12 T.C. 380 (1949), 15477, Estate of Morton v. C.I.R.

Docket Nº:15477.
Citation:12 T.C. 380
Opinion Judge:KERN, Judge:
Party Name:ESTATE OF MABEL E. MORTON, DECEASED, THE NORTHERN TRUST CO., EXECUTOR, (THE NORTHERN TRUST CO., TRUSTEE UNDER THE WILL OF MABEL E. MORTON, DECEASED), PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
Attorney:Preston Boyden, Esq., for the petitioner. Charles E. Leist, Esq., for the respondent.
Case Date:March 22, 1949
Court:United States Tax Court
 
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Page 380

12 T.C. 380 (1949)

ESTATE OF MABEL E. MORTON, DECEASED, THE NORTHERN TRUST CO., EXECUTOR, (THE NORTHERN TRUST CO., TRUSTEE UNDER THE WILL OF MABEL E. MORTON, DECEASED), PETITIONER

v.

COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

No. 15477.

United States Tax Court.

March 22, 1949

Decedent, as beneficiary of three insurance policies on the life of her husband, became entitled to proceeds thereof upon his death in 1934. Instead of taking the lump sum proceeds, she selected one of the optional modes of settlement available to the beneficiary under the policies whereby interest and so much of the proceeds as she requested would be paid to her during her lifetime, and upon her death the balance would be paid to her children. Decedent never requested any part of the principal proceeds. Held, the proceeds are includible in decedent's gross estate as a transfer of property under section 811, Internal Revenue Code.

Preston Boyden, Esq., for the petitioner.

Charles E. Leist, Esq., for the respondent.

Page 381

OPINION

KERN, Judge:

Respondent determined a deficiency of $8,098.73 in estate tax, only part of which is in question.

The sole adjustment contested by petitioner is respondent's inclusion as part of the decedent's gross estate, under section 811(c), (d) or (f) of the Internal Revenue Code, of the sum of $25,178.68 representing proceeds of policies of insurance on the life of decedent's husband which were payable to decedent, as sole beneficiary under the policies, upon the death of her husband in 1934, but which decedent chose to have held by the insurer, paying interest and so much of the principal amount as she might request to her during her lifetime and the remainder after her death to her children and grandchildren, as more fully outlined in a so-called supplementary contract issued to her by the insurer in 1934. It is petitioner's contention that, by decedent's action in not reducing the principal sum to physical possession and by electing the method of settlement that she did, these proceeds were never part of her estate and therefore not includible for estate tax purposes.

Substantially all of the facts have been stipulated, and the stipulated facts are hereby found accordingly. Summarized, the salient facts are these:

Mabel E. Morton, the decedent, died on March 9, 1944, a resident of Chicago, Illinois. Her will was admitted to probate by the Probate Court of Cook County, -and letters testamentary were granted to the Northern Trust Co. on March 24, 1944; and on the same date it was appointed executor thereof. The company was also trustee under the trust created by decedent's will. An estate tax...

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