
    ESTATE OF LOUIS GOLDSTEIN, IDA GOLDSTEIN AND ARNOLD GOLDSTEIN, EXECUTRIX AND EXECUTOR, 59 WEST 12TH STREET, NEW YORK CITY, N. Y. v. THE UNITED STATES
    [No. 50270.
    Decided July 13, 1954.
    Plaintiffs’ motion for rehearing overruled October 5, 1954.] 
    
    
      Mr. Alfred Oeroeo for plaintiffs.
    
      Mrs. Elizabeth B. Davis, with whom was Mr. Assistant Attorney General R. Brian Holland, for defendant. Mr. Andrew D. Sharpe was on the brief.
    
      
      'Plaintiffs’ petition for writ of certiorari pending.
    
   MaddeN, Judge,

delivered the opinion of the court:

The plaintiffs are the executrix and executor, respectively, of the estate of Louis Goldstein, who died in 1945. A Federal estate tax return was filed and the tax shown by the return to be due was paid. The taxing authorities asserted that there was a deficiency based, so far as here material, upon the failure to include in the gross estate of the decedent the proceeds of three policies of life insurance amounting to $82,970.64. The deficiency was paid, a claim for refund was filed and rejected, and this suit was brought.

The three insurance policies were issued on July 13, 1939, on the application of the decedent. The decedent filed amendments to his applications which said:

I agree to this policy being issued with ownership and the privilege to change the beneficiary vesting in the beneficiary, except that during the lifetime of Louis Goldstein, the insured, his written consent must first be obtained.

When the policies were issued, each contained the following typewritten provision:

Section A
BeNEPICIART AND OWNERSHIP PROVISIONS
A 1. Ownership. The beneficiary herein named may exercise every right and receive every benefit reserved to the insured or the owner of the policy, including the right of assignment, and including the privilege to change the beneficiary, and may agree with the Company to any change in or amendment of the policy without the consent of the insured, except that during the lifetime of Louis Goldstein, the insured, his written consent must first be obtained.

In two of the policies it was provided that the net sum payable upon the death of the insured should be paid to Frances Figler, the insured’s daughter, “her executors, administrators, or assigns.” A similar provision, naming Lillian Furst as the beneficiary, was contained in the third policy.

All of the premiums on the three policies were paid by the decedent. No attempt was ever made, prior to the decedent’s death, by either of the beneficiaries, to exercise any of the rights mentioned in the policies.

Section 811 (g) (2) (B) of the Internal Revenue Code provides that there shall be included in the gross estate of the decedent, for estate tax purposes, the amount receivable by a beneficiary of an insurance policy upon the life of the decedent

with respect to which the decedent possessed at his death, any of the incidents of ownership, exercisable either alone or in conjunction with any other person.

Treasury Regulations 105, promulgated under the Internal Revenue Code, at Section 81.27 [as amended by T. D. 5289, 1943 Cum. Bull. 1081, 1092, 1093, 1094] provides that the term “incidents of ownership” as used in the above section is not confined to ownership in the technical legal sense. The Regulation further says:

Incidents of ownership in the policy include, for example, the right of the insured or his estate to its economic benefits, the power to change the beneficiary, to surrender or cancel the policy, to assign it, to revoke an assignment, to pledge it for a loan, or to obtain from the insurer a loan against the surrender value of the policy, etc.

The statute, and the regulation, which is well within the scope of the statute, apply directly to the facts of the instant case. None of the rights exercisable under the policy could be exercised by the beneficiary without the written consent of the decedent insured. That meant that he “in conjunction with” the beneficiary, had all the incidents of ownership with respect to the policy. To say that his control was “negative” or in the nature of a veto power, does not diminish its effectiveness as an incident of ownership. It was, during his life, exactly equivalent to the control of the named beneficiary. Neither could act without the concurrence of the other.

The proceeds of the policies were properly included in the decedent’s estate, for estate tax purposes, and the deficiency was lawfully collected.

The plaintiffs’ petition will be dismissed.

It is so ordered.

Laramoee, Judge; Whitaker, Judge; Littleton, Judge; and Jones, Chief Judge, concur.

FINDINGS OE FACT

The court, having considered the evidence, the report of Commissioner Richard H. Akers, and the briefs and argument of counsel, makes findings of fact as follows:

1. The plaintiffs, Ida Goldstein, Executrix, and Arnold Goldstein, Executor, are the duly appointed and acting executrix and executor of the Estate of Louis Goldstein, deceased. Ida Goldstein was the wife and Arnold Goldstein the son of the deceased.

2. Louis Goldstein departed this life testate on April 27, 1945, and in and by the terms of his last will and testament, which was duly admitted to probate in the Surrogate’s Court, New York, N. Y., the plaintiffs were named executrix and executor. Letters testamentary were duly issued by the Surrogate on or about June 28, 1945.

3. The Federal estate tax return for the Estate of Louis Goldstein was filed on or about July 9,1946, showing a tax liability of $43,350.40, all of which sum was paid. The payment was made to the Collector of Internal Revenue, Second New York Collection District. The aforesaid Collector of Internal Revenue is now deceased.

4. By letter dated June 26, 1947, after the report of an examination by a revenue agent, the plaintiffs were advised that a recomputation of the estate tax liability showed a total tax liability in the amount of $67,673.22, that is, a deficiency in the reported tax of $24,322.82. In arriving at that deficiency, there were added to the assets of the gross estate the proceeds of three policies of insurance on the life of the decedent issued by the Union Central Life Insurance Company, which had been returned in the tax return for information only. The amount included in the gross estate on that account was $82,970.64. The numbers of the policies and the respective amounts making up this total are as follows:

No. 1331135 $25,000 dividend $928.33
1331136 40,000 dividend 1,485.33
1331137 15,000 dividend 556.98

The reason assigned in the revenue agent’s report for the inclusion of those amounts in the gross estate of the decedent was:

Items 7, 8 & 9 — Proceeds of insurance policies includi-ble in gross estate of decedent pursuant to Sec. 811 (g) (2) I. R. C.

The deficiency tax was paid July 31, 1947.

5.On December 16, 1948, the plaintiffs filed a claim for refund in the amount of $23,644.22. The ground upon which refund was claimed was stated as follows:

Insurance policies did not pass to the beneficiaries because of the death of the transferor. Decedent had no legal incidents of ownership in the life insurance policies valued at $82,970.64 and included for estate tax purposes. Transfers made within two years of decedent’s death were not made in contemplation of death.

6.In a revenue agent’s report on that claim, dated September 16,1949, it was recommended that the claim be allowed in the amount of $1,228.17 and rejected for the balance. The proposed allowance did not result from any adjustment proposed in the claim for refund. With respect to the claim, the following statement appears in that report:

Claim, Form 843, filed December 16, 1946 [1948] for refund of Federal estate tax resulting from the inclusion of proceeds of insurance policies in decedent’s gross estate is rejected. At the time of decedent’s death, he possessed incidents of ownership which were never released by the amendments to the respective insurance policies. Said policies were properly included in decedent’s gross estate pursuant to Section 811 (g) (2) I. K. C.

On September 8,1949, the Acting Internal Kevenue Agent advised the plaintiffs that the claim for refund referred to above was allowed for 1,301.18 and rejected for the balance.

7.The three insurance policies, referred to in finding 4, were issued on July 13,1939, on the life of Louis Goldstein. The applications for policies numbered 1331135 and 1331136 were signed by Louis Goldstein, the decedent, as the “applicant”, these applications being dated June 30, 1939. These applications contained, at the bottom of the left-hand side, a block with the following statement at the top thereof:

This application is made at the instance and request of the undersigned, who will pay the premiums out of his, her or its funds, and who ratines the foregoing representations, statements, answers and agreements.

There is then space for a signature with the following statement: “Signature of person who will pay the premiums.” The application for policy numbered 1331135, in the amount of $25,000, named Frances Figler, daughter of decedent, as primary beneficiary, and her signature appears in the block above mentioned. The application for policy numbered 1331136, in the amount of $40,000, named Lillian Furst, decedent’s daughter, as primary beneficiary, and her signature appears as the person who will pay the premiums. Frances Figler and Lillian Furst signed the applications at or about the same time as Louis Goldstein, the decedent.

No separate application was made for policy numbered 1331137 as explained later.

8. After these applications had been signed and before the policies were issued, the decedent, Louis Goldstein, filed an amendment of his application with respect to policies numbered 1331135 and 1331136. The application, signed by Louis Goldstein, stated as follows:

I agree to this policy being issued with ownership and the privilege to change the beneficiary vesting in the beneficiary, except that during the lifetime of Louis Gold-stein, the insured, his written consent must first be obtained.

With respect to policy numbered 1331137, for which no separate application was filed but which was issued naming Frances Figler as beneficiary and in the amount of $15,000, the decedent filed an amendment to the application filed on June 30,1939, stating as follows:

I agree to accept an additional policy for $15,000.00 with ownership and the privilege to change the beneficiary vesting in the beneficiary, except that during the lifetime of Louis Goldstein, the insured, his written consent must first be obtained.

9. When the three above-mentioned insurance policies were issued each contained the following typewritten provision :

Section A.
Beneficiary and Ownership Provisions.
A 1. Ownership. The beneficiary herein named may exercise every right and receive every benefit reserved to the insured or the owner of the policy, including the right of assignment, and including the privilege to change the beneficiary, and may agree with the Company to any change in or amendment of the policy without the consent of the insured, except that during the lifetime of Louis Goldstein, the insured, his written consent must first be obtained.

It was further provided in policies numbered 1331135 and 1331137 with respect to “Beneficiary” that “The net sum payable on the death of the insured shall be paid to Frances Figler, his daughter, her executors, administrators or assigns”. The policy numbered 1331136 contained a similar provision with respect to Lillian Furst.

10. All the premiums on the above three policies were paid by the decedent. No attempt was ever made, prior to the decedent’s death, by either of the beneficiaries named in the policies to exercise any rights under the policies.

11. The parties have stipulated that the proceeds of policy numbered 1330315, also issued by the Union Central Life Insurance Company, in the amount of $5,190.35 were properly includible in the decedent’s gross estate. The plaintiffs included the proceeds of this policy in the estate tax return as a part of the decedent’s gross estate.

CONCLUSION OF LAW

Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes that as a matter of law the plaintiffs are not entitled to recover, and the petition is therefore dismissed.  