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ATTORNEYS FOR APPELLANT: JOHN L. WALKEY CHERYL M. KNODLE BALL EGGLESTON PC Lafayette, IN

ATTORNEYS FOR APPELLEE: GREGORY F. ZOELLER ATTORNEY GENERAL OF INDIANA KRISTEN M. KEMP DEPUTY ATTORNEY GENERAL Indianapolis, IN _____________________________________________________________________

IN THE INDIANA TAX COURT
IN RE THE ESTATE OF FORREST W. QUACKENBUSH, DECEASED,

FILED
Apr 22 2010, 3:28 pm
of the supreme court, court of appeals and tax court

_____________________________________________________________________ CLERK ) ) ) CAROL R. BEAN, AS PERSONAL ) REPRESENTATIVE OF THE ESTATE ) OF FORREST W. QUACKENBUSH, ) ) Appellant, ) ) Cause No. 49T10-0810-TA-61 v. ) ) INDIANA DEPARTMENT OF STATE ) REVENUE, INHERITANCE TAX DIVISION, ) ) Appellee. ) ____________________________________________________________________ ON APPEAL FROM THE TIPPECANOE CIRCUIT COURT The Honorable Donald L. Daniel, Judge Case No. 79C01-0705-EU-167 FOR PUBLICATION April 22, 2010 FISHER, J. The Estate of Forrest W. Quackenbush (Estate) appeals the Tippecanoe Circuit Courts (probate court) order determining its inheritance tax liability. The Court restates the issue for review in this case as whether, for inheritance tax purposes, the beneficiary should be classified as a Class A or as a Class C transferee, given that she

was adopted pre-emancipation during the lifetime of her biological grandfather. RELEVANT FACTS AND PROCEDURAL HISTORY On May 21, 2007, Forrest W. Quackenbush (Forrest) died testate. At the time of his death, Forrests trust, in relevant part, stated: Upon [my] death . . . , the Co-Trustees shall . . . at the end of each calendar year, pay all the annual net income AND approximately five percent (5%) of the principal of the trust . . . as follows: (a) one-half in equal shares to the three (3) children of [my] deceased daughter, Lois Lynn Lynch-Rothert[:] James Edmund Lynch, Jessica Ward Lynch and Pamela Stewart Martin (a daughter of said Lois Lynn Lynch-Rothert who was given up for adoption after birth), or to the issue, per stirpes of any of the named beneficiaries in this paragraph [] who are not living at such time[.] (Appellants App. at 19.) On February 2, 2008, the Estate filed its inheritance tax return, reporting, inter alia, that Pamela Stewart Martin (Pamela) was Forrests biological granddaughter and that her two sons, Miles and Matthias Martin (Miles and Matthias), were his greatgrandsons. Therefore, the Estate treated Pamela, Miles, and Matthias as Class A

transferees in computing its inheritance tax liability. (See Appellants App. at 22-23.) On March 14, 2008, the probate court accepted, as filed, the Estates inheritance tax return and therefore determined that the Estate owed $32,885.52 in inheritance tax. On June 23, 2008, the Indiana Department of State Revenue, Inheritance Tax Division (Department) filed a "Petition for Rehearing and Redetermination of Inheritance Tax" (Petition) with the probate court. In its Petition, the Department asserted that because Pamela had been adopted pre-emancipation, for purposes of the inheritance tax, both she and her children should have been classified as Class C transferees rather than as Class A transferees. (Appellants App. at 24.) In turn, the Department

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explained that that classification would have, inter alia, allowed Pamela, Miles, and Matthias with only a $100 exemption on the property interests transferred, and not a $100,000 exemption as reported on the return. (See Appellants App. at 24-25.) As a result, the Department claimed that the Estate owed an additional $29,699.14 in inheritance tax plus interest. (See Appellants App. at 25.) On July 29, 2008, after holding a hearing on the matter, the probate court issued an order granting the Departments Petition. In the order, the probate court stated that it believed that: Indiana courts have made it clear that when children are adoptedout all ties must sever to the natural family, meaning it is not possible to treat adopted-out children as Class A transferees. In addition, the possibility of natural children breaking confidentiality records, receiving du[e]l Class A inheritance, or forcing themselves into the inheritance of other blood relatives is enough to treat adopted-out children as [C]lass C transferees, regardless of the [d]ecedents intent. (Appellants App. at 10.) Accordingly, the probate court ordered the Estate to pay an additional $29,699.14 in inheritance tax plus statutory interest. On August 28, 2008, the Estate filed an appeal with this Court. The Court heard the parties oral arguments on January 30, 2009. Additional facts will be supplied as necessary. STANDARD OF REVIEW The Indiana Tax Court acts as a true appellate tribunal when reviewing an appeal of a probate courts determination concerning the amount of Indiana inheritance tax due. IND. CODE ANN.

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