Parson v. United States, No. 30726.

CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)
Writing for the CourtAINSWORTH, INGRAHAM and RONEY, Circuit
Citation460 F.2d 228
Docket NumberNo. 30726.
Decision Date22 May 1972
PartiesBeatrice Smither PARSON, Executrix of the Will and Estate of George W. Parson, Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.

460 F.2d 228 (1972)

Beatrice Smither PARSON, Executrix of the Will and Estate of George W. Parson, Plaintiff-Appellee,
v.
UNITED STATES of America, Defendant-Appellant.

No. 30726.

United States Court of Appeals, Fifth Circuit.

May 22, 1972.


460 F.2d 229

Roby Hadden, U. S. Atty., Beaumont, Tex., Jerry A. Wells, Atty., Tax Div., Dept. of Justice, Ft. Worth, Tex., Scott P. Crampton, Asst. Atty. Gen., John Brown, Meyer Rothwacks, Attys., Tax. Div., Dept. of Justice, Washington, D. C., Roby Hadden, U. S. Atty., Tyler, Tex., Johnnie M. Walters, Asst. Atty. Gen., Grant W. Wiprud, Atty., Dept. of Justice, Washington, D. C., for defendant-appellant.

C. B. Wheeler, Wheeler, Watkins, Hubbard, Patton & Peek, Texarkana, Tex., for plaintiff-appellee.

Before AINSWORTH, INGRAHAM and RONEY, Circuit Judges.

INGRAHAM, Circuit Judge:

This is an appeal by the United States from a judgment by the district court sustaining a claim for refund of estate taxes paid by the estate of Dr. George W. Parson. Parson v. United States, 308 F.Supp. 1159 (E.D.Tex., 1970).

The case was submitted on a stipulation of facts which indicated that decedent Parson and his wife were married on April 24, 1926, and resided in Texarkana, Arkansas until January 1945, at which time they moved to Texarkana, Texas. They remained there as residents of Texas until decedent's accidental death on December 17, 1961.

I.

The first issue in this case revolves around an application made by decedent, while living in Texas, for a Lumbermen's Mutual Casualty Company insurance policy. On February 20, 1958, decedent signed an application and was issued a certificate providing for payment of $50,000 upon his accidental death. The first and all subsequent premiums were paid with community funds.

460 F.2d 230

Decedent, on February 20, 1958, executed the following instrument in his application for this accident policy:

"COMPLETE ONLY ONE OF THESE SECTIONS
I. THIRD PARTY OWNERSHIP
If you wish a third party, who has an insurable interest in your life, to own this certificate, complete the following statement:
THIRD PARTY OWNERSHIP—It is agreed by the person to be insured that all right and title to the insurance applied for shall vest in and every incident of ownership thereof may be exercised and enjoyed irrevocably without the consent of any other person by:
Name of Owner (PLEASE PRINT)
/s/ Mrs. Beatrice Smither Parson
(Show Given Name—Example,
Mary Jones—NOT Mrs. Edward F. Jones)
whose insurable interest is Wife (Example, Wife, Son, Daughter, etc.)
II. "REGULAR" BENEFICIARY PROGRAM
If you wish to retain ownership of this certificate state name of person(s) to whom benefits are to be paid in case of Accidental Death.
NAME OF BENEFICIARY RELATIONSHIP (PLEASE PRINT) __________________ _________________ __________________ _________________ (Show Given Name—Example, Mary Jones— NOT Mrs. Edward F. Jones) Signature of Applicant /s/ Geo. W. Parson"

Upon Dr. Parson's death the full proceeds were paid to appellee Beatrice Smither Parson as third party policy owner. The estate tax return excluded these proceeds from decedent's gross estate, but the Internal Revenue Service included one-half in the gross estate under § 2042(2) of the Internal Revenue Code.1

The district court held that the instrument executed by Dr. Parson was sufficient to divest himself of the "incidents of ownership" and to transfer his community interest in the policy to his wife, thus the proceeds were not includable in his gross estate.

The question before us is whether the instrument executed by Dr. Parson operated as an effective assignment or gift of his community interest in the policy.

Under § 2042(2), life insurance proceeds payable to a beneficiary (other than the executor) are includable in the gross estate if the decedent at his death possessed any of the "incidents of ownership" exercisable either alone or in conjunction with any other person. § 20.2042-1 of the Treasury Regulations defines these incidents as follows:

"(2) For purposes of this paragraph, the term `incidents of ownership\' is not limited in its meaning to ownership of the policy in the technical legal sense. Generally speaking, the term has reference to the right of the insured or his estate to the economic benefits of the policy. Thus, it includes the power to change the beneficiary, to surrender or cancel the policy, to assign the policy, to revoke an assignment, to pledge the policy for a loan or to obtain from the insurer a loan against the surrender value of the policy, etc."

In addition to this determination of decedent's possession of economic benefits,

460 F.2d 231
the Commissioner is required to consider whether ownership can be attributed under applicable state law. See Catalano v. United States, 429 F.2d 1058 (5th Cir., 1969); Freedman v. United States, 382 F.2d 742 (5th Cir., 1967). The government urges that under Texas law there is a presumption that property purchased with community funds is community property even though title is taken in the name of one spouse only, citing Magee v. Young, 145 Tex. 485, 198 S.W.2d 883 (1946); Brick & Tile, Inc. v. Parker, 143 Tex. 383, 186 S.W.2d 66 (1945), and Freedman v. United States, supra. The government's contention is that a Texas spouse does not make a gift of his community interest when community funds are used to buy life insurance, record title to which, though taken in the wife's name, is not limited to the use and benefit of her separate estate

The government bases its argument primarily on Freedman v. United States, supra. There the decedent wife applied for a $50,000 life policy and the husband was named primary beneficiary. Under the terms of the policy all values, rights and privileges would belong to the person who entered his signature as "owner" in the blank space provided.2 The husband signed the application in this space. All premiums were paid with community funds and on the wife's death the husband attempted to exclude all the proceeds, which were paid to him as beneficiary, from her estate. The court, however, held that even though the husband signed the policy as owner, "the decedent did not perform an affirmative act which would clearly reflect an intention to make a gift of her community share." 382 F.2d at 747. The court concluded,...

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16 practice notes
  • Jackson v. Johns-Manville Sales Corp., JOHNS-MANVILLE
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • January 22, 1986
    ..."under Erie we cannot skirt the clear import of state decisional law solely because the result is harsh." Parson v. United States, 460 F.2d 228, 234 (5th The denial of certification does not give us a license to change Mississippi law. We are still to apply the law as it exists. The privile......
  • Lee v. Rogers Agency, No. 06–15–00037–CV
    • United States
    • Court of Appeals of Texas
    • October 6, 2016
    ...in determining whether the decedent possessed incidents of ownership." Connelly, 551 F.2d at 549 n.15 ; see also Parson v. United States, 460 F.2d 228, 231 (5th Cir. 1972) (holding that "[i]n addition to [the] determination of [a] decedent's possession of economic benefits, the Commissioner......
  • Boatner v. Atlanta Speciality Ins. Co., No. 96-60815
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • June 27, 1997
    ..."[U]nder Erie we cannot skirt the clear import of state decisional law solely because the result is harsh." Parson v. United States, 460 F.2d 228, 234 (5th Cir.1972) (quoted in Jackson, 781 F.2d at 397). We review de novo the district court's interpretation of an insurance contract. Mulberr......
  • Mitchim v. Mitchim, No. 12101
    • United States
    • Court of Appeals of Texas. Court of Civil Appeals of Texas
    • April 3, 1974
    ...subject to division as community property. Gaulding v. Gaulding, 503 S.W.2d 617 (Tex.Civ.App.1973, no writ), see Parson v. United States, 460 F.2d 228, 233 (5th Cir., The judgment is affirmed. ON MOTION FOR REHEARING The Arizona judgment did not divide the military retirement benefits which......
  • Request a trial to view additional results
16 cases
  • Jackson v. Johns-Manville Sales Corp., JOHNS-MANVILLE
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • January 22, 1986
    ..."under Erie we cannot skirt the clear import of state decisional law solely because the result is harsh." Parson v. United States, 460 F.2d 228, 234 (5th The denial of certification does not give us a license to change Mississippi law. We are still to apply the law as it exists. The privile......
  • Lee v. Rogers Agency, No. 06–15–00037–CV
    • United States
    • Court of Appeals of Texas
    • October 6, 2016
    ...in determining whether the decedent possessed incidents of ownership." Connelly, 551 F.2d at 549 n.15 ; see also Parson v. United States, 460 F.2d 228, 231 (5th Cir. 1972) (holding that "[i]n addition to [the] determination of [a] decedent's possession of economic benefits, the Commissioner......
  • Boatner v. Atlanta Speciality Ins. Co., No. 96-60815
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • June 27, 1997
    ..."[U]nder Erie we cannot skirt the clear import of state decisional law solely because the result is harsh." Parson v. United States, 460 F.2d 228, 234 (5th Cir.1972) (quoted in Jackson, 781 F.2d at 397). We review de novo the district court's interpretation of an insurance contract. Mulberr......
  • Mitchim v. Mitchim, No. 12101
    • United States
    • Court of Appeals of Texas. Court of Civil Appeals of Texas
    • April 3, 1974
    ...subject to division as community property. Gaulding v. Gaulding, 503 S.W.2d 617 (Tex.Civ.App.1973, no writ), see Parson v. United States, 460 F.2d 228, 233 (5th Cir., The judgment is affirmed. ON MOTION FOR REHEARING The Arizona judgment did not divide the military retirement benefits which......
  • Request a trial to view additional results

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