Court Opinion

ID: 9443454
Source: CourtListenerOpinion
Date Created: 2023-08-03 19:20:56.402188+00
Date Added: 2024-06-11T17:29:29.625545
License: Public Domain

DUFFY, Circuit Judge
(dissenting).
In 1935, when decedent was 62 years of age, she purchased a life insurance policy in the face amount of $72,000, paying a single premium of $53,717.04. A physical examination of decedent was not required. On the same date and as a part of the same transaction she purchased an annuity contract for a single premium of $22,602.96, which provided for annual payments to her until her death of $1,618.03. The insurance company required that the annuity contract be purchased as a condition of issuing the life insurance policy to her.
The majority opinion points out that the contracts were separate, and that neither contained a reference to the other, and states that they constituted two independent pieces of property. While admitting that the United States Supreme Court in Helvering v. Le Gierse, 312 U.S. 531, 61 S.Ct. 646, 85 L.Ed. 996, held that a similar transaction to that in the case at bar' was a single investment program, the majority states, “ * * * it does not follow that this investment program, made up. of the two contracts, was indivisible.” It further states that the fact that the life insurance policy would not have been issued if decedent had not bought the annuity policy is without legal significance.
In reaching its conclusion, I think the majority gives only lip service to the decision of the Supreme Court in Le Gierse. In that case the life insurance policy, in standard form, containing the usual provisions including those for assignment or surrender, was issued to a woman 80 years of age, without physical examination, for a single premium less than the face of the policy. The company also issued an annuity policy for another premium, calling for annual payments to her until her death. The Supreme Court held that although both policies were on the face, separate contracts, neither referring to the other, they must be considered together; that in case of a premature death, the gain to the insurance company on one policy would neutralize its loss under the other; and that there was in fact no insurance risk. The issue in that case, as stated by the court, 312 U.S. at page 537, 61 S.Ct. at page 648, was: “The ultimate question is whether the ‘insurance’ proceeds may be included in decedent’s gross estate,” the statute at that time providing that insurance *495in excess of $40,000 was to be considered as a part of such estate. And the court ruled; 312 U.S. at page 540, 61 S.Ct. at page 650: “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.”
In my opinion the majority refuses to accept the rationale on which the Supreme Court decided Helvering v. Le Gierse, supra, and the companion cases of Estate of Keller v. Commissioner, 312 U.S. 543, 61 S.Ct. 651, 85 L.Ed. 1032, and Tyler v. Helvering, 312 U.S. 657, 61 S.Ct. 729, 85 L.Ed. 1105. While, as pointed out, the ultimate issue in the Le Gierse case was different than in the case at bar, the cases are alike in that in each a life insurance policy and an annuity contract were issued to the decedent as separate contracts, and in each the life insurance policy was issued without any medical examination and would not have been issued except in conjunction with the purchase of the annuity contract. In the case at bar the effect of the combination of contracts is that decedent invested a sum of money with respect to which she reserved the right to the income for her life, and transferred to her children, as the owners of the insurance policy, the right to receive the insurance upon her death. In my opinion such a transfer is squarely within the provisions of Sec. 811 (c) (1) (B), Internal Revenue Code, 26 U.S.C.A § 811(c) (1) (B), and the insurance proceeds should be included in the taxable gross estate.
Except for the decision by the learned district judge who sat in this case, all cases on this point have been decided contrary to the holding of the majority herein. I think that the decision of the Second Circuit in Burr v. Commissioner, 156 F.2d 871, certiorari denied 329 U.S. 785, 67 S.Ct. 298, 91 L.Ed. 673, and the decision of the Board of Tax Appeals in Estate of Cora C. Reynolds v. Commissioner of Internal Revenue, 45 B.T.A. 44, were correctly decided. In addition, the attention of the Sixth Circuit was particularly directed to the decision of the trial court in this case, and such view was rejected by that court in Conway v. Glenn, 193 F.2d 965.
Feeling that the decision of the district court should be reversed, I must respectfully dissent.