
    CARRIE HOWARD STEEDMAN AND EUGENIA HOWARD EDMUNDS v. THE UNITED STATES
    
    [No. E-563.
    Decided February 28, 1927]
    
      On the Proofs
    
    
      Federal estate tax; real estate included in gross estate; section 402(a), revenue act of. 1921. — Tbe value of tbe gross estate of a decedent in tbe State of Missouri subject to tbe provisions of section 402(a), revenue act of 1921, includes tbe real estate owned by sucb decedent at tbe time of bis death.
    
      The Reporter's statement of the case:
    
      Mr. S. L. Smarts for the plaintiffs. Messrs. Frank S. Bright and Lowndes G. Gonnally were on the briefs.
    
      Mr. Fred K. Dyar, with whom was Mr. Assistant Attorney General Herman J. Galloway, for the defendant.
    The court made special findings of fact, as follows:
    I. Plaintiffs Carrie Howard Steedman and Eugenia Howard Edmunds at all times hereinafter mentioned were, and still are, citizens of the United States and residents of the city of St. Louis, State of Missouri.
    II. Kate M. Howard, mother of the plaintiffs, died on the 23d day of February, 1923, being a widow and a resident of said city of St. Louis at the time of her death, and leaving a last will and testament dated the 5th day of November, 1918, which was duly admitted to probate in the probate court within and for the city of St. Louis, Missouri, on the 7th day of March, 1923. On the 12th day of March, 1923, George Fox Steedman and Sterling E. Edmunds were duly appointed and qualified as executors of the estate of Kate M. Howard, deceased.
    III. The city of St. Louis, State of Missouri, was at all the times herein mentioned, and still is, within the district of the office of the collector of internal revenue located in said city.
    IV. By said last will and testament of said Kate M. Howard, deceased, one-half (%) of the entire net estate of said decedent, real and personal, was devised and bequeathed to the plaintiff, Carrie Howard Steedman, and one-half (14) of said entire net estate was devised and bequeathed to the plaintiff, Eugenia Howard Edmunds, after the payment of decedent’s debts, her funeral expenses, and the expenses of her last illness.
    V. Said executors duly administered said estate according to law and distributed the entire net personal estate of said decedent to the plaintiffs in equal shares, pursuant to the provisions of said last will and testament and the orders of said probate court. On the 7th day of July, 1924, said executors filed their final settlement of said estate and said final settlement was duly approved, and said executors were duly discharged as such by said probate court. Said real estate passed directly to plaintiffs under said will.
    VI. Pursuant to the revenue act of November 23, 1921, said executors, on or about the 31st day of December, 1923, filed in the office of the collector of internal revenue at St. Louis, Missouri, a Federal estate tax return for said estate of Kate M. Howard, deceased. The return showed a gross estate of the decedent of $1,707,576.46, which included the real estate situated in the State of Missouri, at the value of $393,776.67; a net estate for the purposes of the Federal estate tax of $1,542,635.54 and a tax of $106,616.26, which said tax'of $106,616.26 was duly paid to the collector of internal revenue at St. Louis, Missouri, on December 31, 1923.
    VII. Subsequently, and in due time, said Federal estate tax return was audited and reviewed by the Commissioner of Internal Revenue, who determined and fixed the total value of the gross estate of said decedent to be $1,757,542.89, including the value of the real estate, situated in the State of Missouri owned by the decedent at the time of her death, which was fixed at the sum of $433,700.00; and said commissioner, after allowing deductions from said gross estate in the sum of $161,187.00, including the statutory exemption of $50,000.00, finally determined and fixed the value of the net estate of said decedent for the purposes of' the Federal estate tax to be $1,596,355.89, and the Federal estate tax on the transfer thereof to be the sum of $113,062.71, thereby determining that there was due from the executors of said estate an additional tax of $6,446.45, over and above the tax theretofore paid on the return. Said executors, after notice, and demand, paid said additional tax of $6,446.45 to the collector of internal revenue at St. Louis, Missouri, on November 12, 1924. Had the commissioner excluded from the gross estate of said decedent the value of the real estate situated in Missouri, the net estate for the purposes of the Federal estate tax would have been $1,162,655.89, the tax upon the transfer of which would have been $67,765.64, instead of $113,062.71 actually determined by said commissioner and paid by said executors. The action of the commissioner upon the review and audit of said return in continuing to include in the gross estate said real estate situated in Missouri at an increased valuation, with the resultant increase in the tax, is material; but no other changes made by him upon said review and audit are material to this litigation.
    VIII. There was included in the sum of $161,187.00 allowed by said commissioner as deductions from the said gross estate, the sum of $27,934.56, representing debts of said decedent for which claims had been presented to and allowed by said probate court, and no other claims or demands were presented to or allowed by said probate court as debts of the decedent, and the said sum of $27,934.56 representing debts of the decedent was duly paid by said executors out of the personal estate of said decedent. Included in the deductions allowed by the commissioner from said gross estate was the sum of $1,220.63 representing real estate taxes on said real estate accrued to the date of decedent’s death. There were no mortgages or other liens on said Missouri real estate.
    IX. On the 19th day of February, 1925, plaintiffs duly filed in the office of the collector of internal revenue at St. Louis, Missouri, pursuant to law, a claim for refund of Federal estate taxes alleged to have been erroneously and illegally assessed and collected by the defendant from said estate of Kate M. Howard, deceased, in the sum of $45,297.07, the amount of tax, not including interest, refundable if the value of the real estate situated in Missouri was improperly included in the decedent’s gross estate, which claim for refund alleged and charged:
    That the Commissioner of Internal Revenue had erroneously and illegally included in the value of the gross estate of said decedent the real estate situated in the State of Missouri owned by the decedent at the time of her death.
    That said claim was based upon the contention that said real estate situated in the State of Missouri, owned by the decedent at the time of her death, was not subject to the payment of the expenses of the administration of her estate, and was therefore not taxable under section 402 of the revenue act of November 23, 1921, which required that the value of the gross estate of the decedent should be determined by including the Avalué at the time of her death of all property, real or personal, tangible or intangible, wherever situated (a) to the extent of the interest therein of the decedent at the time of her death, which after her death was subject
    (1) to the payment-of the charges against her estate and
    (2) to the payment of the expenses of the administration of her estate and (3) to distribution as a part of her estate.
    X. On the 20th of August, 1925, said claim for refund was wholly disallowed and rejected in its entirety by said Commissioner of Internal Revenue.
    XI. At all of the times mentioned herein, sections 141 and 142 of the Revised Statutes of Missouri, 1919, were in full force and effect and said sections were and are as follows:
    “ Sec. 141. Sale oe Lands to Pat Debts. — If any person die and his personal estate shall be insufficient to pay his debts and legacies, his executor or administrator shall present a petition to the proper court, stating the facts; and praying for the sale of the real estate, or so much thereof as will pay the debts and legacies of such deceased person.” (R. S. 1909, sec. 150, amended laws 1919, p. 101.)
    “ Sec. 142. PetitioN AND Exhibits. — Such petition shall be accompanied by a true account of his administration, a list of debts due to and by the deceased and remaining unpaid, and an inventory of the real estate and of the remaining personal estate, with its appraised value, and all the other assets in his hands, and the whole to be verified by the affidavit of the executor or administrator.” (E. S. 1909, sec. 151.)
    XII. Upon the settlement and distribution of said estate by the executors as aforesaid, the entire residuary personal estate of said decedent, including this claim, was by order of the probate court and in pursuance of the provisions of said will of the decedent, transferred to plaintiffs, one-half to each, and no assignment of said claim, or any part thereof, or any interest therein has been made by plaintiffs or either of them to any person, persons, or corporation, nor has any transfer been made by either of them of her one-half interest or any part thereof in said claim presented in the above-entitled cause, and which was received by them under said will as aforesaid.
    The. court decided that plaintiffs were not entitled to recover.
    
      
       Writ of certiorari denied.
    
   Graham, Judge,

delivered the opinion of the court:

This case involves a claim for refund of estate taxes voluntarily paid, upon the ground that there was erroneously included in decedent’s tax return as a part of her gross estate, certain real estate located in the State of Missouri owned by her at the time of her death, for the alleged reason that under the statute of that State real estate could not be sold for the payment of expenses of administration and should, therefore, have been excluded from the gross estate under the terms of the taxing statute. Thus in effect plaintiffs are claiming an exemption by reason of the alleged failure of the State to pass a statute, and attempting to make the enforcement and effectiveness of the taxing act contingent and dependent upon the passage by the different States of statutes making real estate subject to sale for payment of administration expenses.

The question involved is whether the value of this real estate should have been included in the gross estate of the decedent under the provisions of section 402 (a) of the revenue act of 1921, 42 Stat. 227, chap. 136, as follows:

“ That the value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated—
“ (a) 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; * *

The mother of the petitioners, Kate M. Howard, died on the 23d of February, 1923. She owned at the time of her death certain real estate which she devised to the petitioners, one-half to each, by her last will and testament. Her executors, in making a return for Federal estate tax purposes, included the value of this real estate in her gross estate, and paid the taxes assessed. They thereafter filed a claim for refund upon the ground that said real estate should not have been included in the gross estate. The Commissioner of Internal Eevenue rejected the claim and thereupon this action was brought for the same reasons as those urged before the commissioner.

The Supreme Court in construing the above-quoted section of the act of 1921, in the case of United States v. Field, 255 U. S. 257, 262, held that the provisions of paragraph (a) of section 402 must be taken conjunctively. The court said:

“These conditions are expressed conjunctively; and it would be inadmissible, in construing a taxing act, to read them as if prescribed disjunctively. Hence, unless the appointed interests [the property involved in this particular case] fulfilled all three conditions, it was not taxable under this clause.”

It will be seen that section 402 provides, first, that the value of the gross estate shall include “ all property ” of the decedent at the time of death, wherever situated; second, “ to the extent of the interest” therein of the decedent at the time of death; and third, said interest is such interest as after the decedent’s 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.”

The decision of the Supreme Court in the Field case, it is urged, requires that in order to subject to taxation an interest in real estate of which a decedent dies the owner, it must be “ subject to ” all three of the conditions named.

The plaintiffs’ contention is that under the statutes and rulings of the courts of Missouri the real estate of a decedent is not “ subject to ” the payment of “ expenses of its administration,” conceding that it is subject to the other conditions. The statutes of Missouri allow the sale of real property for the payment of debts and legacies, and section 149 of the Missouri Code provides:

“ The proceeds of the sale of such real estate shall be first applied to the payment of such judgments and attachments according to their priority of lien, and the residue of such proceeds, if any, shall become assets in the hands of the executor or administrator to be administered according to law.”

Section 402, supra, does not use the word “ liable ”; it uses the words “subject to.” “Subject to” does not necessarily mean “ liable for.” It may be said that where land is liable for sale for the payment of debts, it is subject to the payment of debts, but the converse is not necessarily true. Eeal estate may be under certain conditions “ subject to ” the payment of expenses of administration and yet not liable to sale therefor; that is, it may be under the contingency of or exposed to payment of administrative expenses and thus “ subject to ” the payment.

Eeal estate may be sold under the Missouri statute for the payment of debts, and, having been sold, because the personal estate was not sufficient to pay the debts and the administration expenses, the latter could be paid, under the decision of the court of Missouri, out of the fund realized from the sale. Howell v. Jump, 140 Mo. 441. If the proceeds from the sale of real estate for payment of debts may be used under certain contingencies for the payment of administration expenses, it is in such a case “subject to” the payment of the expenses of administration.

The expression “expenses of administration” covers the whole field of administrative charges. It is difficult to see how real estate could be sold and the proceeds not be held liable for the expenses incident to the sale, which, in the case of a sale by an administrator under order of court, are part of the expenses of administration.

The plain purpose of Congress as disclosed by the first part of section 402 was to subject to taxation “all of the estate ” of a decedent to the full extent of his interest therein at the time of his death, whether real or personal, tangible or intangible, and wherever situated.

What the qualification, “ which is subject to,” was expected to exclude it is difficult to see. It is not reasonable to hold that Congress intended or had in mind the possibility of the exclusion from taxation of all real estate of a decedent where a statute of the State in which it was located did not specifically grant the right to sell it for the payment of the expenses of administration, or where a court of such State had held that under the existing statute it could not be subjected to sale for such purpose; that is to say, it is unreasonable to hold that Congress intended to exempt from taxation the real estate of a decedent in any of the States where the statute of the State did not specifically authorize the sale of it for the payment of expenses of administration. If each of the States had no such statute, all real estate would be exempt, and if in one State there was such a statute, the real estate would be taxable, and in another, where there was none, it would not be taxable, thus creating an inequality in taxation and a discrimination in favor of the States that have not passed such a statute.

The case of United States v. Field, supra, under the facts, we do not think controlling here.

It is presumed that Congress knew that under the common law real estate could not be sold by a probate court for the payment of debts or administration expenses. To hold that it intended to exclude from taxation all real estate or interest therein which was not subject to the payment of charges against the estate or expenses of administration and subject to distribution, unless specially allowed and jurisdiction given to the courts by State statutes, would be to hold that Congress included all real estate as subject to taxation and then provided for the possibility of all of it being excluded and exempted.

It is an established rule of construction that an act must be read as a whole with a view to ascertaining the real purpose of Congress, with the assumption of a reasonable and intelligent purpose on its part, and that no construction should be given to an act or a limitation thereof which would do violence to the general purpose of the act and render it futile or absurd. It is the duty of the court to so construe an act as to accomplish its general purpose and to enforce it in conformity with that purpose and within the reason of the act.

We are of opinion that the real estate of the decedent was properly assessed as part of her gross estate by the Commissioner of Internal Revenue under section 402 of the revenue act of 1921, and that plaintiffs are not entitled to the refund which was refused by the commissioner.

Moss, Judge; Hat, Judge; Booth, Judge; and Campbell, Chief Justice, concur.  