Blacksher v. COMMISSIONER OF INTERNAL REVENUE
| Decision Date | 25 October 1938 |
| Docket Number | Docket No. 88453. |
| Citation | 38 BTA 998 |
| Parties | D. W. BLACKSHER AND FIRST NATIONAL BANK OF MOBILE, ALABAMA, EXECUTORS OF THE ESTATE OF JAMES URIAH BLACKSHER, DECEASED, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Board of Tax Appeals |
George E. H. Goodner, Esq., for the petitioners.
Francis S. Gettle, Esq., for the respondent.
The petitioners ask the redetermination of a deficiency in estate tax in the amount of $33,827.41. The deficiency arises from the respondent's inclusion in the gross estate of the decedent of the value of certain life insurance policies on the life of the decedent and his valuation of certain other life insurance policies admittedly a part of the decedent's gross estate.
The petition alleges eleven errors on the part of the respondent in the determination of the deficiency in paragraphs 4 (a) to 4 (k), inclusive. At the hearing of this proceeding the petitioners waived allegations 4 (i) and 4 (j). In his brief the respondent concedes the correctness of the petitioners' contentions with regard to 4 (b), 4 (e), 4 (f), and 4 (k). The allegations of error not settled by the waivers and concessions are:
4. * * *
(a) In arriving at the gross estate, and therefore the net estate, respondent has erroneously included therein the sum of $43,250.00 representing the value as determined by him of insurance policy No. 1,176,103 in the Mutual Life Insurance Company of New York, when decedent had no property interest in said policy at the time of his death.
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(c) In arriving at the gross estate, and therefore the net estate, respondent has erroneously included therein the sum of $18,750.00 representing the value as determined by him of insurance policy No. 328,783 in the Union Central Life Insurance Company, when decedent had no property interest in said policy at the time of his death.
(d) In arriving at the gross estate, and therefore the net estate, respondent has erroneously included therein the sum of $18,750.00 representing the value as determined by him of insurance policy No. 328,782 in the Union Central Life Insurance Company, when decedent had no property interest in said policy at the time of his death.
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(g) In arriving at the gross estate, and therefore the net estate, respondent has erroneously included therein the sum of $31,022.40 as the value of insurance policy No. 1,603,359 in the Equitable Life Assurance Society of New York at the date of death of decedent, when the value was not in excess of $25,224.15.
(h) In arriving at the gross estate, and therefore the net estate, respondent has erroneously included therein the sum of $30,000.00 as the value of insurance policy No. 1,100,992 in the Prudential Insurance Company of America at the date of death of the decedent, when the value was not in excess of $21,925.00.
By an amendment to the petition filed April 6, 1938, the petitioners allege:
4. (1) If it should be held that the value of insurance policy No. 1,176,103 in the Mutual Life Insurance Company of New York (referred to in paragraph 4 (a) above) should be included in the gross estate, then respondent has erroneously included therein the sum of $43,250.00 as its value, when the value at the date of death of decedent was not in excess of $36,475.82.
FINDINGS OF FACT.
2. A Federal estate tax return for James Uriah Blacksher was filed by petitioners with the collector of internal revenue for the district of Alabama, on or about June 15, 1935. A Federal estate tax was paid thereon on July 31, 1935, in the amount of $54,454.06, no part of which has ever been refunded. Likewise, there was paid to the State of Alabama as inheritance tax on the estate of James Uriah Blacksher the sum of $11,427.74, by check on July 31, 1935, no part of which has ever been refunded.
3. In auditing the Federal estate tax return filed respondent determined the net estate of the decedent to be $605,041.88 under the provisions of the Revenue Act of 1926, and $655,041.88 under the provisions of the Revenue Act of 1932; and a total tax liability based thereon of $99,709.21, less a credit of $11,427.74 (inheritance tax paid to the State of Alabama), and a deficiency in tax of $33,827.41.
4. On September 28, 1901, there was issued to the decedent by the Mutual Life Insurance Co. of New York a life insurance policy, No. 1,176,103, in the face amount of $50,000. Willie C. Blacksher, wife of the decedent, was named as beneficiary. The policy provided for the payment upon the death of the insured of an annuity of $2,500 per year to the beneficiary for a period of 20 years certain and as long thereafter as she might live. If she died within the 20 years the remaining payments during that period were payable to the executors or administrators of the insured. The pertinent provisions of the policy are as follows:
Upon acceptance of the Head Office of the Company in the City of New York of satisfactory proofs of the death of the said insured during the continuance of this Policy and on the surrender of this Policy at said office the said insurance will be adjusted in instalments without interest by the issuance of an Annuity Contract in lieu hereof as hereinafter provided.
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ANNUITY CONTRACT. — Upon surrender of this policy after acceptance by the Company of satisfactory proofs of the death of the insured the Company will issue a non-participating annuity contract, the single premium for which shall be entered on the Company's books as a death claim under this policy. The said annuity contract shall provide as follows:
(a) If the beneficiary be living at the date of said annuity contract the Company will pay to the beneficiary on such date a first instalment equal to five per cent. of the face amount of this policy, and thereafter on each anniversary of said date an instalment of like amount without interest, until twenty such instalments shall have been paid, and furthermore the Company will continue the payment of such annuity in like instalments throughout the remaining lifetime of said beneficiary.
Should the beneficiary die during the continuance of said annuity contract and before the completed payment of said twenty annual instalments, the Company will pay the remainder thereof, as they become due, to the executors or administrators of the Insured.
(b) If the beneficiary be not living at the date of said annuity contract, the Company will pay twenty instalments only, as above described, to the executors or administrators of the insured.
CASH SURRENDER VALUE. — After three full years' premiums have been paid, upon the non-payment of any subsequent premium on the date called for in the policy and within sixty days thereafter, or at any time after all the premiums required have been paid, this policy may be surrendered and the Company will pay therefor, within sixty days from the date of such surrender, the amount stated in the table below for the end of the last completed policy year; deducting any unpaid loan hereon.
LOANS. — After this policy shall have been in force three full years, the Company, within sixty days after written application, and upon the assignment of this policy as security, will, in conformity with its rules then in force, loan amounts within the limits of the cash surrender value, with interest in advance, at the rate of five per cent. per annum, provided: (1) that premiums be fully paid to the end of the policy year in which the loan falls due; (2) that in any settlement of this policy all outstanding indebtedness must be paid.
SURPLUS. — The first distributive share of surplus shall be apportioned to this policy, if in force, at the expiration of twenty years from date, and may be drawn in cash or be applied to purchase an annuity. Subsequent distributions shall be made annually during the lifetime of the insured only.
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ASSIGNMENTS. — The Company declines to notice any assignment of this policy until the original assignment, or a duplicate or certified copy thereof shall be filed in the Company's Head Office. The Company will not assume any responsibility for the validity of an assignment. No assignment or hypothecation of this policy, or of any part thereof or interest therein, or of any instalment accruing thereon, made by the beneficiary without the written concurrence of the insured, shall be valid, and if assigned without such concurrence no payment shall be made by the Company during the lifetime of the beneficiary, except to the beneficiary within named, personally, or upon his or her order for each payment as the same may become due.
Under the practice of the company the cash surrender value of the policy could be obtained only by the beneficiary upon her application therefor, and any check representing such cash surrender value would have been made in the name of the beneficiary. No loan on the policy could have been obtained without the beneficiary's written consent. The insured had no right to change the beneficiary.
The respondent determined the value of this policy at the date of the death of the insured to be $43,250 and included that amount in the gross value of the estate of the insured.
5. On December 1, 1906, there was issued to the decedent by the Union Central Life Insurance Co. two life insurance policies, Nos. 328,782 and 328,783, identical in terms and each in the face amount of $25,000. Wesley May Blacksher and David William Blacksher, children of the insured, were named, respectively, as beneficiaries. Each policy provided that upon the death of the insured the insurer would pay to the beneficiary $1,250 annually for 20 years certain and as long thereafter as the beneficiary might live. Each policy expressly reserved to the insured the right to participate in the...
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