Legal Document

356 U.S. 274 78 Supreme Court Reporter 730 2 United States Reports Lawyer’s Edition 2d Series KF101.8 U54 765 FIDELITY-PHILADELPHIA TRUST COMPANY and Robert baron Haines, III, Executors of the Will Mary or Haw. Hawai‘i KFH45 A2 Deceased, Petitioners,v.Francis R. SMITH, Collector Internal Revenue. Number 130. Argued Jan. 30, 1958. Decided April 28, Mr. T. McCracken, Philadelphia, Pa., for petitioner. Myron C. Baum, Washington, D.C., respondent. Chief Justice WARREN delivered opinion Court. 1 The question before is whether proceeds certain insurance policies on life decedent, payable to named beneficiaries irrevocably assigned by insured, should be included in estate decedent purposes federal tax. facts are not dispute. In 1934 then aged 76, purchased a series annunity-life policy combinations. Three single-premium policies, at face values 200,000, $100,000, $50,000, respectively, were obtained without requirement medical examination. As condition selling each policy, companies involved required also purchase separate, singlepremium, nonrefundable annuity policy. premiums fixed regular rates. size annuity, however, was calculated so that event annuitant-insured died prematurely premium, less amount allocated payments already made, would combine with companion plus interest, equal paid.1 Each could have been same premium charged it under annuity-life combination. decedent's children primary policies; Fidelity-Philadelphia Trust Company, as trustee trust established beneficiary interests any who predeceased her. year purchase, all rights benefits two her other Company trustee. These receive dividends, change beneficiaries, surrender assign them. Dividends received, but, far record discloses, none exercised. A gift tax these transfers paid 1935. 1938 amended above-mentioned became irrevocable. Government concedes, retained no beneficial reversionary interest trust. 3 insured 1946. three return. Commissioner Revenue determined assessed deficiency accordingly. adjusted executors, when claim refund denied, this action followed. District entered judgment taxpayers but Appeals Third Circuit reversed. 241 Federal Reporter, 2nd 690. We granted certiorari.2 354 921, 77 1383, 1435. 4 It conceded parties determinable provision dealing proceeds. Cf. Helvering versus Le Gierse, 312 531, 61 646, 85 L.Ed. 996. To support decision below, argues includible Section 811(c)(1)(B) Code 1939, 26 Annotated KF65 U5 § 811(c)(1)(B), which includes, property, extent therein, had transferred adequate full consideration, wuich transfer 5 'has his * (i) possession enjoyment of, right income from, property *.' 6 contends payments, until death, from through use policies. 7 On hand, petitioners, executors estate, assert separate since away she them death. 8 relies supra, where issue taxability an After holding hte according statutory provisions insurance,3 held 302(c) Act 1926 because they devolved took 'effect after death.' page 542, 650. However, reaching conclusion did consider problem case bar, Gierse instant point fundamentally different. Prior divested herself including possibility funds return if her.4 assignees 'owners' death; received immediate unlimited their worth. value always substantial. assignment total cash over $289,000; death over.$326,000. Under assignment, become tenant postpones remaindermen death.5 Bullard, 303 297, 58 565, 82 852; Estate Church, 335 632, 69 322, 337, 93 288. contrary, bundle rights, incidents ownership, totally divorced herself. Chase National Bank City New York States, 278 327, 49 126, 73 405; Goldstone 325 687, 65 1323, 89 1871. 9 Illustrative distinction between bar fact has endeavored here sustain applied case. Instead taxing 'intended take effect after' transferor's death,6 transferor 'the from' property.7 Government's position annuities well taken. 10 establish its contention, must aggregate those derived entire investment. This proposition cannot established. Admittedly, purchased, insurance-annuity combination product single, integrated transaction. neither intended that, nor acted if, transactions quality indivisibility. Regardless considerations prompting hedge contracts annuities, time written, items purchaser. acquired separately, been, was, conveyed separately. arose personal obligations way conditioned continued existence contracts. periodic unimpaired diminution throughout even extinguished.8 Quite clearly solely entirely independent Because independence, may not, aggregating types into one investment, conclude receiving contracts.9 11 Accordingly, 12 Reversed. 13 BURTON, whom BLACK CLARK join, dissenting. 14 For reasons stated court Cir., 690, Conway Glenn, 193 965, Burr Commissioner, 156 871, seems me purposes, indistinguishable settlor places sum such terms he shall life, principal designated upon principal, event, includable settlor's estate. & N Dec. Immigration Nationality Decisions affirm Appeals. Of course, additional added compensate expenses. agreement below 965. contrary Bohnen Harrison, 199 492, affirmed equally divided Court, 345 946, 863, 97 1371. 302(g) 1926, 44 Statutes-at-Large 9, 71, exempted up $40,000 'receivable insurance' persons than executor. considered arisen 'insurance' Congress meant word used ordinary 'insurance risk' present. company undertaken shift risk premature distribute among policyholders. requiring concurrent contract, neutralized expense 'insured.' remaining risk, annuitant live beyond actuarial prediction surrendered, Meisenholder, Taxation Annuity Contracts Inheritance Taxes, 39 Mich.L.Rev. 856, 883. principle applies hands another person. 1325, supra. Nor like second annuitants survivorship joint survivor annuities. donor's donee's common fund source extinguished, destroyed. economic must, realistically speaking, await first annuitant, substantial portion surviving annuitant's similarly postponed. Cf., e.g., Wilder's Estate, 118 281; Clise, 122 998; Mearkle's 129 386. 811(c)(1)(C) 7(a) October 25, 1949, chapter 720, 63 891, 895, 811(c)(1)(C). 894, 811(c)(1)(B). part applicable Gierse. Where contemplation promise make lifetime, include decedent. E.g., Sarah Atlantic Bergan, Tax KF6280 U55 543, Acq., 1943 Cum.Bull. 2; Security Savings Bank, Trustee, B.T.A. 833; Seymour Johnson, 411; Hirsh 1929, 35 982, 68 Ct.Cl. 508; cf. Welch Hall, 134 366. cases obligation transferee, usually chargeable actual made. treatment lower courts similar situation field taxation, Meyer, 139 256; Edna E. Meredith, T.C.M. 847, 140 973; John Koehrer, 219.

Classification Label: 11