The opinion
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
*2282 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 ; Louis M. Weiller et al., 18 B.T.A. 1121 , followed.
Joseph S. Rosenbaum, Esq., for the petitioner.
W. F. Gibbs, Esq., for the respondent.
MURDOCK
*993 The Commissioner determined a deficiency of $2,562.82 in estate taxes. The petitioner alleges that the Commissioner erred in including *994 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 *2283 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.
*995
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
*2284 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
*996 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 *2285 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 *2286 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. *2287 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 *997 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.