WARDELL, Internal Revenue Collector, v. BLUM et al., 276 F. 226

ROSS, Circuit Judge. This suit was brought for the recovery of an estate tax paid to the government under jmotest on the half interest of the wife of the decedent Blum in the community properly which passed to her under the laws of the state of California upon the death of her husband. All inheritance taxes are imposed on the transfer of the net estate of the “deceased”; from which the conclusion is inevitable that the property upon which such a tax is imposed must, in truth, be the property of the deceased. In the case entitled In re Moffitt's Estate, 153 Cal. 359, 95 Pac. 653, 1025, 20 L. R. A. (N.

S.) 207, the Supreme Court o£ that state held that the share of the surviving wife in the community property was subject to the inheritance tax imposed by the statute of the state, citing a number of its previous decisions to the effect that upon the death of her husband the wife took one-half of the community property only as “heir” of her husband, and reaffirming the correctness of tha1 holding. If she took only as heir, as a matter of course, the whole of the community property belonged to the husband at the time of his death, and was accordingly liable to the inheritance tax imposed by the then state statute.

But In 1917 (Stat. 1917, p. 880) the Legislature of California so changed its inheritance tax law as to expressly declare that for Hie purposes of the act the half of the community property which goes to the widow oti the death of the husband shall “not” Be deemed to pass to her as “heir” of her husband, but shall go to her as for a valuable and adequate consideration, and shall not be subject to the inheritance law of the state.

That manifestly is a clear statutory declaration that the wife’s half of the community property is not part, of the property of the deceased husband, at least so far as the state inheritance taxes are concerned. The statute of the United States imposes an inheritance tax upon the transfer of the net estate of every decedent “to the extent of the interest therein of the decedent at the time of his death which after his death is subject to the payment of the charges against his estate, and the expenses of its administration and is subject to distribution as part of his estate.” Sections 201-203, 39 Stat. 777.

How is that interest to be determined? Manifestly, we think, by the law of the state where the property is situate. In the present instance the law of that state is declared by the statute enacted in 1917, providing that so far as state inheritance taxes are concerned, the wife of a decedent acquires upon his death one-half of the community property in her own right, and not as heir of her husband; in effect, therefore, that in so far as state inheritance taxes are concerned, the estate of a decedent has no interest of any sort in the wife’s half of the community property.

That, in our opinion, settles' the question here presented against the contention of the government; for we not only see nothing in the above-quoted provision of the United States statute to indicate any intention to impose a federal inheritance tax upon the wife’s half of community property which the statute of the state where the property is situate expressly declares passes to the wife upon the, death, of her husband in her own right and not as his heir, but the federal statute, as will be seen, expressly declares as one of the essential conditions to the imposition of a federal inheritance tax that the net estate of the decedent shall be “subject to distribution as part of his estate.” It must not be forgotten that the sole question here is one of federal inheritance tax and, even if the case was not controlled by the California statute of 1917 above referred to, applying to it the rule of law announced by the Supreme Court of the United States in the case of Arnett v.

Reade, 220 U. S. 311, 320, 31 Sup. Ct. 425, 55 L. Ed. 477, 36 L. R. A. (N. S.) 1040, the result, it seems to us, must be the same. That court there said: “It is very plain that the wife has a greater interest than the mere possibility of an expectant heir.” Under that rule, one half of the community property would go to the surviving wife, the other half being subject to the testamentary disposition of the husband by virtue of

section 1402 of the Civil Code of California, which declares, among other things: “Upon the death of the husband, one half of the community property goes to the surviving wife, and the other half is subject to the testamentary disposition of the husband, and in the absence of such disposition, goes to his descendants.” The judgment is affirmed.