Helvering v. Illinois Life Ins Co, 27
| Decision Date | 09 November 1936 |
| Docket Number | No. 27,27 |
| Citation | 81 L.Ed. 56,299 U.S. 516,57 S.Ct. 63,299 U.S. 622,81 L.Ed. 458,299 U.S. 88 |
| Parties | HELVERING, Com'r of Internal Revenue, v. ILLINOIS LIFE INS. CO |
| Court | U.S. Supreme Court |
As Corrected on Denial of Rehearing Dec. 7, 1936.
The Attorney General and Mr. Thurman W. Arnold, of New Haven, Conn., for petitioner.
Messrs. Samuel B. Kraus and Lewis C. Jesseph, both of Chicago, Ill., for respondent.
In its income tax return for 1929, respondent made a deduction of $133,755.71. The Board of Tax Appeals held the deduction rightly taken. Illinois Life Ins Co. v. Com'r of Internal Revenue, 30 B.T.A. 1160, 1162. The Circuit Court of Appeals affirmed. 80 F.(2d) 280. Upon on petitioner's insistence that the decision below conflicts with Helvering v. Insurance Co., 294 U.S. 686, 55 S.Ct. 572, 79 L.Ed. 1227, we granted this writ.
The case involves a construction of a clause of section 203(a)(2), Revenue Act of 1928, 45 Stat. 842 (26 U.S.C.A. § 203 note), which declares that, in case of a life insurance company, net income means gross income less, among other permissible deductions, an amount equal to 4 per cent. of the mean of the reserve funds required by law and held at the beginning and end of the taxable year. That provision is a re-enactment of section 245(a)(2), Revenue Act of 1921, 42 Stat. 261, which in Helvering v. Insurance Co. v. held not to apply to assets reserved by a life insurance company against matured, unsurrendered, and unpaid coupons attached to its policies. That decision rests upon the ground that the reserves in respect of the coupon liability were not essentially insurance reserves which alone constitute the base on which deduction is computed. The question now for decision is whether respondent's assets reserved in 1929 in respect of its survivorship investment funds are included in that base.
The reserves in question conveniently may be described by reference to a typical policy. Applicable to age 35, it contains the company's agreement, upon death of the insured, to pay $10,000 to the beneficiary; the annual premium is $379.90, payable for 20 years. The company also agrees that, out of each year's premium after the first, $64.60 will be placed in the survivorship investment fund applicable to policies on the survivorship investment plan issued in the same calendar year; that no deduction shall be made from the fund; that all contributions to it shall be accumulated at 3 1/2 per cent. compound interest; that, if the insured shall survive the twentieth anniversary of the policy, the company will apportion to the policy as a survivorship investment a sum bearing the same proportion to the total in the fund as the contributions from premiums paid on that policy bear to the aggregate contributions from premiums paid on all policies in the same class in force at the end of 20 years. Thus, the entire fund is divided among the persistent surviving contributors. The policy provides for optional settlements at the end of 20 years: (A) The insured may continue the policy as one fully paid up and in addition receive either cash payment of the survivorship investment apportioned to it or, if then insurable, a fully paid up life insurance policy for such amount as would be purchased by the survivorship investment. (B) The insured may surrender the policy and receive payment of the cash value, $6,100, and in addition the survivorship investment.
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