Kern v. United States
| Decision Date | 18 March 1974 |
| Docket Number | No. 72-1712.,72-1712. |
| Citation | 491 F.2d 436 |
| Parties | Arline G. KERN and Pacific National Bank of Washington, a national banking association, as executors of the Estate of Albert R. Kern, Deceased, Appellants, v. UNITED STATES of America, Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Stanley S. Pratt of Gavin, Robinson, Kendrick, Redman & Mays, Yakima, Wash., for appellants.
Scott P. Crampton, Asst. Atty. Gen., Elmer J. Kelsey, Richard Farber, Meyer Rothwacks, Ann Belanger, U. S. Dept. of Justice, Tax Div., Washington, D. C., Dean C. Smith, U. S. Atty., Spokane, Wash., for appellee.
Before GOODWIN and SNEED, Circuit Judges, and BURNS,* District Judge.
This is an estate tax case involving the interaction between the community property law of the State of Washington as it relates to the proceeds of life insurance policies and Section 2042(2) of the Internal Revenue Code of 1954. The facts are not disputed; the problem consists of the legal consequences of these facts under Washington law and Section 2042(2).
Albert R. Kern and his wife, Arline G. Kern, were married on January 22, 1928. On January 15, 1958 there was issued by the Northern Life Insurance Company of Seattle, Washington, Policy No. 467-750 in the face amount of twenty thousand dollars naming Albert as the insured and Arline as the beneficiary. The application for this policy reflects that Albert signed as a proposed "insured" and Arline as the "applicant." The following provision also appeared in the application:
IT IS FURTHER AGREED that the Proposed Insured consents to the insurance herein being applied for and agrees that any policy or policies that may be issued hereunder shall belong to and be subject to the exclusive control and disposition of the applicant or applicants hereunder without further action or consent on the part of the Proposed Insured for any purpose whatsoever.
In addition, Policy No. 467-750 contained a typed endorsement in the policy stating:
It is understood and agreed that application for this policy was made by Arline G. Kern, wife of the Insured, designated as the applicant. It is further understood and agreed that the said applicant is the sole owner of this policy and may receive and exercise every right and privilege thereunder, if she be living, otherwise the Executors, Administrators or Assigns of the said applicant. Under this agreement, it is understood that neither the Insured nor his estate shall have any interest in this policy.
A second policy, Policy No. 505389, on the life of Albert was issued on March 3, 1965, by Northern Life in the full amount of ten thousand dollars. The application also reflects that Albert signed as the proposed "insured" and Arline as the "applicant." The application contains the same language set out above that appears in the application for Policy No. 467-750. However no typed endorsement such as was placed on Policy No. 467-750, appears on this 1965 policy.
All the premiums with respect to both policies were paid from community funds. Arline was designated the beneficiary under both policies.
The proceeds of both policies were paid to Arline following Albert's death on July 15, 1967. The estate tax return prepared with respect to Albert's estate included one half of the proceeds of each policy in the gross estate, presumably on the ground that the policies were the community property of Albert and Arline. Thereafter, a timely claim for refund was filed seeking to exclude from Albert's gross estate any amount with respect to these two policies. This claim was disallowed by the Commissioner of Internal Revenue and this suit for the refund was initiated by the executor of Albert's estate.
The trial court dismissed the complaint of the executors with prejudice on the ground that the policies were community property. We reverse and render judgment with respect to Policy No. 467-750 and reverse and remand for further proceedings with respect to Policy No. 505389. Neither action is intended to preclude further proceedings regarding the extent to which the premiums paid with respect to Policy No. 467-750 and the premiums paid with respect to, or proceeds of, Policy No. 505389 should be included in Albert's gross estate by reason of Section 2035 of the Internal Revenue Code of 1954. These issues were not reached by the trial court and our action here should not foreclose their consideration on remand.
The proper characterization of each policy is governed by Washington law. Recently this court had the opportunity to describe in general terms the structure of Washington's community property law. See United States v. Overman, 424 F.2d 1142 (9th Cir., 1970). We recognized that property acquired during marriage was, subject to certain exceptions, community property. The interest of each spouse is an equal, present, and vested right in the community property which is protected from certain acts by the other that would impair it. Each can sell or give his interest to the other during the existence of the community and, upon its termination by the death of a spouse, the interest of such spouse may be subject to testamentary disposition.
More particularly, under Washington law, to establish that property acquired during marriage is not community property it is necessary to show that it was obtained by the acquiring spouse by gift, devise or descent. Any such demonstration must overcome a strong presumption in favor of the community and the burden is upon the party who asserts separate property...
To continue reading
Request your trial
-
Dean v. Lehman
...12. It is true that either spouse, acting alone, may give his or her share of a community asset to the other as a gift. Kern v. United States, 491 F.2d 436 (9th Cir.1974). But in order to overcome the strong community property presumption evidence of a gift must be "clear, definite, and con......
-
Everett Trust & Savings Bank v. Comm'r of Internal Revenue (In re Estate of Meyer)
...fair statement is that the evidence sufficient to overcome the presumption must be clear, definite and convincing.’ Kern v. United States, 491 F.2d 436, 439 (9th Cir. 1974). In Kern two policies of life insurance were issued on the life of the decedent-husband, a resident of Washington. In ......
-
First Kentucky Trust Co. v. U.S.
...by Mrs. Moore's executor. We start with the basic premise that entitlement to insurance proceeds is governed by state law. Kern v. U.S., 491 F.2d 436 (9th Cir.1974). With this assumption in mind, we look to Kentucky law for a determination of the disposition of the Moore's children by a pre......
-
Estate of Madsen v. C.I.R.
...such property is actually separate property must prove that assertion by "clear, definite and convincing" evidence. Kern v. United States, 491 F.2d 436, 439 (9th Cir. 1974). Thus, for the appellant to prevail, she must show by clear, definite and convincing evidence that her husband intende......
-
Table of Cases
...(9th Cir. 1967): 7.2(33), 7.3(13), 7.3(14), 7.3(17) Kaufman v.United States, 462 F.2d 439 (5th Cir. 1972): 7.4(13) Kern v. UnitedStates, 491 F.2d 436 (9th Cir. 1974): 4.6, 7.4(1) King v. Fid.Natl Bank of Baton Rouge, 712 F.2d 188 (5th Cir. 1983), cert. denied, 465 U.S. 1029 (1984): 6.5(15)(......
-
§4.6 Management and Disposition of Community Personalty
...177 Wash. 130, 30 P.2d 972 (1934). The policy itself, of course, could be the subject matter of a gift. See, e.g., Kern v. United States, 491 F.2d 436 (9th Cir. 1974); Livingston v. Shelton, 85 Wn.2d 615, 537 P.2d 774 (1975), cert. denied, 424 U.S. 958 (1976). The courts formerly held that ......
-
§7.4 Federal Gift Taxes
...community property, the evidence that the premiums were paid with separate funds must be clear and convincing. See Kern v. United States, 491 F.2d 436 Cir. 1974). Under the federal regulations, if one person pays a premium on a policy owned by another, he or she has made a gift to the owner......