Equitable Life Assurance Soc'y of the United States v. Comm'r of Internal Revenue, Docket No. 31470.
| Decision Date | 19 November 1952 |
| Docket Number | Docket No. 31470. |
| Parties | THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
On the date of a decedent's death, petitioner-insurer held insurance proceeds which were includible in the decedent's gross estate under section 811(g) of the Internal Revenue Code. The decedent had made provision that the proceeds of the insurance should be paid to the beneficiaries in installments on the happening of certain contingencies. Held, that petitioner-insurer is not a transferee or trustee within the meaning of section 827(b) of the Internal Revenue Code. Stuart McCarthy, Esq., for the petitioner.
Francis J. Butler, Esq., for the respondent.
The respondent determined that the petitioner was liable for estate tax of the estate of Avis A. Roudabush in the amount of $5,240.72 as a transferee and trustee of the property of this estate.
Two issues were raised by the pleadings. One of these concerned the running of the statutory period of time within which any part of the deficiency could be assessed against the transferee. Petitioner has made no argument with respect to this issue and accordingly we consider it to have been abandoned. The only issue raised for decision, therefore, concerns the question whether the petitioner is a transferee or trustee under the provisions of section 827(b) of the Internal Revenue Code.
The facts were stipulated and they are so found. Only those necessary for an understanding of the case are presented herein.
Petitioner is a mutual life insurance corporation organized under the laws of the State of New York, and has its principal place of business in New York. During the course of its business it insured the life of one Avis A. Roudabush. Avis A. Roudabush died on or about March 13, 1945, and an estate tax return was filed with the collector of internal revenue for the district of Virginia on July 1, 1946, by the administrator of his estate.
On January 13, 1947, the respondent issued a statutory notice of deficiency to the decedent's estate in which it was determined there was a deficiency in Federal estate tax in the amount of $15,724.76. The estate petitioned this Court for a redetermination of its liability for the deficiency, and on November 29, 1949, this Court entered a decision that there was a deficiency in estate tax due from the estate of Avis A. Roudabush in the amount of $15,724.76, pursuant to a stipulation of the parties in Docket No. 13497. Only $50 of such deficiency has been paid. All of the assets of the estate have been distributed and there remains in the estate no assets with which to pay the balance of the deficiency.
Respondent determined that the amount of $5,240.72 constitutes petitioner's liability as transferee and trustee of the property of the decedent's estate. Notice of liability was mailed to petitioner on or about September 6, 1950.
The policies issued by the petitioner on the life of the decedent and the net amount thereof included in his gross estate for Federal estate tax purposes are shown by the following schedule: (SCHEDULE OMITTED) There were certain optional settlement provisions contained in the three policies. Decedent had elected to avail himself of these provisions and, accordingly, pursuant to his request, there were attached to and made a part of these policies certain settlement agreements designated certain beneficiaries and setting forth the manner in which, and the persons to whom, the amounts payable under the policies by reason of his death were to be paid by the petitioner.
In accordance with the terms and conditions of the option settlement agreements, portions of the proceeds of the insurance policies, aggregating $2,493.88, were to be paid by the petitioner to the insured's daughter, Susan Roudabush Sheets, upon her attainment of age 30. She reached the age of 30 on October 30, 1945, and petitioner thereupon paid her the sum of $2,493.88, plus interest. Of the remainder of the proceeds of the policies the sum of $252.99 is to become payable to the insured's daughter, Nancy Jeanette Roudabush McDaniel, upon her reaching the age of 30 years, apparently November 28, 1955. If Nancy Jeanette Roudabush McDaniel dies prior to the attainment of the age of 30, this sum is to be paid to her surviving children, if any, and if there is none, then to certain other contingent beneficiaries. An additional sum of $252.99 is to be paid on the death of Nancy Jeanette Roudabush McDaniel to her surviving children, if any, and a further sum of $2,493.86 is to be paid on the death of Susan Roudabush Sheets to her surviving children, if any. If there are no surviving children of either of these two daughters then other named contingent beneficiaries are to receive the sums specified. During the period of deferment of the payment of proceeds of the policies, interest at the rate determined in accordance with the option settlement agreements is payable to Susan Roudabush Sheets and Nancy Jeanette Roudabush McDaniel.
None of the proceeds of the policies on the life of the decedent have ever been segregated by the petitioner, but all such proceeds have been commingled with its general assets.
The issue before us, as framed by the parties, is whether under section 827(b) of the Internal Revenue Code the petitioner-insurer is liable for any part of unpaid estate tax as an alleged ‘transferee or trustee‘ of life insurance proceeds includible in decedent's gross estate under section 811(g) of the Internal Revenue Code.
Section 827 reads as follows:
SEC. 827. LIEN FOR TAX
(b) LIABILITY OF TRANSFEREE, ETC.— If the tax herein imposed is not paid when due, then the spouse, transferee, trustee, surviving tenant, person in possession of the property by reason of the exercise, nonexercise, or release of a power of appointment, or beneficiary, who receives, or has on the date of the decedent's death, property included in the gross estate under section 811(b), (c), (d), (e), (f), or (g), to the extent of the value, at the time of the decedent's death, of such property, shall be personally liable for such tax. Any part of such property sold by such spouse, transferee, trustee, surviving tenant, person in possession of appointment, or beneficiary, to a bona fide purchaser for an adequate and full consideration in money or money's worth shall be divested of the lien provided in section 827(a) and a like lien shall then attach to all the property of such spouse, transferee, trustee, surviving tenant, person in possession, or beneficiary, except any part sold to a bona fide purchaser for an adequate and full consideration in money or money's worth.
It is obvious, of course, that the above section does not specifically refer to the liability of an insurer holding life insurance proceeds. Nor does the section contain any all-inclusive or general classification into which the petitioner might fall. Instead, it sets out six specific persons who may be liable under the section. Accordingly, petitioner is liable under this section only if it comes within one of these classifications. We can exclude the classifications of spouse, surviving tenant, and person in possession of the property by reason of the exercise, nonexercise, or release of a power of appointment. Nor do we perceive any basis upon which the petitioner here could be held to be a beneficiary. The question remains whether the petitioner is, as the respondent maintains, a transferee or trustee under this section.
We believe that the respondent's position is predicated on an interpretation of the scope of these terms as employed in section 827(b) which is clearly erroneous. Viewed categorically, the two terms, trustee and transferee, are subject to multiple and varied interpretations, but when such terms are employed in a technical provision of statutory law they take on a more definite and restrictive meaning supplied by the context of the particular section of which they are a part. In a single sentence of section 827(b) it is provided that there may be liable six classifications of persons who hold property includible in the estate under six specific subsections of section 811 of the Code. We believe that the authors of this provision, desirous that the holders of the property under each of these subsections should be liable, studiously chose a classification applicable to each of such subsections and included them in section 827(b) in the same order as the related property interests appear in subsections (b) through (g), inclusive, of section 811. This will be more apparent from an examination of each of the classifications. The first one mentioned is ‘spouse‘, which corresponds with the first of the subsections, 811(b), which provides for the inclusion in the gross estate of dower or curtesy interests. The next two classifications, that of transferee and trustee, are applicable both to section 811(c), which refers to transfers by trust or otherwise, in contemplation of death, etc., and to section 811(d), which refers to transfers by the decedent by trust or otherwise where enjoyment thereof was subject at the date of his death to any change through the exercise of a power by the decedent, etc. The fourth classification, that of surviving tenant, corresponds and relates to section 811(e), joint interests. The fifth classification, person in possession of the property by reason of the exercise, nonexercise, or release of a power of appointment, corresponds and relates to section 811(f), powers of appointment. The final classification, beneficiary, corresponds and relates to section 811(g), which requires inclusion in the gross estate of proceeds of life insurance.
The relationship between each classification to each of the above subsections, (b) through (g), inclusive, of section 811, is clearly defined. The transferee and truste...
To continue reading
Request your trial
-
Garrett v. Commissioner
...the taxpayer, the taxpayer was the "transferee of a transferee". Id. at 1016. This Court, relying on Equitable Life Assurance Society v. Commissioner [Dec. 19,303], 19 T.C. 264, 267 (1952), rejected this liability-by-secondary-transfer argument, applying a "more definite and restrictive mea......
-
Armstrong v. Comm'r of Internal Revenue
...against the estate or the estate's insolvency. See Schuster v. Commissioner, 312 F.2d at 315; Equitable Life Assurance Society v. Commissioner, 19 T.C. 264, 269, 1952 WL 80 (1952); Estate of Callahan v. Commissioner, T.C. Memo.1981–357. Relying on the portion of section 6901(a) which states......
-
Occidental Life Ins. Co. of California v. Comm'r of Internal Revenue, Docket No. 2630-66.
...for notice. Respondent did not argue that petitioner was personally liable for the tax under sec. 6324(a)(2). See Equitable Life Assurance Society, 19 T.C. 264; Patricia B. Englert, 32 T.C. 1008. 6. SEC. 192. LIABILITY OF FIDUCIARIES.Every executor, administrator, or assignee, or other pers......
-
Englert v. Comm'r of Internal Revenue, Docket No. 65073.
...and (6) beneficiary. Petitioner ‘is liable under this section only if it comes within one of these classifications.’ Equitable Life Assurance Society, 19 T.C. 264, 267. The respondent contends that petitioner falls into classes (2) and (6). Petitioner contends that she does not fall in any ......