Tax Type
Estate Tax
Description
Proceeds received after probate
Topic
Computation of Tax
Date Issued
03-19-1997
March 19, 1997
Re: Request for Ruling: Probate Tax
Dear****************
This will reply to your letters requesting a ruling on the application of the probate tax on claims filed on behalf of estates by personal administrators. I apologize for the delay in replying.
FACTS
You have asked whether the proceeds of a legal action received after the probate of the estate are subject to the probate tax.
RULING
Code of Virginia § 58.1-1713, copy enclosed, provides that the probate tax is based on the value of all property within the Commonwealth. It states that "[t]he value of the estate shall be determined at the time of death of the decedent, or if an alternative time of valuation has been chosen under § 2032 of the Internal Revenue Code ... at such time." The probate taxes' measurement is based on the value of the decedent's property at the time of his death or at the time of the alternative valuation. The proceeds of any cause of action pending at the time of the decedent's death, or at the time of the alternative valuation, would be awarded after his death or the alternative valuation respectively. However, the cause of action itself, which exists at the time of the decedent's death or time of alternative valuation, may be estate property subject to the probate tax.
The Court held in Bagley v. Weaver. Adm'r, 211 Va. 779, 782 (1971), copy enclosed, that an existing legal action brought on behalf of a decedent, not pursuant to the wrongful death act, is an asset of the decedent's estate and subject to the payment of his debts. § 503 of 31 AmJur. 2d, copy enclosed, states that "[a]ll causes of action or collectable claims which the decedent has at the time of his death and which survive his death, and the proceeds of such claims are personal property which become assets of his estate." Thus, any cause of action which exists at the time of the decedent's death is property of the estate regardless of whether a legal action is pending. However, any cause of action which arises subsequent to the date of the decedent's death or the alternative valuation would not be property of the estate.
A court clerk may base the probate tax on the value of any cause of action which exists at the time of the decedent's death or the alternative valuation date if the alternative valuation method is used. Code of Virginia § 58.1-1717, copy enclosed, provides that the clerk of the court may adjust the tax amount by comparing the value of the property on the probate tax return with the value of the property listed on the personal representative's inventory. Code of Virginia § 26-12, copy enclosed, requires personal representatives to file inventories whenever additional property comes into the estate. A court clerk would determine when a legal judgment is awarded by reviewing the filed inventories. The clerk could then adjust the probate taxes accordingly.
I trust the foregoing has responded to your questions. If you should have any further questions regarding this ruling, you may contact *********** at***********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/7849B
Rulings of the Tax Commissioner