Estate of Bixby

295 P.2d 68 (1956)

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Estate of Bixby

California Court of Appeal
295 P.2d 68 (1956)

SC

Facts

On May 17, 1952, Fred Bixby (Mr. Bixby) died, leaving 19,000 shares of stock to his wife, Florence Bixby (Mrs. Bixby), and leaving the residue of his estate in four equal trusts to his four children. The trusts were to continue until the surviving child’s death, at which time the remainder would be distributed to Mr. Bixby’s grandchildren. The net income from the trusts was to be paid to the children. After administration of the estate, the stock was given to Mrs. Bixby by court order on September 3, 1953. Dividends from the stock amounting to $76,000 were paid to the executor of the estate during the estate’s administration. The executor used the estate’s administration expenses as an income tax deduction instead of an estate tax deduction. Doing so saved over $100,000 for the children who were entitled to the trust’s income. However, paying the taxes in this manner harmed the grandchildren entitled to the remainder of the trusts. Mrs. Bixby argued that the income taxes assessed against the estate’s income during administration were on the administration of the estate and should be paid by the residue of the estate, leaving the full $76,000 to Mrs. Bixby. The trustees for the children’s trusts argued that the income taxes assessed against the estate’s income during administration should be paid from the estate’s income.

Rule of Law

Issue

Holding and Reasoning (Fox, J.)

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