NORTH CAROLINA

INHERITANCE, ESTATE, AND GIFT TAXES

Inheritance Tax

Tax imposed. A tax is imposed upon the transfer of any property, real or personal, or of any interest therein or income therefrom, in trust or otherwise, to persons or corporations. (1)

Transfers taxable. The transfers taxable under this act, without the conditions and limitations attached thereto, are summarized as follows: Those made by will or the intestate laws of this State from a resident decedent; those made by settlement, contract, agreement, or court order by reason of claims arising under intestate laws; those made by will or intestate laws of this or any other State or by settlements in controversies over wills, of real or personal property within this State, or of any property over which this State has taxing jurisdiction, including State and municipal bonds, and decedent was a resident of this State; transfers made by residents or nonresidents of real or personal property within this State, or of any property over which this State has taxing jurisdiction, by deed, grant, bargain, sale, or gift made in contemplation of the death of the grantor, vendor, or donor, or intended to take effect at or after his death; when any person or corporation comes into possession or enjoyment, by a transfer from a resident, or from a nonresident whose property consists of real property within this State or tangible personal property that has acquired a situs herein, of an estate in expectancy which is contingent or defeasible, or of any property transferred pursuant to a power of appointment contained in any instrument. (1)

Same. Whenever any person or corporation exercises any power of appointment derived from any disposition of property, such appointment when made is deemed a taxable transfer; and if any person or corporation fails or omits to exercise such an appointment, or if the power has not been exercised, a transfer is deemed to take place to the extent of such omission or failure. Whenever any property of any kind is disposed of by will or by deed to any person for life, or for a term of years, or to any corporation for a term of years, with the power of appointment in such person or corporation, or reserving to the grantor or devisor the power of revocation, the tax, upon the death of the person making such will or deed, is, on the whole amount of property so disposed of, due and payable as in other cases, and is computed according to the relationship of the first donee or devisee to the devisor. Where real property is held by husband and wife as tenants by the entirety the survivor is taxable on one-half of the value thereof. (1) Additional estate tax.—In addition to this inheritance tax, an estate tax is imposed upon the transfer of the net estate of every decedent, whether a resident or nonresident of this State. If the inheritance tax

imposed under the inheritance tax provisions is in the aggregate of a lesser amount than the maximum credit of 80 percent of the Federal estate tax allowed, then the inheritance tax provided for is increased by an estate tax on the net estate, so that the aggregate amount of tax due this State shall be the maximum amount of credit allowed under said Federal estate tax act. Where no tax is imposed by this inheritance tax schedule because of exemptions and a tax is due the United States under the Federal estate tax act, then a tax is due this State equal to the maximum amount of the credit allowed under said Federal estate tax act.2 (6)

Deductions allowed.-In determining the clear market value of property taxed under the inheritance tax provisions, the following deductions are allowed: Taxes due and payable, and the pro rata part of taxes accrued for the fiscal year that have not become due and payable; drainage and street assessments; funeral and burial expenses; debts; estate and inheritance taxes paid other States, death duties paid foreign countries, and Federal estate taxes finally assessed; not exceeding $500 actually expended for monuments; commissions of executors and administrators, and costs of administration.

(7)

Exemptions. There are exempt from this tax transfers of property passing to or for the use of this State or the municipal corporations therein, or other political subdivisions thereof, for exclusively public purposes; as is property passing to religious, charitable, or educational corporations, or to churches, hospitals, orphan asylums, public libraries; or to religious, benevolent, or charitable organizations (or to trustees for such purposes), located within the State; and property passing to religious, educational, or charitable corporations incorporated under the laws of any other State and receiving and disbursing funds donated in this State for such purposes; proceeds of life insurance policies, not exceeding in the aggregate $20,000, when payable to beneficiaries named therein, and such beneficiaries are any of the persons designated in class A; and proceeds of war risk insurance policies. The personal exemptions allowed are as follows: Widow, $10,000; each child under 21 years of age, $5,000; all other beneficiaries in class A, $2,000. A grandchild or grandchildren are allowed the single exemption or pro rata part of the exemption of the parent when the parent is deceased or does not share in the estate. If decedent leaves a widow and child or children under 21 years of age, and leaves all or substantially all of his property by will to his wife, the wife is allowed. an additional exemption of $5,000 for each such child. No exemptions are allowed beneficiaries of classes B and C. (2, 3) Classification of beneficiaries.-The beneficiaries under this act are classified as follows: Class A: Lineal issue, lineal ancestor, husband or wife, or adopted child, of decedent. Class B: Brother or sister or descendant of either, or uncle or aunt by blood, of decedent. Class C: All others. (3,4,5)

Rates of tax. The rates of tax imposed on the value of the property transferred to the several classes of beneficiaries, for each $100 or fraction thereof, are as follows: (3, 4, 5)

The provisions of law relating to this tax are shown on p. 7.

132222-397

Payment of tax; interest; penalty.—This tax is due and payable to the commissioner of revenue at the death of the testator, intestate, grantor, donor, or vendor, and if paid within 6 months from such death, a discount of 3 percent is allowed; if not paid within 12 months from death, interest at the rate of 6 percent per annum is charged, to be computed from the expiration of 12 months from the date of death until paid. If the tax is not paid in full within 2 years, a penalty of 5 percent is imposed upon the amount unpaid, but this penalty may be remitted by the commissioner of revenue in case of unavoidable delay in settlement of the estate or of pending litigation, and the commissioner may, in case of protracted litigation or other delay in settlement not attributable to laches of the party liable for the tax, remit all or any portion of the interest charges accruing hereunder with respect to so much of the estate as was involved in such litigation or other unavoidable cause of delay, and the time for payment and collection of such tax may be extended by the commissioner for good reasons shown. If the tax is not paid within 2 years, the sheriff collects the same as other taxes are collected, with an additional 21⁄2 percent as collection costs; and the sheriff is given the same rights of levy and sale upon any property upon which the tax is payable as is given for the collection of other taxes. (14,15)

Tax lien.—This tax is a lien upon the real and personal property of the estate on which imposed or upon the proceeds arising from the sale of such property from the time said tax is due and payable, and continues a lien until paid. (18)

Securing payment of taxes due other States.-Provisions exist in this law requiring executors and administrators to file proof that all death taxes, interest, and penalties due the State of domicile of a nonresident decedent have been paid or secured, unless letters testamentary or of administration have been issued on the estate of such decedent in the State of his domicile. These provisions are applicable only in the event the laws of said State of domicile contain a provision whereby the payment of similar taxes, interest, and penalties due this State is reasonably assured. (29)

Disposition of proceeds. The proceeds of this tax are for the expenses of the State government, the appropriations to its educational, charitable, and penal institutions, pensions for Confederate

soldiers and widows, interest on the State debt, for public schools, and other specific appropriations, and they are collected and paid into the general fund of the State treasury. (819)

Administration of act.-The commissioner of revenue has complete supervision of the enforcement of all provisions of the inheritance tax act. (22)

Source of information.-Chapter 127, Session Laws of 1937.

Gift Tax

Tax imposed. State gift taxes are levied upon the shares of the respective beneficiaries in all property within the jurisdiction of this State, real, personal, and mixed, and any interest therein which passes by gift in any calendar year. (600)

Transfers taxable. This tax applies whether the gift is in trust or otherwise and whether it is direct or indirect. In the case of a gift made by a nonresident, the tax applies only if the property is within the jurisdiction of this State. (600)

Rates; exemptions.-The amount of tax on all gifts is based on the relationship between the donor and donee, and is graduated in proportion to the amount of such gifts. The rates of tax imposed are the rates set out under the above inheritance tax schedule; the personal exemptions allowed are the same as those under the inheritance tax act, except that the exemption allowed to each child of the donor is $5,000. The total exemptions allowed are not to exceed eight times the exemption allowed for a single year, and where two or more gifts are made in excess of the exemption, the tax is calculated on the total amount of gifts in excess of the exemption. Property passing for exclusive State, county, or municipal purposes within this State, and that passing for the exclusive benefit of any institution, association, or corporation in this State, the property of which is exempt from taxation by State laws, is specifically exempted from the provisions of this gift tax. (600)

Filing returns.-Reports of gifts are required to be made, on or before March 15 of each year, by the donor to the State department of revenue for the purpose of having the returns audited. For failure to file a report at the proper time, a penalty of 10 percent of the tax is added, plus interest at 6 percent per annum from the due date of the report. (603, 604, 609)

Payment of tax; interest.—The amount of tax is payable at the time of making the report of the gift, or not later than March 15 following the close of the calendar year. Unpaid taxes, penalties, and interest bear interest at the rate of 6 percent per annum from date of assessment. (603, 604)

Tax lien. This tax is a lien upon all gifts constituting the basis for the tax for a period of 10 years from the time they are made. (605)

Disposition of proceeds. Same as for the inheritance tax proceeds. (819)

Administration of act. The provisions of this act are administered by the State department of revenue. (603)

Source of information.-Chapter 127, Laws of 1937.

NORTH DAKOTA

ESTATE TAX

Tax imposed.-A tax is imposed upon the transfer of the net estate of every decedent, whether in trust or otherwise, under the conditions and subject to the limitations hereinafter prescribed. (2)

Transfers taxable. The value of the gross estate of a resident decedent is determined by including all real property within this State, all tangible personal property except that which has an actual situs without this State, and all intangible personal property wherever located. In determining the value of the gross estate of a nonresident decedent there are included all real property located within this State; all tangible personal property having an actual situs within this State; sheriff's certificates of sale of real property; decedent's equitable interest in real estate within this State; the full value of shares of stock in domestic corporations, but transfers of such shares are not taxed if decedent's State of residence imposes no inheritance tax or other death tax upon any form of intangible personalty of nonresident decedents, or if decedent's State of residence grants a like exemption in favor of residents of this State. There is also included in the value of the gross estate all property transferred prior to and in contemplation of death; and all property transferred by the decedent prior to death by grant or gift without an equivalent monetary consideration, whether intended to take effect at or after the death of the decedent. The gross estate of a decedent also includes the value of interest and property held as joint tenants or as joint depositors and payable to either or to the survivor. The value of the decedent's interest in such a case is determined by dividing the value of the entire property by the number of joint tenants, joint depositors, or other persons interested therein. Transfers of property subject to an exercised or unexercised power of appointment are taxable to the estate of the donor only. (2)

Same. Whenever a decedent has reserved unrestricted power of revocation of any trust created during his lifetime, such trusts are considered as a part of his estate and taxed accordingly. Where, however, the trust provided that only a portion of such property is to be revested, that portion only is taxable as a part of the estate and the irrevocable portion of such trust only is to be taxable when the transfer was made in contemplation of death or the possession or enjoyment thereof was intended to take effect at or after death. Whenever a donor of such trust reserved a life income therefrom, it is considered a part of the estate and taxed accordingly. A transfer of property which has paid a transfer tax to this State within 5 years is subject to this tax as though it had not been transferred; but if the property can be identified as having been received by the decedent by gift, bequest, devise, or inheritance within 5 years, or if it can be identified as having been acquired in exchange for property so received, a credit for the transfer taxes paid within 5 years upon the property is allowed upon the transfer tax, but this credit is not to exceed the tax due under the present appraisement of such property for transfer tax purposes. (2)