, 283 U.S. 15, 51 S. Ct. 324, 75 L. Ed. 809 (1931) for this premise.

We find there is a distinction. Under the statute, the taxable event is at the time of the irrevocable transfer. It is only if the transferor fails to meet the statutory criteria by living the required period of time, that the transfer becomes a part of his gross estate.

9 The annotation, "Retrospective Operation of Succession Tax," at 26 A.L.R. 1454 (1922) has been supplemented by 66 A.L.R. 404 (1930), 109 A.L.R. 858 (1937), and 114 A.L.R. 518 (1938).

10 State v. District Court of Eighth Judicial District, 109 Mont. 331, 96 P.2d 936 (1939) was overruled on jurisdictional grounds in State v. District Court of Second Judicial District, 255 P.2d 693 (Mont. 1953).

11 See In Re Childs' Estate, 18 Cal. 2d 237, 115 P.2d 432, 136 A.L.R. 333 (1941).

12 Okla. Tax Comm'n. v. Harris, 455 P.2d 61, 73 (Okl. 1969).