Court Opinion

ID: 9605069
Source: CourtListenerOpinion
Date Created: 2023-08-22 02:29:52.400146+00
Date Added: 2024-06-11T18:02:25.879130
License: Public Domain

ON MOTIONS FOR REHEARING
JACOBSON, Presiding Judge.
On May 14, 1982, this court filed its opinion in this matter, which affirmed in part and reversed in part the trial court’s judgment and remanded the matter to the trial court for further proceedings. Both parties filed motions for rehearing and respective responses.
The issue raised by the motion for rehearing of appellee Valley National Bank of Arizona (Bank) is that a portion of our opinion dealing with proceeds of insurance is factually in error. In our prior opinion we stated:
Two of the insurance policies included in W.C. Estes’ gross estate were owned by Garbage Service Company; and of which Garbage Service Company was the beneficiary; (1) New England Mutual Life Insurance Company policy No. 2767107 which paid $100,614.48 and (2) Manhattan Life Insurance Company policy No. 466761 which paid $43,935.76.
Based upon the factual determination that Garbage Service Company was the beneficiary of these policies, we applied the first sentence of Treasury Regulation § 20.-2042(c)(6), and held that the proceeds of these insurance policies were improperly included in the decedent’s gross estate.
The Bank points out (which is undisputed by Mrs. Estes) that the beneficiaries of these two policies are not the corporation, but Mrs. Estes. From this factual posture, the Bank argues that Treasury Regulation § 20.2042(c)(6) requires that if any of the proceeds of the insurance policies are not paid to or for the benefit of the corporation “any incidents of ownership held by the corporation as to that part of the proceeds will be attributed to the decedent through his stock ownership where the decedent is the sole or controlling stockholder.”
We admit our factual error as to the beneficiaries of these two policies and therefore our legal analysis set forth in our prior opinion is inapplicable.
Since Mrs. Estes is, in fact, the beneficiary of the two corporate policies and since Mr. Estes was the sole stockholder of the corporation, the following portion of Treasury Regulation § 20.2042(e)(6) is applicable:
[I]f the decedent is the controlling stockholder in a corporation, and the corporation owns a life insurance policy on his life, the proceeds of which are payable to the decedent’s spouse, the incidents of ownerships held by the corporation will be attributed to the decedent through his stock ownership and the proceeds will be included in his gross estate under section 2042.
Mrs. Estes argues that since we held in our prior opinion that other insurance policies on Mr. Estes’ life were improperly included within his gross estate, the same *83reasoning would apply to the corporate policies. We disagree.
Our prior opinion held that Mr. Estes’ ownership of policies owned by him on his own life had been divested by reason of a property settlement agreement entered into between Mr. and Mrs. Estes at the time of their divorce. By this divesture, Mr. Estes retained no incidents of ownership in these policies and therefore the proceeds of the policies should not have been included in the gross estate for tax purposes.
However, there is nothing in the property settlement agreement which would indicate that the divesture provisions of that agreement would affect life insurance policies owned by third parties. Thus, the reasoning of our prior opinion as to life insurance policies owned by Mr. Estes is not applicable to policies owned by the corporation.
We therefore modify our prior opinion by holding that the two Garbage Service Company policies in question were properly included in the decedent’s gross estate for tax purposes and that the trial court properly disallowed surcharges against the executor for taxes paid as a result of that inclusion.
The Bank’s motion for rehearing has also called into question our holding concerning the denial of executor’s fees in this matter. We decline to reconsider the position taken on this issue in our prior opinion.
Mrs. Estes’ motion for rehearing attacks our prior holding that the bank should not be surcharged for failure to account for assets of Garbage Service Company. We decline to reconsider this issue.
We hereby modify our prior opinion in the manner heretofore set forth and upon such modification, the motions for rehearing by both the Bank and Mrs. Estes are denied.
YALE McFATE and R. PORTER MUR-RY, Judges (retired), concur.
Note: The Honorable YALE McFATE and the Honorable R. PORTER MURRY, retired judges of courts of record, were authorized to participate in this matter by the Chief Justice of the Arizona Supreme Court pursuant to Arizona Const, art. VI, § 20.