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NO. 93-333
IN THE SUPREME COURT OF THE STATE OF MONTANA

IN THE MATTER OF THE ESTATE OF

JOSEPH F. LANGENDORF,
Deceased.

APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Carbon,
The Honorable Maurice R. Colberg, Jr., Judge

presiding.

COUNSEL OF RECORD:
For Appellant:

Lawrence G. Allen, Tax Counsel, Dep't of Revenue,
Helena, Montana

For Respondent:
Bruce E. Lee, Attorney at Law, Billings, Montana

Submitted on Briefs: October 15, 1993

Decided: November 18, 1993
Filed:

Justice Karla M. Gray delivere3 the Opinion of the Court.

This appeal arises from a dispute over the taxable value of a
gift of real property made by Joseph F. Langendorf two years prior
to his death. Although the Estate of Joseph F. Langendorf (the
Estate) agrees that the gift is subject to Montana inheritance tax,
it challenges the Department of Revenue's (the Department)
valuation of the gifted property. The Thirteenth Judicial District
Court, Carbon County, granted summary judgment to the Estate,
allowing the Estate a $20,000 reduction in the taxable value of the
gifted property under Montana's inheritance tax statutes. We
reverse, holding that the court incorrectly interpreted the
statutes at issue.

The pertinent facts are undisputed. Joseph F. Langendorf

(Langendorf) died on September 17, 1990. Two years prior to his
death, Langendorf gifted real property located in Carbon County to
Dean and Teresa Hayden in equal undivided interests.

Teresa Hayden, the personal representative named in
Langendorfrs will, filed a petition for informal probate on October
10, 1990. She subsequently filed an application for Determination
of Inheritance Tax with the Department, listing the appraised value
of the gifted real property as $128,000. She then subtracted
$20,000 for an exclusion she denominated "annual gift exclusion"

($10,000 per donee) and submitted the property's taxable value for
state inheritance tax purposes as $108,000.
The Department disallowed the $20,000 exclusion and determined
inheritance taxes due based on the $128,000 market value of the

2

property. The Estate filed its objection to, and appeal of, the
Department's determination of tax in District Court. Both parties
moved for summary judgment, agreeing that no disputed issues of
fact remained. In its opinion, the District Court tacitly conceded
that the statutes did not provide for the exclusion, but reasoned
that the legislature must have impliedly intended to allow the
exclusion. It concluded that, in order to avoid an absurd result,
the statute must be read to allow the $20,000 exclusion. The
Department appeals.

The sole issue on appeal is whether Montana's inheritance tax
statutes allow a deduction, exclusion or exception for the first
$10,000 per donee of the taxable value of a gift made in
contemplation of death.

The District Court's interpretation of the statutes in light
of the facts presented resulted in a conclusion of law. Thus, our
standard of review is whether the District Court's interpretation
of the law is correct. Mooney v. Brennan (Mont. 1993), 848 P.2d
1020, 1022, 50 St.Rep. 229, 230; Andrews v. Ford Const. (1990), 241
Mont. 203, 205, 786 P.2d 18, 19. Applying our well-established
rules of statutory construction, we conclude that the District
Court's interpretation was in error.

In interpreting statutes, we first look to the plain meaning
of the words used. Allison v. Jumping Horse Ranch (1992), 255
Mont. 410, 412, 843 P.2d 753, 755. When the language of a statute
is plain, unambiguous, direct and certain, the statute speaks for
itself and no further interpretation is required. Blake v. State

(1987), 226 Mont. 193, 198, 735 P.2d 262, 265; GBN, Inc. v. Montana
Deprt of Revenue (1991), 249 Mont. 261, 265, 815 P.2d 595, 597.
Furthermore, we have stated many times that it is the function of
the courts to ascertain and declare what, in terms or substance, is
contained in a statute; it is not our function to insert what has
been omitted or omit what has been inserted. Section 1-2-101, MCA.
With those principles in mind, we review the applicable Montana

inheritance tax statutes.

Section 72-16-308, MCA, establishes that taxable transfers will be taxed on the "clear market value" of the property and enumerates the allowable deductions which may be made in determining the clear market value. The statute is clear that only the listed deductions "and no other shall be allowed. " Section 72- 16-308(2), MCA. Moreover, even absent such explicit language, it is a general rule of taxation that an item may constitute a deduction only when the legislature specifically establishes the deduction. GBN, Inc., 815 P. 2d at 597. Under the plain meaning of g 72-16-308, MCA, no deduction is allowed for the first $10,000 in value per donee of the transfer at issue here.
The question remains, therefore, whether the gift was a
taxable transfer under Montana inheritance tax statutes. Section
72-16-301, MCA, reads, in pertinent part:

Taxable transfers generally -contemplation of death.
(1)
A tax shall be and is hereby imposed upon any
transfer of property, real, personal, or mixed, or any
interest therein or income therefrom in trust or
otherwise to any person, association, or corporation in
the following cases, except as provided in this section:


(c)
when the transfer is of property made by a resident . . . by deed, grant, bargain, sale or gift made in contemplation of the death of the grantor, vendor, or donor or intended to take effect in possession or enjoyment at or after such death.

(3)
Every transfer during the 3-year period ending
on the date of the decedent's death must be considered to
have been made in contemplation of death, except:


(b)
if the transfer was a gift to a donee made
during the calendar year and if the decedent was not
rewired bv section 6019 of the internal revenue code to
file anv qift tax return for the year with respect to the
donee, the transfer may not be considered to be a gift
made in contemplation of death. [Emphasis added.]



Thus, 5 72-16-301(1)(c) and (3), MCA, begin by clarifying that transfers made in contemplation of death--such as Langendorf's gift to Dean and Teresa Hayden two years prior to his death--generally are taxable transfers for purposes of Montana inheritance tax. Section 72-16-301(3) (b) , MCA, unambiguously goes on to provide that if the decedent was not required to file a federal gift tax return pursuant to 5 6019 of the Internal Revenue Code (I.R.C.) for the particular transfer, that transfer is not made in contemplation of death and, therefore, is not subject to Montana inheritance tax.
The I.R.C. provision referenced in 5 72-16-301(3)(b), MCA, only exempts a person from filing a gift tax return if the gift is $10,000 or less in value. See 5 6019 and 2503, I.R.C. The property gifted to Dean and Teresa was worth more than $10,000 Per donee and, therefore, a federal gift tax return was required. Because the federal gift tax return was required, the exclusion in
72-16-301(3)(b), MCA, was not triggered.

We conclude, therefore, that the District Court erred in

allowing the Estate's deduction. Under the plain meaning of 1 72-
16-301, MCA, Langendorf's gift to Teresa and Dean was a taxable

transfer and the exception provided in 5 72-16-301(3)(b), MCA, did
not apply because a federal gift tax return was required.

Accordingly, the plain language of 1 72-16-308, MCA, requires that
the property be taxed at its clear market value, $128,000.

The Estate argues that the 1989 Editorial Comments to g 72-16-
301, MCA, demonstrate legislative intent to incorporate federal

estate and gift tax provisions into Montana's inheritance tax

scheme. On that basis, it asserts that the $10,000 annual federal

gift tax exclusion per donee should be read into 1 72-16-301, MCA.
We disagree.

The comments read:

1989 Editorial Comment: Former Montana law
subjected gifts of a "material part" of a decedent's
estate to inheritance taxation if made within 3 years of
the donorfs death. However, former law did not define
the phrase "material part". Some attorneys argued that
the phrase meant that any amount, no matter how small,
would be included, so long as the inheritance tax would
increase by such inclusion.

This change conforms Montana inheritance tax
provisions concerning the de minimis exception for gifts
made within 3 years of death with the corresponding
provision of the federal estate tax. See Internal
Revenue Code section 2035. Thus, if no federal gift tax
return must be filed because the gift is within the
annual exclusion of internal Revenue Code section 2503(b)

. . . then such gifts are not considered to be made in
contemplation of death and therefore are not subject to

Montana inheritance tax. . . .
As the comments indicate, the legislature intended to conform

Montana inheritance tax statutes with the federal estate tax

statutes--not federal gift tax statutes--with regard to what was

formerly referred to as the de minimis exception. Both the federal estate and Montana inheritance tax systems exempt from taxation any transfer that was not required to be reported under

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