T.C. Memo. 2001-210

UNITED STATES TAX COURT

ESTATE OF WILLIAM BLAKE BURRIS, DECEASED,

WILLIAM B. BURRIS III, EXECUTOR, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 12899-99. Filed August 8, 2001.

H and W resided in Louisiana, a community property

State, throughout their marriage. During their

marriage, H purchased three policies of insurance on

his life using community funds. H was named as owner

of the policies, and W was initially designated as the

beneficiary. W predeceased H, and at H’s death the

life insurance proceeds were remitted to his children.

Held: The policies of life insurance constitute

community property under Louisiana law such that only

one-half of the proceeds therefrom is includable in H’s

gross estate. Sec. 2042(2), I.R.C.; sec. 20.2042-

1(c)(1), (5), Estate Tax Regs.

Raymond P. Ladouceur, for petitioner.

Susan Smith Canavello, for respondent.
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MEMORANDUM OPINION

NIMS, Judge: Respondent determined a Federal estate tax

deficiency in the amount of $82,997 for the estate of William

Blake Burris (the estate). After concessions, the issue for

decision is the appropriate treatment for estate tax purposes of

three insurance policies on the life of William Blake Burris

(decedent).

Unless otherwise indicated, all section references are to

sections of the Internal Revenue Code in effect as of the date of

decedent’s death, and all Rule references are to the Tax Court

Rules of Practice and Procedure.

Background

This case was submitted fully stipulated pursuant to Rule

122, and the facts are so found. The stipulations of the

parties, with accompanying exhibits, are incorporated herein by

this reference. Decedent was a resident of Shreveport,

Louisiana, when he died testate in that State on June 18, 1996. 

His will was subsequently admitted to probate in the First

Judicial District Court, Caddo Parish, Louisiana. Decedent’s

son, William Blake Burris III, was named executor of the estate

and likewise resided in Louisiana at the time the petition in

this case was filed.
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1 We note that the record does not contain the complete

contract of insurance for either the Pacific Standard policy or

its successor Hartford Life policy. However, as neither party

has intimated that the terms of these policies differed in any

material way from those of the First Colony policies, we assume

that the First Colony contracts are representative and that

relevant provisions were substantially identical.

On December 17, 1943, decedent married Audrey Shovan Burris

(Mrs. Burris). The couple resided in Louisiana, a community

property state, throughout their marriage and did not enter into

a matrimonial or other agreement separating the spouses in

property. During their marriage, between 1987 and 1988, decedent

applied for and obtained three policies of insurance on his life:

First Colony Life Insurance Policy No. 1319100, First Colony Life

Insurance Policy No. 1330053, and Pacific Standard Life Insurance

Policy No. 30L0174116. Each was a single premium policy for

which the premiums of $150,000, $34,504.32, and $243,000,

respectively, were paid with community funds. The policies each

provided for payment of a specified death benefit amount and

additionally accumulated a cash surrender value. The contract

terms also permitted loans against the policies. Effective May

11, 1994, Pacific Standard Policy No. 30L0174116 was taken over

by Hartford Life Insurance Company as Policy No. UM0174116.

Decedent was identified as the owner and as the insured with

respect to each of the insurance policies.1 The initial named

beneficiary was Mrs. Burris, and such designation was not made to

be irrevocable. According to the policy terms, the owner was
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granted “all rights” stated therein. In particular, the policies

provided that the owner could change the designation of owner and

beneficiary, could surrender the policy for its cash value, and

could obtain loans against the security of the policy.

On September 7, 1995, Mrs. Burris predeceased decedent. 

Following her death, the three children of decedent and Mrs.

Burris were made the beneficiaries, in equal one-third shares, of

the foregoing life insurance policies. Decedent then died on

June 18, 1996, as indicated above, and the proceeds of the

policies were presumably paid to the children.

Subsequently, on October 28, 1996, a Form 706, United States

Estate (and Generation-Skipping Transfer) Tax Return, was filed

on behalf of each spouse. On the Form 706 for Mrs. Burris’s

estate, one-half of the cash surrender value of the three life

insurance policies as of her date of death, an amount equaling

$226,070, was included as an asset in her gross estate. On the

Form 706 for decedent’s estate, the total amount of the proceeds

payable under the three policies, $825,089, was reported as

property includable in his gross estate. The estate now

contends, however, that such reporting was erroneous and that

only one-half of the proceeds, or $412,544.50, should have been

included for gross estate purposes on decedent’s return.
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Discussion

I. General Rules

As a general rule, the Internal Revenue Code imposes a

Federal tax “on the transfer of the taxable estate of every

decedent who is a citizen or resident of the United States.” 

Sec. 2001(a). Such taxable estate, in turn, is defined as “the

value of the gross estate”, less applicable deductions. Sec.

2051. Section 2031(a) then specifies that the gross estate

comprises “all property, real or personal, tangible or

intangible, wherever situated”, to the extent provided in

sections 2033 through 2045.

Section 2042 governs the treatment of life insurance

proceeds and provides in relevant part as follows:

SEC. 2042. PROCEEDS OF LIFE INSURANCE.

The value of the gross estate shall include the

value of all property--

* * * * * * *

(2) Receivable By Other Beneficiaries.--To

the extent of the amount receivable by all other

beneficiaries as insurance under policies on the

life of the decedent with respect to which the

decedent possessed at his death any of the

incidents of ownership, exercisable either alone

or in conjunction with any other person. * * *

Regulations promulgated under section 2042 further explain

that “Section 2042 requires the inclusion in the gross estate of

the proceeds of insurance on the decedent’s life not receivable

by or for the benefit of the estate if the decedent possessed at
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the date of his death any of the incidents of ownership in the

policy”. Sec. 20.2042-1(c)(1), Estate Tax Regs. Regulations

also define “incidents of ownership”:

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 the obtain from the

insurer a loan against the surrender value of the

policy, etc. * * * [Sec. 20.2042-1(c)(2), Estate Tax

Regs.]

The above definition is then augmented by the following caveat:

As an additional step in determining whether or

not a decedent possessed any incidents of ownership in

a policy or any part of a policy, regard must be given

to the effect of the State or other applicable law upon

the terms of the policy. For example, assume that the

decedent purchased a policy of insurance on his life

with funds held by him and his surviving wife as

community property, designating their son as

beneficiary but retaining the right to surrender the

policy. Under the local law, the proceeds upon

surrender would have inured to the marital community. 

Assuming that the policy is not surrendered and that

the son receives the proceeds on the decedent’s death,

the wife’s transfer of her one-half interest in the

policy was not considered absolute before the

decedent’s death. Upon the wife’s prior death, onehalf of the value of the policy would have been

included in her gross estate. Under these

circumstances, the power of surrender possessed by the

decedent as agent for his wife with respect to one-half

of the policy is not, for purposes of this section, an

“incident of ownership”, and the decedent is,

therefore, deemed to possess an incident of ownership

in only one-half of the policy. [Sec. 20.2042-1(c)(5),

Estate Tax Regs.]
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II. Contentions of the Parties

The parties in this case disagree as to the portion of the

proceeds from the three policies of insurance on decedent’s life

which must be included in his gross estate. The estate contends

that only 50 percent is includable, while respondent maintains

that inclusion of 100 percent is necessary. The two sides reach

their differing conclusions primarily as a result of their

opposing views as to whether, under Louisiana law, decedent

possessed incidents of ownership in all or only part of the

policies in question.

The estate avers that because the policies were acquired

during the marriage with community funds, they are presumed to be

community property. Further, the estate asserts that there

exists no evidence of intent on the part of Mrs. Burris that the

policies be held as decedent’s separate property, as would be

necessary to overcome the marital presumption. Accordingly, it

is the estate’s position that each spouse possessed an undivided

one-half interest in the policies and that decedent, as

registered owner, merely acted as managing agent for the

community.

In the alternative, the estate argues that if the policies

are found to be the separate property of decedent, then a

reimbursement claim would exist in favor of Mrs. Burris’s

successors in interest on the grounds that community funds were
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used to purchase the assets. In that event, the estate alleges

that such claim, in the amount of one-half of the cash surrender

value of the policies at the date of Mrs. Burris’s death, should

be allowed as a debt against decedent’s estate.

Conversely, respondent alleges that the general rules of

Louisiana community property law are inapplicable to the policies

at issue in this case. Rather, respondent contends that

Louisiana jurisprudence, particularly as interpreted by the Court

of Appeals for the Fifth Circuit in Catalano v. United States,

429 F.2d 1058 (5th Cir. 1969), has established a separate body of

law governing life insurance policies. Moreover, in respondent’s

view, this body of law stands for the principle that ownership of

life insurance policies in Louisiana is determined by the terms

of the contract of insurance itself. Hence, since the contracts

here expressly placed all incidents of ownership in decedent,

respondent avers that the policies were decedent’s separate

property and that the full value of the proceeds therefrom is

includable in his gross estate.

Additionally, in response to the estate’s alternative

argument, respondent maintains that the heirs have no

reimbursement claim against his estate because any such claim was

extinguished upon the death of the insured, because Mrs. Burris’s 
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2 Black’s Law Dictionary 23 (7th ed. 1999) defines “acquet”

as follows: “Property acquired by purchase, gift, or any means

other than inheritance; profits or gains of property between

husband and wife.”

one-half of the premiums constituted a gift to decedent, and

because there has been no proper substantiation of a

reimbursement claim.

III. Analysis

As previously indicated, Louisiana is a community property

state. La. Civ. Code Ann. art. 2334 (West 1985) provides that

“The legal regime of community of acquets[2] and gains applies to

spouses domiciled in this state”. Spouses may, however, modify

or terminate such matrimonial regime by contract. La. Civ. Code

Ann. arts. 2328, 2329 (West 1985). For purposes of implementing

the foregoing principles, all property is classified as either

community or separate. La. Civ. Code Ann. art. 2335 (West 1985). 

Moreover, all assets acquired during marriage are presumed to be

community property, in which each spouse is considered to own a

present undivided one-half interest. La. Civ. Code Ann. arts.

2336, 2340 (West 1985). Although this presumption is rebuttable,

it is not overcome by merely showing that title is taken in the

name of one spouse only. Catalano v. United States, supra at

1060; Biondo v. Biondo, 99-0890, p.10 (La. App. 1 Cir. 7/31/00),

769 So. 2d 94, 102. Property “acquired with community things” is

also defined generally as community property, while property
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acquired prior to marriage, by gift or inheritance to one spouse,

or “with separate things” is included in the definition of

separate property. La. Civ. Code Ann. arts. 2338, 2341 (West

1985).

With respect to life insurance in particular, there exists a

substantial body of caselaw, at both the State and the Federal

levels, that attempts to parse the relationship between such

policies and the above community property maxims. The Court of

Appeals for the Fifth Circuit, to which appeal in this case would

normally lie, addressed this issue in Catalano v. United States,

supra. In that case the husband acquired a policy of life

insurance on his life with community funds and named his wife as

both owner and beneficiary. Id. at 1060. Upon the husband’s

death, the Commissioner asserted that one-half of the proceeds

should be included in his gross estate under section 2042. Id.

The Court of Appeals, however, reasoned:

The Louisiana jurisprudence is well settled that life

insurance policies on the life of the husband

unconditionally owned by the wife or in which she is

the irrevocable beneficiary are, as a matter of law,

deemed part of her separate estate. They therefore are

not within the Louisiana presumption that all property

acquired during the marriage is community property. * *

* [Id. at 1061-1062.]

The court then held that “where a husband takes out a policy

of insurance on his life and either irrevocably names his wife

the beneficiary or makes her the owner of the policy, he retains

no interest in the proceeds of the policy under Louisiana law
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and, therefore, no ‘incidents of ownership’ within Int. Rev.

Code, § 2042.” Id. at 1062. Furthermore, because in these

circumstances the policy inured to the wife’s separate benefit

from the date of its issuance, the court additionally noted that

the wife’s separate interest was in no way affected by payment of

premiums from community funds. Id. at 1060-1061.

In reaching the specific holding just described, the Court

of Appeals also made the following broader statement:

in Louisiana a life insurance policy is a contract sui

generis, governed by rules peculiar to itself. It is

the outgrowth of judicial precedent and not of

legislation, and, as such, it is not governed by the

articles of the Louisiana Civil Code as to ownership of

the policy itself or as to ownership of the proceeds. *

* * [Id. at 1060.]

As support for this proposition, the court cited Sizeler v.

Sizeler, 127 So. 388 (La. 1930). Therein the Louisiana Supreme

Court, after observing that “a life insurance policy is a

contract sui generis, governed by rules peculiar to itself, the

outgrowth of judicial precedent and not of legislation”,

concluded that “the proceeds of life insurance policies form no

part of the estate of the deceased, and inure to the beneficiary

‘directly and by the sole terms of the policy itself’”. Id. at

388-389.

Since 1969, this Court has on several occasions followed the

decision in Catalano v. United States, 429 F.2d 1058 (5th Cir.

1969), in requiring an interpretation of Louisiana law under
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which a policy on the life of one spouse is deemed the separate

property of the other spouse when the noninsured spouse is named

as owner and beneficiary of the policy. See Estate of Marks v.

Commissioner, 94 T.C. 720 (1990); Bergman v. Commissioner, 66

T.C. 887 (1976); Estate of Saia v. Commissioner, 61 T.C. 515

(1974). Similarly, respondent maintains that here, too, Catalano

v. United States, supra, settles the issue in this case in a

manner consistent with respondent’s position and is binding on

this Court pursuant to the rule of Golsen v. Commissioner, 54

T.C. 742 (1970), affd. 445 F.2d 985 (10th Cir. 1971).

In Golsen v. Commissioner, supra at 757, this Court

established the rule that we shall “follow a Court of Appeals

decision which is squarely in point where appeal from our

decision lies to that Court of Appeals” (the Golsen rule). We

subsequently have further clarified the doctrine’s reach,

emphasizing that it is “a narrow exception” and should be applied

only when the following rationale prompting its development rings

true: “where a reversal would appear inevitable, due to the

clearly established position of the Court of Appeals to which an

appeal would lie, our obligation as a national court does not

require a futile and wasteful insistence on our view.” Lardas v.

Commissioner, 99 T.C. 490, 494-495 (1992).

Specifically, we have made clear that the Golsen rule does

not apply where the precedent from the Court of Appeals contains
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distinguishable facts or law. See, e.g., Metzger Trust v.

Commissioner, 76 T.C. 42, 72-74 (1981) (factual distinctions

render Golsen rule not squarely on point), affd. 693 F.2d 459

(5th Cir. 1982); Kueneman v. Commissioner, 68 T.C. 609, 612 n.4

(1977) (distinct legal questions not governed by the Golsen

rule), affd. 628 F.2d 1196 (9th Cir. 1980).

With respect to the matter before us, we conclude that

Catalano v. United States, supra, is not squarely on point within

the meaning of the Golsen rule. From a factual standpoint,

Catalano v. United States, supra, established a particular

circumstance in which life insurance policies in Louisiana are

deemed to be separate property. Namely, this is true where one

spouse is designated the owner or irrevocable beneficiary of a

policy on the life of the other spouse. See id. at 1061-1062. 

In contrast, the factual scenario we address involves one spouse

being both the insured and the named owner. Accordingly,

respondent’s reliance on the Golsen rule to dictate a particular

outcome in this case is misplaced.

In addition, given that more than 30 years have passed since

the decision in Catalano v. United States, supra, was issued, we

believe that it is appropriate to consider not only the more

generalized pronouncements made therein regarding Louisiana law

but also any subsequent refinements that might be gleaned from

courts of the State whose law it is our duty to apply. In this
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connection, we note that the decades ensuing since Catalano have

seen State courts describe Louisiana law in a manner which seems

to conflict with respondent’s argument that community property

principles govern ownership of neither a policy itself nor its

proceeds.

For instance, we highlight two recent cases issued in the

context of a partition upon divorce of a marital community. In

Biondo v. Biondo, supra at p.9, 769 So. 2d at 102 (citations

omitted), the court articulated the Louisiana rule as follows:

While life insurance is generally considered sui

generis under Louisiana law, it is the proceeds of the

life insurance policy, not the policy itself, which are

not subject to claims of the community. There is a

clear distinction between the ownership of a policy of

life insurance and the right to receive the proceeds of

a life insurance policy after the death of the insured. 

The issue of the ownership of the life insurance

proceeds is not before us today. The * * * policy was

acquired during the marriage and the existence of the

legal regime and is presumed to be community property.

Similarly, the court in Kambur v. Kambur, 94-775, p.6-7 (La.

App. 5 Cir. 3/1/95), 652 So. 2d 99, 103, further explained:

It is well settled in Louisiana that life

insurance proceeds, if payable to a named beneficiary

other than the estate of the insured, are not

considered to be a part of the estate of the insured. 

The insurance proceeds do not come into existence

during the life of the insured, never belong to him,

and are passed by virtue of the contractual agreement

between the insured and the insurer to the named

beneficiary. Life insurance proceeds are not subject

to the Civil Code Articles relating to donations inter

vivos or mortis causa, nor are they subject to

community claims or the laws regarding forced heirship.

* * *
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There is a clear distinction between the ownership

of a policy of life insurance and the right to receive

the proceeds of a life insurance policy after the death

of the insured. The issue of life insurance proceeds

is not before us today. The record reveals that the

life insurance policies, annuities and IRAs in question

were community property. * * * The assets in question

were acquired during the existence of the legal regime

and are presumed to be community property. * * *

See also, to like effect, Standard Life Ins. Co. v. Franks, 278

So. 2d 112, 114 (La. 1973); Allianz Life Ins. Co. v. Oates, 33-

045, p.2-3 (La. App. 2 Cir. 4/5/00), 756 So. 2d 677, 679; Smith

v. Smith, 95-0913, p.7 (La. App. 1 Cir. 12/20/96), 685 So. 2d

649, 653; Am. Health & Life Ins. Co. v. Binford, 511 So. 2d 1250,

1254 (La. Ct. App. 1987); Berry v. Metro. Life Ins. Co., 327 So.

2d 521, 523-524 (La. Ct. App. 1976).

Faced with these and analogous pronouncements, respondent’s

position is that “Louisiana courts have established different

rules for cases involving the treatment of proceeds and community

partition cases involving the treatment of premiums and/or cash

surrender value of life insurance policies”. Respondent then

summarizes these contrasting rules:

In community partition cases, there is a presumption

that a policy purchased with community funds is

community property. To rebut that presumption, one

spouse may prove that the other spouse donated funds to

pay the premiums. * * *

In proceeds cases such as the present case,

however, where the presumption of community does not

apply, and the Louisiana courts have directed that the

terms of the contract govern, the inquiry is whether

decedent was the owner based upon the terms of the

contract. * * *
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Nevertheless, while not without initial appeal, the

difficulty with the foregoing theory is that it neither

adequately explains the Louisiana jurisprudence nor addresses the

interplay of its premise with the test of section 20.2042-

1(c)(1), Estate Tax Regs.

As regards State law, Louisiana courts have repeatedly

stated that ownership of policies is governed by community

property principles but ownership of proceeds is not. The

explicit distinction has always been between the type of asset

being considered (policy versus proceeds) and never between the

type of case in which the question arises. In this connection,

Berry v. Metro. Life Ins. Co., supra at 523-524, issued in the

context of a dispute over death proceeds, is illustrative. The

court in that case characterized the underlying policy as a

community asset and the former wife as owner of a one-half

interest therein. Id. At the same time, the court nonetheless

reaffirmed the rule that death benefits are outside of the

community regime and belong exclusively to the named beneficiary. 

Id. The former wife was thus held to have no claim to the

proceeds payable by beneficiary designation to the decedent’s

sister. Id. at 522, 524.

Hence, although it is clear under Louisiana law that

ownership of life insurance proceeds is governed solely by

contract terms, such apparently does not prevent a spouse from
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possessing a one-half community interest in the policy at the

time of the insured’s death. Furthermore, it is only logical

that State-level decisions considering policy ownership will

typically arise in a context prior to death, such as a partition,

while cases brought after death will focus on ownership of

proceeds. In each scenario, the litigants dispute, and the State

court is concerned with deciding, only who is entitled to the

asset, either policy or proceeds, which at that juncture

represents economic value.

Against this backdrop, we emphasize that respondent’s own

regulatory test for inclusion under section 2042(2) turns on who

possesses incidents of ownership in the policy, not in the

proceeds. See sec. 20.2042-1(c)(1), Estate Tax Regs. In fact,

the purpose of section 2042(2) is to include in a decedent’s

gross estate the value of life insurance proceeds when the right

to monetary payment belongs to one other than the decedent or his

estate. Thus, the question we face here is not the one generally

addressed by the Louisiana courts in the cases regarding

ownership of proceeds after death. Rather, our inquiry is who

owned the policies at issue here under Louisiana law, a question

upon which Louisiana courts have expounded primarily in a divorce

setting.

Moreover, State jurisprudence offers no cogent basis from

which to conclude that the rules used to ascertain policy
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ownership prior to an insured’s demise would cease to have any

applicability were a court called upon make such a determination

at death. The courts have stated that separate rules govern

ownership of policies and proceeds, not that distinct bodies of

law control policy ownership before versus at the time of death. 

Thus, in absence of any indication to the contrary, it seems

reasonable to assume that Louisiana courts would apply a

consistent set of rules for evaluating policy ownership,

regardless of the procedural context. Since Louisiana caselaw

employs general community property principles in this task, we

cannot reject such standards in the matter before us.

We therefore conclude that the three policies of life

insurance at issue here must be presumed to be community property

under Louisiana law. As the record is devoid of facts sufficient

to rebut such presumption, we hold that in accordance with

section 20.2042-1(c)(1), (5), Estate Tax Regs., decedent

possessed incidents of ownership in only one-half of the

policies. Accordingly, only one-half of the proceeds therefrom

is includable in his gross estate, and we need not reach the

parties’ alternative contentions regarding reimbursement.

To reflect the foregoing and to give effect to concessions,

Decision will be entered

under Rule 155.