480 

OFFICE OF THE AmORNEY GENERAL OF TEXAS 

AUSTIN 

Ronorable Georga ii. Sheppard 

Comptroller 0r Public :i.oooutlts 

Austin, Texas 

Dear Mr. Sheppard: 

Opinion No. O-5294 

aeeigned by him 

aotment or the 

the rstention or 

oontrol by deoedent. 

1943, are them: 

our letter 0r Iday 4, 

upon his own lire various 

eoedent transferred all 

poliolen to his tire and 

t to the cash surrseder 

e oaiw for a loan, to surrender 

beaaiioiarfea or to obtain a 

. All prwuma on suoh polloles 

he ooamaity runds 0r himsalr and 

oontsntion that swh polioies 6re 8Ubnoe tax is predioated upon two proposltions: 

"1. The 1&6aauz'e or taxability is ths payment 

or premiuma by the insured and not the possession or legal 

ineidente of' ownsrahlp at death. 

"2. The bsnefiolarles ot the proceeds of 

these policies did not cone into posaeaeion or enjoyment 

or said prooaeds until the death or the lnaurea.* 
- 

481 

IIonorabls George B. Sheppard, page 2 

You request the opinion ot thlm depudlsnt 

l dri6illg you whether you should inolude the prooee48,;of ruoh 

poliaierr in the final inherltaaos tar rrport and oom~ute the 

tax thereon. 

Artiole 7117, V. A. C. S., laaofar (18 it 

undertakes to tax the prooeeds of inruranoo polloler pqablo 

to nand bonofloiarlea, wa8 enacted in X939. It reada, in part, 

as follows: 

*All property within the jPrf8dlotlon of thl8 

State, real or perronrl, oorperato or lnoorponto, and 8ny 

interest thoroin, inoluding proport~ paa8lng under a general 

p o weor f l ppolntmont eurollred br the deoedont by will, 

inoludlng the proo*ods of iir0 inmmanoe to the rxtuat or 

the mount rooairable br the exeoutor or adminlstrator..~ 

iuaroao6 taken out by the beambat upon hla owa lit*, 

the laws of doeoent and 

or any other State, or by dead, g?ant, rale or gift aado or 

iatendod to take em0t in pomau8ion or enjoyment after the 

death of the grantor or donor, #hall, upon par&&g 80 or for 

the wo of any L)(L~SOII, , . ., bo subjaot to a tax . . .* 

(Ergheilr ouris) 

Artas pointing out that the prorlalona of 

Artiole 7117, rhioh levies an inherltanoo tax upon the prooeeds 

or lnsuranor ~polfoie8, ir praotloelly identloal wltih the protledon of the Federal ostate tax atatutm whloh wae la roreo 

at the time of the pasrage or the 1939 aaendnent to Artiole 

7117, the Texas Supreme Court, in the oaaa of BPI6km.m Y. Emaoa, 

169 8. W. (26) 962, oaidc 

“. . . The sontrolling temm or the Fedora1 

atatute are identical with the Texaras statute. The Toxa8 

statute having been literally taken rrom the Federal statute, 
Honorable George E. Sheppard, pega 3 

In that ea8e the Supmmo Court l dbpted the 

oonstruatlon or this statute given to the FedWal Statute by 

the United State6 Supreme Oourt in l&a& f, Oommie~loner of 

Int. Rev., 304 !I. 9. 264. 58 8. Ct. 880, 82 L. Ed. 1331, 118 

A, L. R. 319, where the Oourt held that only that portion of 

the life inauranoe paid iOr by the deoedant was *taken out by 

the deoedwt upon his own liie” within the terma of the statute. 

pewever, at the time or the pnaraga of the 1939 am#adaent to 

the Texan Statute end at ths time of tha Supreme Court’i~ 

droirion of the Blaokmon base, numerous other oaaea aon8fruing 

the Federal Statute haa been deoided by the Federal aourtta. 

In the oa6e of Lawellfn T, Frlok, 268 0. 9. 

2)8, 45 s. at. 487, 69 L. Ed. 934, t)n laitoa States summa 

Oourt had berore it the ldantloal taot8 and-the ldentioel 

qu8tion hare under oonaldarat1on. In thet oaa#a the oourt, 

l ttar rtatlng th8t there was &rave doubt of the mar of 

Qoagera to anaot a law that would rtteotuall~ tax a trnrrar 

ron8ummated batora ltr l naotment, and in koldlng suah tntWat 

not taxable mde thll, rtetementr 

*blot 0al.y are suoh doubts avOida by oonatruin& the statute en referrlag only to txanrartlon# 

taking plaoo after it we8 peamad, but the goneral prinolpla 

‘that law8 are not to be oonaldrre6 aa applyling to @asa 

whloh aroI)e betore their pa88a@* 18 preaervad, when to 

disregard it would be to impose an unexpeated llablllty 

that, if known, might hare induoed those ooaoarned to 

avoid it, and to use their money in other way@.* 

&gain, in the oaee of Bin&am t. United States, 

296 u. S. 211, 80 I,. JH. 160, )6 8. Ot. 180, the Supreme aourt 

Xtat emphatioally deoluttd that the Federal St8tUta 6&d not 

raaeh the prooeads OS inauranoe pollolw where awh pollolm~ 

had been aerlgnad prior to lte anaotmant, eryingr 

“The principles BO raoently announoed by this ‘, 

oourt in Helrering Y. St. Louis U&ion Trust Co., ante, 

p. 39, ana Beaker Y. St. Louis Union Trust Co., ante, p. 48; 

are dsol8lte of the ease In razor of the taxpayers. Those 

prinolples establlah that the title ana porrsas8ion of the 

benerlolary were fixed by the tarma of the poliofe~! and 

aeeignmenta thereor, beyond the power of the lnoured to 

afroot, many years be&ore the clot in question here wa8 

p4SPSd. No interest paseed to the benerioiary aa tha 

result o? the death of the innurad.* ~pharii~ OurI)) 
Honorable George H. Sheppard, page 4 

Under the Texas law in force at the time La . this statute was waoted tha sseignagnc or ah ~rmuranoe 

polioy (absent the rasenation of the right tq @hangs the 

beneficiary) ia a oompletad traneaotion whloh ?estm in the 

rrsignee oomplete and perfeat titla and rest8 in muoh rs8ignae 

the title to the prooeade of suoh inaumhoe. Burg68 v. Rew 

York Life Ina. Co., 53 S. u. 602. Oanneequantly, aiaoe tit10 

ma alroady tested In the assignob&at the time of the parsage 

OS the 1939 amendment, nothlag pamed to the as&mm thereafter, either by aots or the deosdent or by his do&h. See 

yriok and B3ingham oaaer, ouprs. 

Under the ruli115 of the Suprema Oourt in 

Blaolmm 1. &snBOn, SUplW, our etatut must ba oonotrued in 

the came manner that the Fedsral~Statute from whioh it wa8 

adopted was oonrrtruad at the time or ita pamage. The Friek 

antI Bingham oases represmt the ooswfruofion of the Fe&oral 

Statute at the time of the anaotment of the 1939 mwm6mant 

to Article 7u7. We, therefore, advise you that the prooaedm 

of ineuranoe polidlee whloh wore aaelgned, without rwervatlon, 

prior to the anaotmmt of the 1939 amndmnt to Artlola 7U7, 

and in rhloh deoebent never thereafter aoquired an lntarest, 

are not taxable under the provisions OS Artiole 7117, V. A. C. 5. 

Truatlng that the above fully answer your 

inquiry, we am 

tours very truly 

ATVCWEY ORNERAL OF TEXAS 

Fowler Roberto 

Aesietant