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_____________

No. 95-1575WM

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State Farm Life Insurance *

Company, *

*

Plaintiff-Appellee, *

*

v. *

*

Faye A. Howell; *

*

Defendant, *

* Maximillian D. Howell, a * Appeal from the United States

Minor; Neldra Moody Flint, * District Court for the Western

Co-Guardian of Maximillian D. * District of Missouri.

Howell, a Minor, and *

Conservator of the Estate of *

Maximillian D. Howell, a Minor, *

and Appointed as guardian ad *

litem; Jacqueline Tomlin, *

Co-Guardian of Maximillian D. *

Howell, a Minor; ** Defendants-Appellants,** Falisa Howell, ** Defendant. * _____________

Submitted: September 14, 1995

 Filed: February 9, 1996 _____________

Before FAGG, FLOYD R. GIBSON, and MAGILL, Circuit Judges. _____________

FAGG, Circuit Judge.

Charles W. Howell was murdered in 1990. At the time of his

death, Charles was the insured under a life insurance policy and a

retirement annuity issued by State Farm Life Insurance Company
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(State Farm). Charles designated his wife, Faye A. Howell, as the

primary beneficiary and his son, Maximillian D. Howell, as the

contingent beneficiary of both policies. After Faye was charged

with Charles's murder, the Internal Revenue Service (IRS) served

State Farm with a levy on Charles and Faye's property to recover

their delinquent taxes. See 26 U.S.C. § 6332 (1994). State Farm

paid the IRS's levy by turning over the retirement annuity proceeds

and a portion of the life insurance proceeds (collectively the

disputed proceeds). After a jury convicted Faye of murdering her

husband, State Farm filed an interpleader action and deposited the

remaining life insurance proceeds with the district court.

Maximillian then counterclaimed contending State Farm should have

refused to pay the disputed proceeds to the IRS. The district

court decided State Farm acted properly and dismissed Maximillian's

counterclaim. Maximillian appeals and we affirm.

The IRS may levy on "all property and rights to property"

belonging to a delinquent taxpayer. Id. § 6331(a). Congress

intended the levy power "to reach every interest in property that

a taxpayer might have," United States v. National Bank of Commerce,

472 U.S. 713, 720 (1985), including any property in the custody of

a third party, 26 U.S.C. § 6332(a) (1994). "[E]ven if others claim

an interest in the property and the taxpayer's interest [is small],

the property remains subject to attachment by levy and must be

surrendered until ultimate ownership can be resolved." Congress

Talcott Corp. v. Gruber, 993 F.2d 315, 319 (3rd Cir. 1993); see 26

U.S.C. §§ 6343, 7426 (1994) (allowing recovery of erroneously

levied property from the IRS). Thus, if Faye had an interest in

the disputed proceeds at the time of the levy, State Farm was

required to turn the proceeds over to the IRS.

Maximillian contends Faye never acquired an interest in the

disputed proceeds because she was convicted of Charles's murder.

See Baker v. Martin, 709 S.W.2d 533, 535 (Mo. Ct. App. 1986).

Under Missouri law, "[a] beneficiary who intentionally and
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feloniously causes the death of an insured may not [recover the

proceeds] under a policy of insurance." Id. at 534. A beneficiary

retains an interest in the proceeds, however, until a court decides

the beneficiary killed the insured. See In re McCarty, 762 S.W.2d

458, 461 (Mo. Ct. App. 1988); Bradley v. Bradley, 573 S.W.2d 378,

379-80 (Mo. Ct. App. 1978); Minnesota Mut. Life Ins. Co. v. James,

202 F. Supp. 243, 245-46 (W.D. Mo. 1962). Although charged, Faye

had not been convicted of murdering her husband when State Farm

received the levy. Because Faye had an interest in the disputed

proceeds at the time of the levy, State Farm is "discharged from

any obligation or liability to the delinquent taxpayer and any

other person [arising from the surrender of the levied property]."

26 U.S.C. § 6332(e) (1994).

Contrary to Maximillian's view, State Farm was not required to

incur liability for the delinquent taxes and a fifty percent

penalty by refusing to surrender Faye's property to the IRS. See

id. § 6332(d); Allstate Fin. Corp. v. United States, 860 F. Supp.

653, 656-57 (D. Minn. 1994). We also reject Maximillian's

suggestion that State Farm should have filed an interpleader action

against the United States rather than complying with the levy.

Assuming State Farm could interplead the United States, we fail to

see why State Farm should be required to do so. State Farm

properly responded to the IRS's levy, and we affirm the district

court's judgment.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.