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In Re Estate of Barker

DECEMBER 30, 1974.

IN RE ESTATE OF ZULENA M. BARKER, DECEASED — (THE PEOPLE OF THE STATE OF ILLINOIS, PLAINTIFF-APPELLANT,

v.

ERNESTINE G. BARKER, EX'R, DEFENDANT-APPELLEE.)



APPEAL from the Circuit Court of McLean County; the Hon. WENDELL E. OLIVER, Judge, presiding.

MR. JUSTICE CLARK DELIVERED THE OPINION OF THE COURT:

Rehearing denied January 30, 1975.

This case has been transferred here from the supreme court under Supreme Court Rule 365. (Ill. Rev. Stat. 1973, ch. 110A, par. 365). The Attorney General attempted to consolidate this appeal with an appeal taken by a taxpayer from a Third District decision of In re Estate of Voss, 5 Ill. App.3d 320, 282 N.E.2d 178. The issue in both cases dealt with the propriety of the circuit court's ruling assessing the date-of-death value of United States Treasury bonds for Illinois inheritance tax purposes. The circuit court of McLean County found that the "clear market value" of the United States Treasury bonds at the time of decedent's death under the Illinois Inheritance Tax Act (Ill. Rev. Stat. 1969, ch. 120, par. 375) was the fair market value of said bonds and not the par value. The court's decision was made notwithstanding the fact that the bonds were redeemable at par when used for the payment of decedent's Federal estate taxes. The Attorney General contests the court's ruling.

Aside from the aforesaid valuation issue, the Attorney General, in his reply brief on appeal, raised a second issue. The Attorney General contended that if the treasury bonds can be valued at their fair market values as of the date of decedent's death, then the amount of Federal estate taxes paid and thus allowed as a deduction against the decedent's gross estate for Illinois inheritance tax purposes should be reduced by the difference between the par value of the bonds and the fair market value. The executrix was permitted to file a supplemental brief wherein she urged that the Attorney General had waived the deduction issue.

During the course of oral argument of this case, we propounded to the parties certain constitutional and jurisdictional questions concerning the procedures as specified in section 11 of the Illinois Inheritance Tax Act (Ill. Rev. Stat. 1973, ch. 120, par. 385).

The underlying facts of this cause of action are as follows. On January 23, 1970, Zulena M. Barker died testate. Her will was probated in the circuit court of McLean County. Among the assets of decedent's estate were several United States Treasury bonds. These bonds had a par value of $30,000. Each bond returned 3 1/4 percent interest per annum, and the bonds began maturing annually from 1978 to 1983. The fair market value of the bonds at the date of decedent's death was set at $65.44 per $100. This value was the market-quoted value.

The executrix of the estate determined that such a valuation complied with the requirements of the Illinois Inheritance Tax Act that all property of a decedent be valued at the property's fair market value. The total fair market value of the bonds included in decedent's gross estate amounted to $19,632. The Attorney General filed objections to decedent's Illinois inheritance tax return. The Attorney General contended that all United States Treasury bonds used as part payment of Federal estate taxes, and thus redeemed at par for that purpose, should be valued at par in the Illinois inheritance tax return.

A hearing was held on the Attorney General's objections. On July 9, 1971, the judge ruled in favor of the executrix. In a memorandum of opinion the reasoning of the executrix was essentially adopted. The Attorney General filed a petition for appeal to the circuit court on August 2, 1971. In the appeal, the Attorney General sought to have the aforementioned order overruled. On August 6, 1971, the appeal to the circuit court was allowed. On March 13, 1972, the July 9, 1971, order assessing taxes was affirmed.

The Attorney General then filed a notice of appeal to the Supreme Court of Illinois, which transferred the case to this court.

• 1 As to the Attorney General's first contention, dealing with the correct valuation of the bonds in question, we find that the decision of the supreme court in In re Estate of Voss, 55 Ill.2d 313, 303 N.E.2d 9, is dispositive. In Voss, the supreme court addressed the same issue that is presented to us and rejected the Attorney General's position on that issue. Therein the court stated that, under section 11 of the Illinois Inheritance Tax Act, Illinois inheritance tax is imposed upon the clear market value of decedent's property as set on the date of death. The court discussed the concept of market value as found in the statute and held that the United States Treasury bonds must be valued at their market-quoted value rather than at par or face value. The court observed the fact that bonds are redeemable at par value for payment of Federal estate taxes is a factor considered in establishing the clear market value of bonds.

The Attorney General next urges that if the bonds are valued at market value for Illinois inheritance tax purposes then the deduction allowed under Schedule D for the Federal estate taxes paid should be reduced by the difference between the market and par values of the United States Treasury bonds. The executrix contends that this court may not consider the Attorney General's second issue. It is urged that this issue was not raised below along with the deduction issue and therefore has been waived. We agree.

Theories not raised in the trial court are deemed waived on appeal. (Cockerill v. Wilson, 51 Ill.2d 179, 281 N.E.2d 648.) Likewise, a party cannot change or alter the theory of its case on appeal. (O'Hare International Bank v. Feddeler, 16 Ill. App.3d 35, 305 N.E.2d 325.) This is precisely what the Attorney General has done. We have searched the record and examined the Attorney General's objections to the tax return in question and find that the questions in the circuit court were limited to the valuation issue.

As indicated, this court raised certain questions during the course of oral arguments. These inquiries dealt with various constitutional and jurisdictional matters relating to the procedures found in section 11 of the Illinois Inheritance Tax Act, which provides procedure for the operation of the circuit court and the method of appeal therefrom.

On July 9, 1971, the circuit court dismissed the Attorney General's tax objection. Within 30 days the Attorney General petitioned for appeal to the circuit court. This petition was granted, a hearing was held thereon, and the circuit court took the matter under advisement. ...


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