1975, October, Pg. 2069. CPC Newsletter.

4 Colo.Law. 2069

Colorado Lawyer

1975.

1975, October, Pg. 2069.

CPC Newsletter

2069Vol. 4, No. 10, Pg. 2069CPC NewsletterI. Changes in Colorado Inheritance and Gift Tax Statutes

The 1975 Colorado General Assembly passed House Bill 1704, containing amendments to the Colorado inheritance tax statute, and House Bill 1576, containing amendments to the Colorado gift tax statute. These bills were signed into law by the Governor on July 18, 1975. Prior thereto, in January 1975, the Colorado Department of Revenue adopted new inheritance and gift tax rules and regulations. The purpose of this article is to indicate the more important changes in the statute and the rules and regulations, to the extent that they are not inconsistent with the recent statutory changes.

Inheritance Tax changes 1. The terminology utilized in C.R.S. 1973, § 39-23-103 and throughout the statute has been changed from the "residence" of the decedent to the "domicile" of the decedent.

2. C.R.S. 1973, § 39-23-104(a), with respect to the tax on transfers, now states that real property in a personal trust of a domiciliary shall not be taxed if such real property has an actual situs without Colorado. C.R.S. 1973, § 39-23-104(b) contains a companion provision for a nondomiciliary by holding that real property situated in Colorado held in trust or otherwise is a taxable transfer. That section further states that intangibles of a nondomiciliary (other than a domiciliary of a foreign country) that have acquired an actual or business situs in Colorado shall not be taxable.

3. C.R.S. 1973, § 39-23-105(1), with respect to taxable transfers, has been amended as follows:

   1. Contemplation of death transfers in paragraph (c) now include any transfer of an interest in property or the relinquishment, release or exercise of a general power of appointment made by a person within two years prior to death. The paragraph now provides, however, that no such transfer, relinquishment, release or exercise prior to such two-year period shall be treated as having been made in contemplation of death and no portion of the proceeds of life insurance on the life of the decedent in excess of the aggregate premiums paid by the decedent during the two-year period shall be treated as a taxable transfer.

   2. Transfers to take effect in possession or enjoyment at or after the death of the transferor in paragraph (d) have been modified to state that a transfer by a decedent during his lifetime shall be deemed to be intended to take effect in possession or enjoyment at or after the death of the transferor if possession and enjoyment of the transfer property can be

   2070obtained, through ownership thereof, only by surviving the transferor or by the exercise by the transferor during his lifetime of a power of appointment, or the decedent has retained a reversionary interest in the property, and the value of such reversionary interest immediately before the death of the decedent exceeds 5 percent of the value of such property, but a reversionary interest does not include the possibility that the income alone from such property may return to him or his estate or become subject to a power of disposition by him.

   Rule 2 for C.R.S. 1973, § 39-23-105, with respect to taxable transfers, states that where property is transferred or purchased by the decedent, and title is taken in other than the decedent's name alone, the full value will be included in the taxable estate to the extent that actual possession, enjoyment, or economic benefits are retained by the decedent under an agreement (express or implied) with the transferee. Continued possession or enjoyment of the property to the exclusion of the transferee may be considered by the Department of Revenue to constitute the existence of an implied agreement.

4. C.R.S. 1973, § 39-23-106, with respect to property held in joint names or payable on death, has been substantially modified. Under previous law, whenever any real or personal property was held in the joint names of two or more persons, as joint tenants with rights of survivorship and not as tenants in common, upon the death of one of such joint tenants the right of the surviving joint tenants to the immediate ownership or possession and enjoyment of such property was deemed a taxable transfer, and the taxable interest was determined by dividing the value of the property by the number of joint tenants. An exception was made, however, for the taxable value of co-ownership United States government securities registered in the alternative with the right of survivorship and of bank accounts held jointly or in the alternative with the right of survivorship, which were determined by ascertaining the corresponding amount of contribution of funds made by the decedent toward the purchase of such securities or deposited in such accounts, and the taxable interest passing was that proportion of funds contributed by the decedent.

   The section now provides that whenever any real or personal property is held in the names of joint tenants, or deposited in an account in either of their names and payable to either or to the survivor, or United States government obligations issued to co-owners, the right of the surviving tenant or co-owner shall be deemed a transfer from the deceased tenant or co-owner except such part thereof as may be shown to have belonged originally to the other person and never to have been received or acquired by the latter from the decedent for less than adequate consideration. Where such property or part thereof or part of the consideration with which such property was acquired is shown to have been acquired at any time by such other person from the decedent for less than adequate consideration, there shall be excepted such part of the value of such property as is proportionate to the consideration furnished by such other person.

   Where any property has been acquired by gift, devise, bequest, or inheritance, by the decedent and a spouse as joint tenants, then such property shall be deemed a transfer from the decedent to the extent of one half of the value thereof, or when acquired by the decedent and any other person as joint tenants and their interests are not otherwise specified or fixed by law, then to the extent of the value of the fractional part to be determined by dividing the value of the property by the number of joint tenants.

   Real and personal property owned by a decedent and a spouse as joint tenants, however, shall be deemed a transfer from the decedent to the surviving spouse to the extent of one-half of the value thereof regardless of the consideration furnished by either the decedent or the surviving spouse.

   Accounts in banks and other financial

   2071institutions which are payable on death to, or held in trust for, other persons shall be considered as constituting transfers-in contemplation of, or to take effect in possession or enjoyment at or after death, as provided in C.R.S. 1973, § 39-23-105, except to the extent of the consideration therefor contributed by such other person...