Rauh v. Commissioner , 19 B.T.A. 993 ( 1930 )

EDWIN S. RAUH, EXECUTOR, ESTATE OF A. L. RAUH, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Rauh v. Commissioner

Docket No. 18459.

United States Board of Tax Appeals

19 B.T.A. 993; 1930 BTA LEXIS 2282;

May 19, 1930, Promulgated

---

ESTATE TAX - INSURANCE. - Proceeds of life insurance policies in which the insured reserved the right to change the beneficiaries were properly included in the gross estate. Chase National Bank, v. United States,278 U.S. 327">278 U.S. 327; Louis M. Weiller et al.,18 B.T.A. 1121">18 B.T.A. 1121, followed.

Joseph S. Rosenbaum, Esq., for the petitioner.

W. F. Gibbs, Esq., for the respondent.

---

MURDOCK

The Commissioner determined a deficiency of $2,562.82 in estate taxes. The petitioner alleges that the Commissioner erred in including in the gross estate of the decedent the proceeds in excess of the $40,000 exemption, of certain life insurance policies paid to specific beneficiaries.

FINDINGS OF FACT.

The petitioner, a resident of Pittsburgh, Pa., is the executor of the estate of A. L. Rauh, who died January 27, 1924. During his lifetime A. L. Rauh procured various policies of life insurance upon his own life. Each policy contained a provision permitting the insured to change the named beneficiary. The last named beneficiaries of these policies were a son, Edwin S. Rauh; the son Edwin S. Rauh in trust for Birdie Rauh Sunstein, a minor granddaughter; and Amiee M. Rauh, a minor granddaughter. The proceeds of the policies were paid directly to the beneficiaries. The following table shows the name of the insurance company, the number and date the policies were taken out, the beneficiaries named, the date of change and the names of the new beneficiaries, and the amount of the proceeds of the policies.

Company	Policy	Taken out	Beneficiary
	No.
N.Y. Life Ins. Co	3117318	Feb. 1, 1901	Edwin S. Rauh and Birdie
			Rauh Sunstein
Do	329288	July 1, 1902	do
Reliance Life Ins	322	Dec. 18, 1903	Edwin S. Rauh and Aimee
			Rauh Sunstein
Mutual Life Ins. Co. of N.Y	1573214	Mar. 20, 1905	do
Do	1573216	do	do
Do	1739131	June 3, 1908	do
Do	1842409	Apr. 20, 1910	do
Berkshire Life Ins. Co	79221	Dec. 19, 1908	do
Nat'l Life Ass'n of Des	8948	Jan. 12, 1907	Wife
Moines, Iowa
Northwestern Mut. Life	250274	Feb. 13, 1892	Edwin S. Rauh and Aimee
Ins. Co			Rauh Sunstein
Do	643244	Dec. 8, 1905	do
Do	723906	Nov. 29, 1907	do
Equitable Life Assurance	167790	June 7, 1903	do
Society of the U.S
Do	940010	Oct. 2, 1899	do
Do	2495903	Sept. 21, 1919	do
Do	3003818	July 21, 1922	Aimee M. Rauh
Total proceeds
The Commissioner allowed
the specified exemption of
And determined the
deficiency upon the balance of

		Beneficiary changed
Company	Date	To -	Proceeds
N.Y. Life Ins. Co	Nov. 15, 1923	Edwin S. Rauh	$10,020.00
Do	do	do	5,010.00
Reliance Life Ins	Nov. 19, 1923	do	10,000.00
Mutual Life Ins. Co. of N.Y	Nov. 16, 1923	do	3,035.86
Do	do	do	3,035.86
Do	do	do	10,124.92
Do	do	do	5,072.08
Berkshire Life Ins. Co	Nov. 17, 1923	do	15,173.55
Nat'l Life Ass'n of Des	Nov. 27, 1923	do	4,000.00
Moines, Iowa
Northwestern Mut. Life	Nov. 17, 1923	Edwin S. Rauh in trust	5,000.00
Ins. Co.		for Birdie Rauh Sunstein
Do	do	do	5,000.00
Do	do	do	5,000,00
Equitable Life Assurance	Nov. 21, 1923	do	3,320.00
Society of the U.S
Do	do	do	10,037.57
Do	do	do	5,041.33
Do			5,033.50
Total proceeds			103,904.67
The Commissioner allowed
the specified exemption of			40,000.00
And determined the
deficiency upon the balance of			63,904.67

OPINION.

MURDOCK: The issue before the Board is whether the proceeds, in excess of the $40,000 exemption, of certain life insurance policies paid to the named beneficiaries, were properly included in the gross estate of the decedent under the Revenue Act of 1921, the effective statute at the date of the decedent's death. The beneficiaries of these policies had been named subject to the power of revocation retained by the insured. The pertinent provision of the 1921 Act reads:

SEC. 402. That the value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated -

* * *

(f) To the extent of the amount receivable by the executor as insurance under policies taken out by the decedent upon his own life; and to the extent of the excess over $40,000 of the amount receivable by all other beneficiaries as insurance under policies taken out by the decedent upon his own life.

The petitioner, basing his argument on the construction of the above section of the statute, contends that as fourteen of the policies were taken out prior to the Revenue Act of 1918, in which the above section (in identical language) appeared for the first time, the proceeds of these policies should not be included in the gross estate of the decedent, and the proceeds of the other two policies, taken out after the effective date of the 1918 Act, come within the $40,000 exemption after the exclusion of the proceeds of the first fourteen policies. He cites ; ; ; ; ; .

The respondent contends that if the decedent at the time of his death held any of the incidents of ownership in the policies, then the proceeds in excess of $40,000 were properly included in the gross estate, and it makes no difference when these policies were taken out. He cites , as decisive of the issue.

The opinion of the Supreme Court in , and the opinion of the ) which was affirmed, reveal a pertinent fact, namely, that Frick, the insured, had irrevocably named the beneficiaries or assignees of the policies there involved. This fact distinguishes the case from the case of , in which the insured retained the right to change the beneficiaries right up to the time of his death. In ;; and , the Board followed the Frick case. But in those cases the findings of fact do not show that the insured reserved the right to change the beneficiaries. The present case, where the decedent reserved the right to change the beneficiaries up until the time of his death, is controlled by the Chase National Bank case. See also ; ; ; ; Means v.United States, decided Court of Claims, April 7, 1930.

Judgment will be entered for the respondent under Rule 50.