Commissioner of Internal Revenue v. Twogood's Estate, 135

• Decision Date: 25 February 1952
• Docket Number: Docket 22160.,No. 135,135
• Citation: 194 F.2d 627
• Parties: COMMISSIONER OF INTERNAL REVENUE v. TWOGOOD'S ESTATE.
• Court: U.S. Court of Appeals — Second Circuit

194 F.2d 627 (1952)

COMMISSIONER OF INTERNAL REVENUE v. TWOGOOD'S ESTATE.

No. 135, Docket 22160.

United States Court of Appeals Second Circuit.

Argued January 9, 1952.

Decided February 25, 1952.

Theron Lamar Caudle, Asst. Atty. Gen., Ellis N. Slack, Helen Goodner, Melva M. Graney, Sp. Assts. to Atty. Gen., for petitioner.

Logan Fulrath, New York City, for respondent.

Before SWAN, Chief Judge, CHASE and FRANK, Circuit Judges.

CHASE, Circuit Judge.

Frederick John Twogood was employed by the Standard Oil Company of New York in 1912 and worked for that company and its successor companies, to be called his employer, in the North China area until he was interned by the Japanese in the early part of World War II. Upon his release, he returned to the United States and died, a resident of New York, on April 28, 1944.

His employer had in effect during the entire period of his employment a retirement, or pension, plan for its employees which was underwritten and administered by the Metropolitan Life Insurance Company and called "Group Contract No. 103," hereinafter called the plan. The decedent made contributions to the plan which, in the aggregate, totaled $8,616 and, under it, was entitled to retire after thirty continuous years of foreign service and to receive an annuity of $1,073.34 a month during the remainder of his life. He was also entitled, upon request made before his retirement date, to reduce the annuity payable to him upon his retirement and to designate a dependent to whom annuity payments would be made after his death in a further reduced amount if that designated person survived him. By the terms of the plan, this election could not be changed by the decedent within five years before he reached retirement age, which was on June 1, 1942, except with the consent of the insurance company and, after then, it could not be changed at all. Nor could he, or the designated dependent, sell, assign or transfer in any way their rights to the annuity payments. If, however, either the decedent or his dependent so designated died before the decedent reached the retirement date, his request for change became inoperative; but, if both were living on that date and the designated dependent died thereafter and before the decedent, the latter was, nevertheless, only entitled to the reduced annuity elected by him.

On October 15, 1937, the decedent exercised this option, by electing to receive only $955.82 a month if and when he became eligible to retire and designating his then wife, Theresa C. Twogood, as his dependent who was to be entitled to receive an annuity of $416.67 monthly if he lived to retire and she survived him. Subsequently, on June 18, 1938, the decedent and his wife executed a separation agreement, incident to a decree of divorce he obtained from her in that year, in which he agreed never to change his designation of her under the plan. When he reached his normal retirement date, June 1, 1942, the decedent was still interned by the Japanese but, after he returned to this country, he retired, on July 1, 1943, and was paid his annuity at the reduced amount elected until his death. After his death, in 1944, monthly payments to his former wife were made in accordance with the terms of the plan.

A federal estate tax return was duly filed. After an audit, the Commissioner increased the amount of the gross estate, as shown in the return, by adding $107,945.59 which was the value at the decedent's death of the...