Commissioner of Internal Revenue v. STANDARD LIFE INS. CO. OF AMERICA.

• Decision Date: 11 February 1931
• Docket Number: No. 4324.,4324.
• Citation: 47 F.2d 218
• Parties: COMMISSIONER OF INTERNAL REVENUE v. STANDARD LIFE INS. CO. OF AMERICA.
• Court: U.S. Court of Appeals — Third Circuit

47 F.2d 218 (1931)

COMMISSIONER OF INTERNAL REVENUE v. STANDARD LIFE INS. CO. OF AMERICA.

No. 4324.

Circuit Court of Appeals, Third Circuit.

February 11, 1931.

G. A. Youngquist, Asst. Atty. Gen., and Sewall Key and Randolph C. Shaw, Sp. Assts. to Atty. Gen. (C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and Walter W. Mahon and Stanley Suydam, Sp. Attys., Bureau of Internal Revenue, all of Washington, D. C., of counsel), for petitioner.

Alex. J. Barron, of Pittsburgh, Pa. (Byron K. Elliott, of St. Louis, Mo., and Alter Wright & Barron, of Pittsburgh, Pa., of counsel), for respondent.

Before BUFFINGTON and WOOLLEY, Circuit Judges, and THOMPSON, District Judge.

BUFFINGTON, Circuit Judge.

This case concerns the opposing views of the Commissioner of Internal Revenue and the Board of Tax Appeals on the question whether, as stated in the opinion of the latter, the Standard Life Insurance Company "may include in its reserve funds" for the purpose of determining the deduction from gross income under section 245 (a) (5) of the Revenue Acts of 1921 (42 Stat. 261) and 1924, 26 USCA § 1004 (a) (5), its reserves or liabilities upon the coupon feature of the life insurance policies which it issues." This coupon feature is thus described in such opinion as follows:

"This policy is an ordinary life policy issued for an ordinary life premium payable throughout the life of the insured. An excess premium is charged, however, for additional policy benefits. This excess in the premium is represented by coupons attached to the policy equal in amount and payable to the policyholder on a given date annually, (1) To reduce the succeeding year's premium; (2) To purchase paid-up additions to the face of policy; (3) To reduce the number of premium payments; (4) Be left with the company to accumulate at interest at 3½ per cent. The policy also provides that if the coupons are permitted to remain with the company and accumulate they may be withdrawn at any time or in the event of death will be added to the principal sum payable under the policy. If the coupons are allowed to accumulate in accordance with either option (3) or (4), the policy becomes paid up at the end of twenty-five years and no further premium payments are required."

After an exhaustive discussion of the principles of insurance relative to reserves and the cases bearing thereon, the Tax Board held as follows: "We think, however, that the theory that the amount of the premium covered by the premium...