Court Opinion

ID: 4496064
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:14:39.471952+00
Date Added: 2024-06-11T08:49:27.652054
License: Public Domain

Matthews,
dissenting on the second point. I disagree with the reasoning in the majority opinion in so far as it relates to the insurance policies which were carried on the life of the decedent by the partnership of which he was a member at the date of his death. These policies were carried by the firm at firm expense and had been so carried by the predecessor partnerships in the same manner.
Under the partnership agreement in effect at the date of decedent’s death, it was provided in paragraph 6 that decedent, in consideration of any services he might render to the firm and in consideration of giving the other partners, and any successor firm, the right in perpetuity to use his name, “Marvin”, was to receive diminishing portions of the profits of the firm for a period of 12 years, “and that upon making these payments Marvin will be retired from the firm and his entire interest therein liquidated.” The firm was to continue to pay the premiums on the life insurance policies on Marvin’s life and to pay premiums on policies on the lives of the other general partners. In the event of the death of Marvin or any other partner on whose life insurance was carried by the firm, the proceeds received by the beneficiary designated in the policies were to be received in lieu of the deceased partner’s interest in the good will of the firm, and in the case of Marvin, in lieu of the payment of any further participation, as provided in paragraph 6, and the remaining partners would be entitled to use the name of any such deceased partner in the firm in perpetuity.
As between themselves the partners provided a means whereby the survivors could pay for a deceased partner’s interest in the good will of the firm at the date of death. Therefore, regardless of whether the beneficiary designated was the estate of the partner or a person other than his estate, the proceeds discharged the obligation of the survivors to pay the deceased partner for his interest in the good will of the firm.
Although the amounts in the instant case were received by Marvin’s wife as the proceeds of the policies on his life, the amount of such proceeds was the value at his death of his interest in the good will of the firm and the right to the use of his name. The full amount of such payment should be included in the estate tax return as the value of decedent’s interest in the partnership and not as insurance proceeds.
It so happens that in the instant case the amount to be included in the gross estate will be the same whether it is called insurance proceeds or partnership interest. But a case might arise where it would affect the amount to be included in the gross estate. For example, suppose a decedent’s life was insured under only one policy, that carried by his partnership under an agreement similar to the agreement in the instant case, and that the face amount of the policy *314was $100,000 and was all payable to a beneficiary other than decedent’s estate, and that, under the terms of the partnership agreement, the proceeds were to be in lieu of the decedent’s interest in the partnership. His partnership interest under these circumstances would have a value at death of $100,000 and such amount should be included in the estate tax return. Under the principle of the majority opinion there would be nothing included in the return as partnership interest and only $60,000 returned as insurance proceeds, because all of the amount was payable to a beneficiary other than the estate of the insured.
The majority opinion holds that the premiums on the policies were paid by the firm of which decedent was a member at his death, as consideration for the right to use decedent’s name as a member of the firm in perpetuity, for his interest in the good will of the firm, and for his right to limited participation in partnership profits until May 1, 1941; and that by so assigning those rights and interest to the partnership decedent bought these policies. With this I can not agree. Under the partnership agreement, decedent was to be a member of the partnership until his death or May 1941, whichever occurred first. He was to participate in the profits until 1941. As long as he was a member of the firm, the other members did not have to pay for use of his name. The provisions with respect to the policies were not provisions whereby each member was buying policies of insurance on his life or selling his interest in the firm for such policies, but were provisions whereby the firm was carrying insurance which would inure to the benefit of the surviving partners and provide them with the means to pay for the interest of a deceased partner immediately upon his death. The right of the insured partner to name the beneficiary to whom such proceeds should be paid was nothing more than a designation by him of the person to whom the value of his partnership interest was to be paid.
I think the reasoning in Boston Safe Deposit & Trust Co. et al., Executors, 30 B. T. A. 679, was correct and that the reasoning on the second point in this case is wrong. That decision should not be modified. The Commissioner filed a petition to review the Boston Safe Deposit & Trust Co. case in the Circuit Court of Appeals for the First Circuit, but later asked that the petition to review be dismissed and the case was affirmed per curiam December 10, 1934. There is nothing in the Igleheart case, 28 B. T. A. 888; affd., 77 Fed. (2d) 704, which requires any modification of the rule in the Boston Safe Deposit & Trust Co. case. The facts are entirely different. There Igleheart purchased for an amount equal to the cash surrender value, 13 policies on his life taken out and carried by the corporation of which he was an employee, and in which the corporation was beneficiary. Thereafter, Igleheart had the beneficiary *315changed to his wife and he paid subsequent premiums until his death. The question was whether the policies were taken out by decedent on his own life, and we properly held that the acquisition of the policies by purchase was, in result, the taking out of the policies by the decedent on the date of purchase by him of all the rights thereunder. In the instant case, the decedent did not purchase any policies from the partnership, and we do not get to the question of whether the policies were taken out by decedent upon his own life.
While respondent treated the $40,000 as insurance proceeds, paid to beneficiaries other than estate of the insured, and included the proceeds with other proceeds paid to beneficiaries other than his estate, he should have included the $40,000 in gross estate as the value of decedent’s interest in the good will of the partnership at the date of his death, and have excluded it altogether from the amount includable in gross estate as insurance. The record does not show what was included in gross estate as the value of decedent’s interest in the partnership at date of death. In the recompu-tation under Rule 50, the $40,000 should be added to the value of the partnership interest if it has not already been included therein. This will not result in any additional deficiency.