72 T.C. 198 (1979), 1985-76, Estate of Dimen v. C.I.R.

Docket Nº:1985-76.
Citation:72 T.C. 198
Opinion Judge:WILBUR, Judge:
Attorney:Seymour Goldberg, for the petitioner. Paul E. Vignone, for the respondent.
Case Date:April 24, 1979
Court:United States Tax Court

Page 198

72 T.C. 198 (1979)




No. 1985-76.

United States Tax Court

April 24, 1979

Page 199

Decedent was sole shareholder of a corporation which owned a split dollar life insurance policy on decedent's life. The proceeds were payable to the corporation to the extent of cash surrender value with the remaining portion payable to decedent's daughter. Held, the corporation, and thus decedent, possessed sufficient incidents of ownership in the policy, within the meaning of sec. 20.2042-1(c)(6), Estate Tax Regs., to cause the proceeds of the policy to be included in decedent's gross estate.

Seymour Goldberg, for the petitioner.

Paul E. Vignone, for the respondent.

WILBUR, Judge:

Respondent determined a deficiency in the amount of $19,914.43 in the estate tax of the Estate of Alfred Dimen. This deficiency was based on the omission from the gross estate of decedent Alfred Dimen of life insurance proceeds in the amount of $66,867.56, under section 2042(2).[1]

Other issues having been settled, we are asked to decide only one question:

Whether Bay Shore, decedent's solely owned corporation, possessed any section 2042(2) incidents of ownership in a life insurance policy on decedent's life sufficient to warrant the inclusion of the proceeds, payable to decedent's daughter, in decedent's gross estate.


Some of the facts have been stipulated. The stipulation of facts and exhibits attached thereto are incorporated herein by this reference.

Petitioner is the Estate of Alfred Dimen. Philip Wolitzer, the executor of the estate, resided in Brooklyn, N.Y., at the time the petition was filed in this case. A timely Federal estate tax return (Form 706) was filed with the Internal Revenue Service Center, Mineola, N.Y., Brooklyn District, with payments in the amount of $37,263.28.

Alfred Dimen (decedent), died on March 14, 1972, at the age of 60 years. In 1964, decedent was sole shareholder, as well as president and director, of Accurate Flooring Co., Inc. (Accurate), a New York corporation. On or about June 19, 1964, Accurate[2] acquired a life insurance policy from Mutual Benefit Life

Page 200

Insurance Co. (Mutual Benefit) on the life of decedent. The policy provided coverage of $65,000, the proceeds being payable at decedent's death as follows: " to the owner (Accurate) an amount equal to the cash surrender value * * *; the remainder of the proceeds to Muriel Dimen, Daughter of the proposed insured, if living." [3]

On or about July 29, 1964, Accurate entered into an agreement (supplemental agreement), with Muriel Dimen, daughter of decedent, in connection with the policy on decedent's life.[4] The supplemental agreement provided:

(3) By the terms of this letter you (Muriel Dimen) have an interest in the maintenance of the insurance and its payment as a death claim, even though we (Accurate) are the sole owner of the policy. Accordingly, although we possess the rights to change the beneficiary and elect settlement options, we will arrange with the insurance company (Mutual Benefit) to change from time to time, in accordance with your wishes and only with your written concurrence, both the beneficiary of the portion of the proceeds not payable to us and the manner of payment to such beneficiary. We further agree that we will not exercise any of the remaining policy rights or options, or any other incident of ownership of the policy, without your written concurrence or before we give you a reasonable opportunity to become the owner of the policy by the payment to us of the cash surrender value at that time. We will file a copy of this letter, executed by us, with said insurance company as evidence of the foregoing limitations on our policy rights.

The supplemental agreement also provided:

Either you or we may cancel this arrangement on thirty days' written notice to the other. If we give the notice, you will have the option to purchase the policy from us at any time within the thirty-day period upon payment to us of the then cash value of the policy. * * *

The life insurance policy on decedent's life provided for change of beneficiary and election of settlement options before maturity as follows:

From time to time, upon request satisfactory to the Company (Mutual Benefit) received at its home office before maturity,

(a) the beneficiary may be changed; and

(b) the Company will agree to apply at maturity under any one of the settlement options, as provided in and subject to all of the applicable provisions

Page 201

of this policy, all or any designated part of the proceeds payable at maturity to a beneficiary who is a natural person taking in his or her own right.

When such a request to change the beneficiary or to apply proceeds under such a settlement option is so received, * * * the earlier designation * * * will then be automatically canceled.


To continue reading