134 F.Supp. 467 (D.N.J. 1955), Civ. A. 1248-52, United States v. Bess

Docket Nº:Civ. A. 1248-52.
Citation:134 F.Supp. 467
Party Name:UNITED STATES of America, Plaintiff, v. Molly G. BESS, Defendant.
Case Date:September 07, 1955
Court:United States District Courts, 3th Circuit, District of New Jersey

Page 467

134 F.Supp. 467 (D.N.J. 1955)

UNITED STATES of America, Plaintiff,

v.

Molly G. BESS, Defendant.

Civ. A. 1248-52.

United States District Court, D. New Jersey.

Sept. 7, 1955

Page 468

Raymond Del Tufo, Jr., U.S. Atty., Newark, N.J., by George H. Barlow, Asst. U.S. Atty., Trenton, N.J., H. Brian Holland, Asst, Atty. Gen., Andrew D. Sharpe, H. Eugene Heine, Jr., Special Assts. to the Atty. Gen., of counsel, for plaintiff.

Daniel Oppenheim, Newark, N.J., for defendant.

FORMAN, Chief Judge.

The complaint in this case alleges that the defendant, Molly G. Bess, owes the plaintiff, the United States, for income taxes due from her deceased husband in the aggregate of $9,428.84.

The facts are stipulated.

Herman Bess, a resident of New Jersey, died on June 29, 1950, leaving the defendant, his widow, a resident of Deal, Monmouth County, New Jersey, surviving him. On July 17, 1952 his estate was adjudged insolvent by the Monmouth County Court, Probate Division. Claims were filed by the Government for the years, in the amounts, and upon which payments were ordered to be made as follows:

Year Amount Payment Pursuant to Order of Court

------ -----------------
1945 ..... $ 4,713.59 ........ $ 554.28
1946 ..... 3,789.32
1947 ..... 925.94
1948 ..... 1,411.19)
) ........ 3,990.71
) ---------------
1949 ..... 2,579.52)
-----------
Total .. $13,419.56 ........ 4,544.99
---------- ----------------
Balance due ................... $8,874.57 1

Interest on the above amounts was also claimed. It was further stipulated that Mrs. Bess succeeded to approximately $55,000 of property held in the joint names of herself and her husband; 2 that she was the named beneficiary in eight policies of insurance on the life of her husband from which she received a total of $63,576.95; that on seven of the policies the deceased had had the right to borrow against the cash surrender render value, to change the beneficiary, and to assign the policies; that he did change the beneficiary on several of the policies; that the eighth policy was in group insurance and that under it he had only the right to change the beneficiary; Page 469 that the deceased paid all of the premiums on the policies and that he was solvent at the time he made such payments and that the cash surrender value of the policies at the date of his death was $3,362.53. No facts were left disputed and the case poses only questions of law. It is the proceeds received by Mrs. Bess which the Government is now trying to reach on the theory that the defendant is a 'transferee' under § 311 of the 1939 Code (now § 6901 of the 1954 Code), 26 U.S.C. § 311:

' § 311. Transferred assets '(a) Method of collection. The amounts of the following liabilities shall, except as hereinafter in this section provided, be assessed, collected, and paid in the same manner and subject to the same provisions and limitations as in the case of a deficiency in a tax imposed by this chapter (including the provisions in case of delinquency in payment after notice and demand, the provisions authorizing distraint and proceedings in court for collection, and the provisions prohibiting claims and suits for refunds): '(1) Transferees. The liability, at law or in equity, of a transferee of property of a taxpayer, in respect of the tax (including interest, additional amounts, and additions to the tax provided by law) imposed upon the taxpayer by this chapter. '(f) Definition of 'transferee'. As used in this section, the term 'transferee' includes heir, legatee, devisee, and distributee.'

It is the theory of the Government that Mrs. Bess is a 'transferee' of 'property of a taxpayer' by virtue of having been beneficiary of his life insurance and that she is under a 'liability, at law or in equity * * * in respect of the tax'. Implicit in this theory of the case is that the life insurance proceeds received by Mrs. Bess were property of the deceased taxpayer transferred to her burdened with a liability for his tax delinquency. The Government concedes, however, that several recent cases in the Courts of Appeals have been decided to the contrary. United States v. Truax, 5 Cir., 1955, 223 F.2d 229; United States v. New, 7 Cir., 1954, 217 F.2d 166; Rowen v. Commissioner, 2 Cir., 1954, 215 F.2d 641; Tyson v. Commissioner, 6 Cir., 1954, 212 F.2d 16. 3 Each of these cases distinguishes, or differs from Pearlman v. Commissioner, 3 Cir., 1946, 153 F.2d 560, upon which the Government places heavy reliance. Rowen v. Commissioner, supra, is representative of this problem. There multiple beneficiaries of a...

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