Source: https://supreme.justia.com/cases/federal/us/312/531/case.html
Timestamp: 2016-07-31 07:30:10
Document Index: 85195759

Matched Legal Cases: ['§ 302', '§ 61', '§ 1', '§ 302', '§ 628', '§ 302']

Helvering v. Le Gierse :: 312 U.S. 531 (1941) :: Justia U.S. Supreme Court Center Log In
› Helvering v. Le Gierse
Helvering v. Le Gierse 312 U.S. 531 (1941)
U.S. Supreme CourtHelvering v. Le Gierse, 312 U.S. 531 (1941)Helvering v. Le GierseNo. 237Argued January 9, 10, 1941Decided March 3, 1941312 U.S. 531CERTIORARI TO THE CIRCUIT COURT OF APPEALS
(2) They created no insurance risk. P. 312 U. S. 541. Page 312 U. S. 532
Certiorari, 311 U.S. 625, to review the affirmance of a decision of the Board of Tax Appeals, 39 B.T.A. 1134, reversing a deficiency assessment of estate tax. Page 312 U. S. 536
Less than a month before her death in 1936, decedent, at the age of 80, executed two contracts with the Connecticut General Life Insurance Co. One was an annuity contract in standard form entitling decedent to annual payments of $589.80 as long as she lived. The consideration stated for this contract was $4,179. The other contract was called a "Single Premium Life Policy-Non Participating" and provided for a payment of $25,000 to decedent's daughter, respondent Le Gierse at decedent's death. The premium specified was $22,946. Decedent paid the total consideration, $27,125 at the Page 312 U. S. 537 time the contracts were executed. She was not required to pass a physical examination or to answer the questions a woman applicant normally must answer.
"The value of the gross estate of the decedent shall be determined by including the value at the time Page 312 U. S. 538 of his death of all property, real or personal, tangible or intangible . . ."
"* * * *" "(g) To the extent of the amount receivable by the executor as insurance under policies taken out by the decedent upon his own life, and to the extent of the excess over $40,000 of the amount receivable by all other beneficiaries as insurance under policies taken out by the decedent upon his own life."
Treasury Regulations No. 37, 1921 edition, p. 23. This statement has never been amplified. [Footnote 2] The committee report accompanying the Revenue Act of 1918 merely noted that the provision taxing insurance receivable by the executor clarified existing law, and that the provision taxing insurance in excess of $40,000 receivable by specific beneficiaries was inserted to prevent tax evasion. House Report No. 767, 65th Cong., 2d Sess., p. 22. [Footnote 3] Subsequent Page 312 U. S. 539 committee reports do not mention § 302(g). Transcripts of committee hearings in 1918 and since are equally uninformative. [Footnote 4]
We think the fair import of subsection (g) is that the amounts must be received as the result of a transaction which involved an actual "insurance risk" at the time the transaction was executed. Historically and commonly, insurance involves risk shifting and risk distributing. That life insurance is desirable from an economic and social standpoint as a device to shift and distribute risk of loss from premature death is unquestionable. That these elements of risk shifting and risk distributing are essential to a life insurance contract is agreed by courts and commentators. See, for example, Ritter v. Mutual Life Ins. Co., 169 U. S. 139; In re Walsh, 19 F.Supp. 567; Guaranty Trust Co. v. Commissioner, 16 B.T.A. 314; Ackerman v. Commissioner, 15 B.T.A. 635; Couch, Cyclopedia of Insurance, Vol. I, § 61; Vance, Page 312 U. S. 540 Insurance, §§ 1-3; Cooley, Briefs on Insurance, 2d edition, Vol. I, p. 114; Huebner, Life Insurance, Ch. 1. Accordingly, it is logical to assume that, when Congress used the words "receivable as insurance" in § 302(g), it contemplated amounts received pursuant to a transaction possessing these features. Commissioner v. Keller, supra; Helvering v. Tyler, supra; Old Colony Trust Co. v. Commissioner, 102 F.2d 380; Ackerman v. Commissioner, supra.
The two contracts must be considered together. To say they are distinct transactions is to ignore actuality, for it is conceded on all sides, and was found as a fact by the Board of Tax Appeals, that the "insurance" policy would not have been issued without the annuity contract. Failure, even studious failure, in one contract to refer to the other cannot be controlling. Moreover, Page 312 U. S. 541 authority for such consideration is not wanting, however unrealistic the distinction between form and substance may be. Commissioner v. Keller, supra; Helvering v. Tyler, supra. See Williston, Contracts, Vol. III, § 628; Paul, Studies in Federal Taxation, 2d series, p. 218; compare Pearson v. McGraw, 308 U. S. 313. [Footnote 5]
Considered together, the contracts wholly fail to spell out any element of insurance risk. It is true that the "insurance" contract looks like an insurance policy, contains all the usual provisions of one, and could have been assigned or surrendered without the annuity. Certainly the mere presence of the customary provisions does not create risk, and the fact that the policy could have been assigned is immaterial, since, no matter who held the policy and the annuity, the two contracts, relating to the life of the one to whom they were originally issued, still counteracted each other. It may well be true that, if enough people of decedent's age wanted such a policy, it would be issued without the annuity, or that, if the instant policy had been surrendered, a risk would have arisen. In either event, the essential relation between the two parties would be different from what it is here. The fact remains that annuity and insurance are opposites; in this combination, the one neutralizes the risk customarily inherent in the other. From the company's viewpoint, insurance looks to longevity, annuity to transiency. See Commissioner v. Keller, supra; Helvering v. Tyler, supra; Old Colony Trust Co. v. Commissioner, supra; Carroll v. Equitable Life Assur. Soc., 9 F.Supp. 223; Note, 49 Yale L.J. 946; Cohen, Annuities and Transfer Taxes, 7 Kan.B.A.J. 139. Page 312 U. S. 542
We hold that they are taxable under § 302(c) of the Revenue Act of 1926, as amended, as a transfer to take effect in possession or enjoyment at or after death. See Helvering v. Tyler, supra; Old Colony Trust Co. v. Commissioner, supra; Kernochan v. United States, 29 F.Supp. 860; Guaranty Trust Co. v. Commissioner, supra; compare Gaither v. Miles, 268 F. 692; Comment, 38 Mich.L.Rev. 526; Comment, 32 Ill.L.Rev. 223.