KUCHEL v. MILLER (1947)

This is an appeal by the Controller of the State of California from an order of the probate court sustaining respondent's objections to the report of the inheritance tax appraiser which had held that a parcel of real property of the estate of Ralph H. Miller, deceased, was his separate property. The probate court held that the property was the community property of the decedent, thus reducing the inheritance tax from $746.06 to $207.41.

Conceded Facts

Prior to 1921 decedent and his wife were domiciled in the state of Iowa. While so domiciled in Iowa Mr. Miller accumulated certain property as a result of his earnings while engaged in the drug business. These earnings were received during marriage and the property accumulated therefrom would have been the community property of Mr. and Mrs. Miller had they then been domiciled in the state of California. Iowa is, however, a common law state and under its laws said property became the separate property of decedent.

In 1921 Mr. and Mrs. Miller came to California and established their residence which remained the state of Mr. Miller's residence until his death on April 10, 1945. At the time of his death he held property in joint tenancy with Mrs. Miller of a total value of $63,653.96, of which $36,600 was the value of real property located in California. The balance was intangible personal property. All of this property, both real and personal, represented the rents, issues, profits and reinvestments of the property acquired from Mr. Miller's earnings from the drug business while he was a resident of Iowa.

Upon Mr. Miller's death this proceeding to establish the fact of death was instituted and an inheritance tax appraiser appointed who, in arriving at the inheritance tax, treated the real property of the estate as the separate property of decedent.

Question

Was the real property in Mr. Miller's estate separate or community property?

Under the facts above stated the real property of the estate was community property and not the separate property of decedent.

This conclusion is reached by application of these established principles in the law of community property:

1) At the times herein mentioned the state inheritance tax act provided that ‘intangible personal property, wherever situated, heretofore or hereafter acquired while domiciled elsewhere, which would not have been the separate property of either husband or wife if acquired while domiciled in this State shall be deemed to be community property.’ (Inheritance Tax Act of 1935, sec. 1, subd. 2; Stats.1935, chap. 358, p. 1267, Gen.Laws, Act 8495.)

2) Property does not lose its status as community property by a conversion from personalty to realty or vice versa. (Roberts v. Wehmeyer, 191 Cal. 601, 605, 218 P. 220.

3) The character of property as being either separate or community is determined by its nature at the time of its acquisition, and the character fixed at that time remains unless it is thereafter changed in some manner recognized by law. (Palen v. Palen, 28 Cal.App.2d 602, 604, 83 P.2d 36; Phelps v. Davies, 126 Cal.App. 419, 426, 14 P.2d 922.)

Applying the foregoing rules to the facts of the instant case it is conceded that the consideration for the real property in question was the earnings of decedent acquired while he was domiciled in Iowa, which property would not have been his separate property and would have been community property had he acquired it while domiciled in California.

Therefore under the rule first above stated such property for the purpose of the inheritance tax had the status of community property as soon as the decedent and his wife became residents of the state of California. Since it is conceded that the real property in question was purchased with funds from such community property, under the second rule above stated, it is evident that the real property at the time of its purchase was community property and under rule three it retained its character as community property until the time of Mr. Miller's death, its nature not having been changed in one of the manners recognized by the laws of this state.

Therefore the probate court properly held such property was community property, and based the inheritance tax upon its character as such.

In re Way's Estate, Cal.App., 157 P.2d 46, discussed by counsel is of no assistance in determining the problem presented to us for the reason that the Supreme Court granted a hearing after decision by the District Court of Appeal, and subsequent thereto upon stipulation of the parties and before decision by the Supreme Court the appeal was dismissed. Thus the opinion of the District Court of Appeal was a nullity and is of no force or effect. (In re Estate of Kent, 6 Cal.2d 154, 156, 57 P.2d 901.

It should also be noted that though we have reached the same conclusion as the District Court of Appeal for the first district did in Estate of Way, such case did not involve the construction of the Inheritance Tax Act, but did involve the construction of section 201.5 of the Probate Code which is somewhat similar in wording to the Inheritance Tax Act section here under consideration. However, in Estate of Way there were other questions involved aside from the construction of section 201.5 of the Probate Code, which questions are not involved in the instant case.

The order is affirmed.

McCOMB, Justice.

MOORE, P. J., and WILSON, J., concur.