T H E T A X CONSEQUENCES O F " K E Y MAN"
AND P A R T N E R S H I P L I F E
CHARLES L ,
INSURANCE
SALOMON
THE TAX CONSEQUENCES OF "KEY MAN"
AND PARTNERSHIP LIFE INSURANCE
One of the oldest uses of life insurance in business is the indemnification off the business enterprise
against financial loss resulting from the death of a
I
KEY employee.
In its ordinary narrow connotation, "Key
man life insurance is viewed as a corporate tool, much
like fire or other types of indemnity coverage, which
is used as a hedge against the loss of an important
£
asset„ but the term has a broader application as it is
so well suited to certain business purposes.
In the
broad area key man insurance is in effect business continuation insurance„
It is a source of liquid funds
when a business enterprise can calculate a definite
need for them and is used to keep the business £is s @ its
together.
In this context it applies equally to the
partnership and to the corporate, mainly small and medium
sized, business structures.
The motive, whether in a
corporate or partnership context is basically the same,
namely to protect the investment of the other Joint
owners in the going concern.
The difference in the
legal structure of the corporation and that of the partnership require different considerations but even though
different routes are taken they often reach the same
tax result.
PREMIUMS
In Generalt
As a general rule, life insurance premiums are not
deductible if the taxpayer has any interest in the policy
or proceeds.
The Internali Revenue Code specifically
provides that no deduction shall be allowed for.....
"(1) Premiums paid on any life Insurance policy
covering the life of any officer or employee, or of any
person financially Interested in any trade or business
carried on by the taxpayer, when the taxpayer is directly
3
or Indirectly a beneficiary under such policy,"
The rule under
(a)(1) is an "all or nothing" rule.
Sec. 26k (a)(1) of the Code "does not limit the deduction In ratio to the degree of the employer's involvement as a beneficiary under the policy, but Instead provides for total disallowance„"
In other words, even if
the taxpayer has a right to receive only a portion of the
proceeds or is an indirect beneficiary because he has
5
the power to exercise certain incidents of ownership
during the insured's life, the entire premium is nondeductible*
There is no question that the prohibition of Sec„
26^ (a)(1) applies when the taxpayer is designated as
beneficiary in the policy.
For example, in ordinary
"key man" insurance the employer is normally both the
owner and beneficiary of the policy and therefore the
premium payments are clearly nondeductible by reason
of Sec. l6V(a|(l).
But Sec. 26k (a)(1) also applies
when the taxpayer is an indirect beneficiary which will
be discussed subsequently.
It should be noted though
that the deduction will not be denied merely because
the employer may derive some benefit Indirectly from
G
the increased efficiency of the employee.
Even if the taxpayer manages to avoid the prohibition of Sec, 26k (a)(1), if he has an interest in the
policy it will probably be barred on other grounds. Thus,
they may be denied ass they are not ordinary and necessary
7
business expenses with in the meaning of Sec„ 162 (aK
els being expenses incurred to obtain tax-exempt income
(death proceeds) and consequently are nondeductible
under Sec. 265 (1)? as constituting capital expenditures
and therefore are not an expense.
It should be noted that life insurance, unlike
other types of casualty insurance„ is purchase to cover
an event that is certain to occur.
The Partnership
The problem of when is th e taxpayer an indirect
beneficiary has been broken down into the different
types of business enterprises.
Under the Code the
partnership is not itself a taxable entity.
The taxpayer(s)
are the persons carrying on the business as partners in
7
their separate or Individual capacities.
This caused
quite a lot of early litigation on the question of who
was a beneficiary, direct or indirect, under Sec, 26k (a)
(1) and Its forruners.
The Internal Revenue Service has
been quite successful in disallowing the deduction of
partnership life insurance premiums and the answer to a
questibn of whether premiums paid by a partnership, or
by a partner, for Insurance on the life of a co-partner
are deductible is almost a universal NO, regardless of
who is named beneficiary of the proceeds.
In each
instance, the Insured partner is a person financially
Interested in the business of the partner who is paying
the premiums.
The scope of the term direct or indirect
beneficiary under Sec. Z6b (a)(1) is not limited to the
person named in the policy, but may include one whose
interests are "indirectly favorably affected thereby*"
When the policy or policies are purchased inorder
to protect the partnership investment by keeping it in
tact, the premium paying partner will benefit from the
policy.
ance„
This is the purpose of most partnership insurIt can take a form, much like "key-man"' coverage,
when one partner insures his own life naming his co-partner (s) as irrevocable beneficiary (s) and vesting in
them all of the Incidents of ownership in order to
induce the co-partner to maintain his investment in the
partnership, the insured partner is indirectly a beneficiary under the policy.11 The insured's benefit is
the continued participation of his co-partner in the
business.12
The deduction of premiums for life insurance,
on the life of a partner to insure repayment of a loan
has also been denied along the same grounds.
One of the main objects of partnership insurance
is to hold together the assets of the firm and pass them
to the surviving partners intact,
A good analysis of
a typical situation is discussed in the Keefe Case.
In this case each partner took out a policy on his own
life naming his co-partners as irrevocable beneficiaries
without retaining any rights in the policy.
This was
done pursuant to a partnership agreement that required
the proceeds from the policy and certain cash on hand
be paid into the insured's estate in complete satisfaction of the deceased insured's interests in the business.
Each partner was to pay the premiums on the policy on
his own life.
The court states that this situation must
be "viewed as a whole" and that each partner was an indirect beneficiary because of the reciprocal nature of
their agreement even though taken separately they would
not appear to be beneficiaries.15
-6-
It is not necessary
to be "the" beneficiary but Just "a" beneficiary and
as these policies are part of an interdependent reciprocal arrangement they do receive definable benefits. 16
It makes no difference whether the policies are assigned
to the partnership, who pays the premiums,17 or whether
18
a co-partner pays the premiums.
It should be noted
that the taxpayer is considered to be a "a person financially interested" in his own business under Sec. 26k
(a)(1).
The opening statement of this section might be regarded as too broad as there might possibly be exceptions
to the application of Sec. 26k (a)(1) in the partnership
use of business life insurance.
There might very well
be circumstances that would fall under a literal reading
of this section but be outside its intended purpose and
as Judge Learned Hand put it "There is no more likely
way to misapprehend the meaning of languageu... than to
read the words literally, forgetting the object which the
document (statute in this situation) as a whole is meant
to secure." 20 There is no rule of law forbidding resort
to explanatory legislative history no matter how clear
the statute appears, 21 But there is nothing to indicate
what Congress meant except the words themselves
in
x
Sec 9 l6k (a)(1) as this provision has been in the law
for many years without comment B 22
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U.4.
The Corporationi
As a general rule a corporation cannot deduct the
premiums it pays on "key man" life insurance as it is
usually both owner and beneficiary of the policy, so the
deduction is disallowable by reason of Sec. 26^ (a)(1)
of the Codej but some problems are presented where the
insurance has a duel purpose or where the beneficiary
is revocably or irrevocably someone other than the corporation.
Deductions have
been disallowed, under Sec. 26k
(a)(1), where the taxpayer is only indirectly a beneficiary
under the policy.
Where the corporation had control of
the policy it had taken out on the life of the "key man"
and could have surrendered the policy and received the
cash surrender value the corporation is a beneficiary„^
The Internal Revenue Service has ruled that an employer
who purchases a life insurance policy for key employees
in order to retain their services may not deduct the premiums during the period the employer has any interests in
the policy.2^ This has long been the rule, as in the Omaha
Elevator Co.
Case25
where the corporation had control of
the policies on the lives of its employe® and could not
deduct the premiums even though it had entered into a
binding agreement with them where the employee designated
the beneficiaryo
The Court held that the corporation
could cancel, receive cash surrender value or make loans
on the policies and this control made it a beneficiary
under the terms of Sec. 164 (a)(1),
Similary, a tax-
payer has been deemed to be an indirect beneficiary of
a policy where it was assigned as security for the corporate debt,2^
A deduction will probably also be denied for premiums paid under a "key man" policy where the stockholders are named as beneficiaries.
An early ruling held
that the corporation was an indirect beneficiary^but
there is some question in this area as the Internal
Revenue Service has declared this ruling to be obsolete
po
although "not specifically revoked or superseded".
Alsoe where the stockholder pays premiums on the life of
a "key mian" and the corporation is the beneficiary the
premiums are still not deductible to anyone as the business of the corporation is not the business of the stockholders j 2 ^ and therefore the stockholder is not carrying
on any trade or business within
the meaning of Sec, 162
(a).3°
A deduction will be disallowed, also, where the
insured is a stockholder and the proceeds are to be used
to fianace a redemption of the insured's stock, even
though the corporation may have no right to the cash
value of the policy, and no right to name or change the
beneficiary,^1
The deduction is disallowable because
-9-
the premium payments are not ordlnai*y and necessary
business expenses,-^
TAX LIABILITY OP THE INSURED
Generally speaking, the premiums are not taxable
to the insured if the insurance is purchased for the
benefit of the business and the Insured has no interest
in the p o l i c y . a
somewhat similar result is reached
when the insurance is on the life of a stockholder but
is used to fund a stock redemption agreement.
The pre-
miums are not taxable to the insured provided the beneficiary's right to receive the proceeds is conditioned
upon the transfer of his stock to the corporation,-^
There is no distribution to the stockholder.
On the
other hand, where the proceeds were paid to fund a stock
purchase agreement between the individual stockholder*6
3<
it has been ruled that these were dividends.JJ
The same general rule applies whether the business
is a corporation or a partnership, even though the cases
concern the corporate entity.
The taxation of partner-
ship as a group of individuals rather than a entity 36
avoids many of the problems raised in regards to corporations.
A much more difficult problem is presented by the
Casctle Case37 where the insured was' president of the
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corporation and its major stockholder (98%). The corporation was both owner and beneficiary or a retirement
income contract on the president's life which the corporation had purchased to hedge its obligations to the
insured under a deferred compensation agreement.
The
Tax Court held that the premiums paid by the corporation
were additional compensation and therefore taxable
income to the insured.
They were not deductible by the
corporation as it had beneficial interests in the policy.
But on appeal the tax court was reversed on the grounds
that as long as a corporation was not a sham and alter
ego of the president the corporation's separate entity
could not be ignored.
The Court also found that the
insured had received no current economic benefit which
would constitute taxable income but this is questionable
as upon maturity of the policy the insured had a vested
right in benefits.
There is another possibility, in
similar circumstances the Internal Revenue Service considers the proceeds rather than the premiums to be taxable income aisdthis might be applied whether it's held
to be a dividend or compensation.^
further in the proceeds section.
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This is discussed
TAXATION OF DEATH PROCEEDS
In Generals
As a general rule, the entire lump sum payable to
any beneficiary by reason of insured's death Is exempt
from income tax whether the beneficiary is an individual,
a corporation, a partnership, a trust, or insured's
kf)
estate.
u
It should be noted that the Code expressly
provides that the proceeds are taxable, under some circumstances, namely where the policy has previously been
sold or otherwise transferred for a valuable consideration>
There is also danger that the death proceeds may
be considered taxable income from a wagering contract
instead of tax-exempt life insurance proceeds,
insur-
able Interest is determined by the law of the various
states.^
it
faily well settled though that a corp-
oration has an insurable interest in its key employees.^
The Partnership
When a partner receives the death proceeds of a life
insurance policy on the life of a co-partner they are
excluded from his income.^
Proceeds received by a part-
nership retain their tax-exempt character when passed on
to the individual partners.^
It makes no difference
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-ilO
whether the partner or the partnership is a transferee
for value.
The transfer-for-value exception of Sec. 101
(a)(2)(b) applies where the policy is transferred to a
partner of the insured or to a partnership in which the
insured is a partner.
Moreover, if a policy is trans-
ferred more than once, and the last transfer is to a
partner of the Insured, or to a partnership In which the
Insured is a partner, the proceeds will be entirely
tax-exempt regardless of any previous transfer for value
This would allow th^artners to set up a cross-purchase
agreement funded by life insurance even if one partner
was uninsurable at the time of the agreement by allowing
him to transfer any policy previously taken out on his
life, even if it had been owned by a third person, and
have; the proceeds retain their tax-exempt status.
The Corporation
The corporation presents a more complicated picture
than does the partnership because of the "separate entity"
theory.
In the simple "keyman" situation, the corporation
is both owner and beneficiary of the policy and under
Sec. 101 the proceeds would be tax-exempt,,in the hands of
the corporation.
A corporation can also take advantage
of the transfer for value exception where the insured is
a stockholder or officer of the corporation in-'much the
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same manner as the partnership, but not if the insured
is a non-officer employee or director.
Also, it is
doubtful whether the holder of a few qualifying shares
would be considered a "shareholder" or whether a person
who is only nominally an officer, with no real executive
authority or duties would be considered an "officer".**8
The regulations do not define the terms "shareholder"
and "officer" for this purpose.
It should also be noted
that the transfer for value exception does not apply
between co-stockholders or co-officers or from the corporation to any person not the insured.
The difference between the partnerships treatment
and that of the corporation Is most evident when for some
reason the corporation finds it desirable to distribute
the death proceeds.
Once proceeds have been received
tax-free by the corporation they lose their tax-exempt
character as life insurance proceeds.
Therefore, if
the corporation distributes the proceeds to its shareholders, the shareholders will be treated as having
received a taxable dividend.^9
Also, if the insured
is an employee and the proceeds are paid to his widow
or other personal beneficiary, they may be treated as
50
compensation for services.-'
If the corporation can foresee that it will desire
to distribute the death proceeds to the shareholders,
it can attempt a tax free distribution.
On one hand,
if the corporation receives the proceeds and distributes
uj jve/?.e
them it is taxable but, if, on the other extremeTTthe
corporation has no ownership rights in the policy and
is not the beneficiary, the proceeds should be received
tax free by the beneficiary as life insurance proceeds.^1
Under these circumstances, the payment of premiums by
the corporation on policies owned by the stockholders
was the taxable distribution, not the payment of the
death proceeds, even if paid through a trustee as a conduit,
But when the corporation choses the middle
ground there is some conflict in the cases.
In the
Golden C a s e „ t h e corporation entered into a contract
with and delivered unmatured insurance policies to a
trust company, who agreed to collect the proceeds and
distribute them to the stockholders.
The Court conceded
that the proceeds were life insurance proceeds but said
that they were also in the nature of dividends and,
possibly because the corporation had retained some interests in the policies, the dividend label was placed
on themu
The Ducros C a s e r e a c h e d
conclusion,,
Just the opposite
In this case the corporation owned the
policy and the individual stockholders were named as
revocable beneficiaries in the policy.
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The Court held
that the proceeds, received directly by the shareholders
from the Insurance company, were life insurance proceeds
and, therefore, tax exempt.
The Internal Revenue Service
has announced its refusal to follow the Ducros
Case.
"It is the position of the Service that life
insurance proceeds paid to stockholders of a
corporation are taxable as dividends in cases
where the corporation uses its earnings to pay
the insurance premiums and has all incidents of
ownership including the right to name Itself
beneficiary, even though the corporation does
not name itself beneficiary and therefore, is
not entitled to and does not in fact receive
the proceeds.
57
The view in the Golden Case
one.
probably is the correct
The Court in Ducros^^distinguished the Golden Case"^
pn account of the trust arrangements but this should not
make any difference.^0
The Court in Golden^held that
a corporation cannot make a gift to its shareholders and
any receipt of funds caused to flow from the corporation
to the shareholders "out of its (the corporation's) earnings or profits accumulated after Feb. 28, 1913" are dividends?2 The tax free distribution of earnings is obviously
opposed to the statute but by allowing the proceeds to go
-16-
untaxed the Court has done exactly that.
The premium
payments were not taxable as distributions as the corporation had control over the policy and could cancel
the policy, borrow, or change the beneficiary so no
economic benefit had accrued to the stockholders.1 In
dicta the Court in Pucros^3 indicates that possibly the
cash surrender value might be taxed but the point in
time when the stockholders became irrevocable beneficiaries was at the death of the insured and at that time
the cash surrender value was equal to the proceeds.
Therefore, the proceeds should be the value of the distribution received by stockholders under such circumstances . ^
TAXATION -OF THE PROCEEDS OF BUSINESS LIFE INSURANCE
IN THE INSURED'S ESTATE
The Partnership
Where the co-partners of the insured is the complete
owner and beneficiary of a policy of life insurance,
the proceeds are not includable in the estate of the
insured as he has no interest in the policy.
The pro-
blem in regards to partnership insurance is presented
when the partnership rather than the individual partners
is the absolute owner and beneficiary of the policy.
It then can be contended that the insured partner has
-17- •
"incidents of ownership" exercised "in conjunction with
any other p e r s o n s n a m e l y his co-partners, but some
early cases^ have held, that where the partnership is
the aboslute owner and the insured has none of the
"incidents of ownership" except through the partnership,
that the proceeds are not includable but these cases
deal primarily with the "payments of premiums test"
applicable to estates of decedents dying before Aug. 17,
195^.
It appears that the Internal Revenue Service will
only include such proceeds of life insurance received by
the partnership by Including them with other partnership
assets in determining the value of decedents partnership
interest for estate tax purposes.
If the insured has
personal incidents of ownership in the policy the entire
value of the proceeds will be includable in his gross
estate,^
Some costly errors can be avoided by carefully
planning the purchase and use of partnership life
insurance, as the actions taken can most effect the
estate tax consequences of such use.
Where the part-
nership is simply insuring Itself against the loss of
i
a "key man", it should strive to keep as much of the
proceeds as possible out of the deceased insured's
estate.
When the partnership is absolute owner and
beneficiary, the proceeds will be considered a
-18-
partnership asset and decedents pro rata share will fall
into his estate.
The premiums will not be deductible,
whether the partnership or the individual partners pay
them and the proceeds will not be taxable as income under
Sec. 101.
So where the object of the purchase is to
compensate the insured's co-partners upon his death,
the partners should consider removing the policies from
the partnership to the ownership of those intended as
beneficiaries, insured's co-partners.
None of the pro-
ceeds, assuming the insured possessed none of the incidents
of ownership, would fall into the insured's estate.
But in many Instances, partnership insurance is
intended to supply funds fo r the purchase by the remaining partner^
of the deceased partner's interest in the
partnership and is reciprocal in nature.
If, under sucft
an arrangement, the proceeds are not payable to insured's
68
estate, and the insured has no incidents of ownership
in the policies on his life, the proceeds are not
includable in his gross estate.^
It should be noted that the value of any unmatured
policies that the deceased owns on the life of his
co-partners will be includable in his gross estate along
with his interest in the partnership.
If the proceeds are payable to the insured's
estate, or if the insured has any of the incidents of
-19-
ownership in a policy on his life, the proceeds are
includable in his gross estate.
However, where the
proceeds are includable in the gross estate but the
estate is obligated to apply them to the purchase price
of the insured's business interest, the value of the
business interest will be includable in the gross estate
only to the extent that it exceeds the value of the
proceeds.
Therefore, both the business interests and the
proceeds are not taxed and double taxation is avoided.
Case law has established rules whereby under certain
conditions, business purchase agreements can be used to
fix the value of a partnership interest or close corporation stock for estate tax purposes but it is beyond
the scope of this paper.
The Corporation
In many respects the inclusion of death proceeds
of "key man" insurance in the estate of the Insured is
much like that of the partnership where the insured is
a noncontrblling stockholder or officer.
Where the
key-man is only an officer and the corporation is the
absolute owner and beneficiary there is no grounds for
Including any of the proceeds in the insured's estate.
-20-
In the case of a non-controlling stockholder, the proceeds will be included as a corporate assets in determining the value of his stock? consequently, like the
partnership ownership, only a pro rata share of the
value of the proceeds, proportionate to his stock ownership will be included in his gross estate.
The entire
value of the proceeds, will be included as a corporate
asset.^
Note that it may be possible to obtain some
reduction in the value of the stock to reflect the loss
to the business of the key man"s services.^2
A much more complicated problem is presented when
' the officer-stockholder is the controlling shareholder
as is usually the case in a closely held corporation.
The indirect possession cf ownership rights by the insured
may cause the proceeds to be included in his gross
estate.
Thus, the regulations state that the term
"incidents.of ownership" includes a power to change the
beneficiary reserved to a corporation of which the
decedent is the sole stockholder.^
(
In the case of a
100$ stockholder, it makes no difference whether the
amount of the proceeds is Included in the gross estate
as insurance or as a part of the value of the stock,
but what happens when the controlling stockholder is
not the sole stockholder of the corporation.
The
-21-
428
Internal Revenue Service ruled?1* that this regulation
is applicable in any circumstance where the insured
decedent could exercise voting control of the corporation,
and pointed out that while "the 100$ ownership situation
provides the clearest example of a circumstance under
which an insured decedent had the power to exercise
incidents of ownership in a policy of Insurance owned
by his company, it is not the only situation In which
decedent's ownership of stock will include control of
incidents of ownership possessed by a corporation;, to
the contrary, the regulation is applicable in circumstances where the insured decedent, or his estate, could
exercise voting control of the corporation despite the
combined votes of all of the other stockholders.
Thus,
according to this ruling, the entire proceeds of a policy
of insurance on the life of a controlling stockholder,
although the insurance is owned by and payable to the
corporation, are includable in the insured's gross estate.
The result in the revenue ruling example would cause
100$ of the proceeds to be included In the deceased
insured stockholder's gross estate as insurance on the
life of decedent even though the insured only owned
75$ of the corporate stock.
The ruling states that if
the proceeds are included in the insured's gross estate
as insurance, they should not be reflected in the value
-22-
of the insured's stock and that the actual percentage
of stock needed for "control" will depend upon the respective state laws but the meaning of "control" was not
otherwise defined though the ruling mentions the power
to cause dissolution of the corporation which would
effectuate a cancellation or distribution of the insurance policy and the power to elect the officers and directors which would allow the exercise of the incidents of
ownership without the necessity of acquiring the policy
itself.
The Internal Revenue Service has had second thoughts
about this ruling
insofar as it includes "incidents of
ownership" as a power to change the beneficiary reserved
to a corporation of which the insured-decedent is in
75
control has withdrawn it pending reconsideration.
Depending on the subsequent ruling of the Internal Revenue
Service this area will likely fcesult in some future
litigation.
-23-
FOOTNOTES
1.)
S. P. Simmons, Federal Taxation of Life Insurance,
P. 117, A.L.I.-A.B.A. Taxation/Practice Handbook,
(1966).
2.)
W. M. Goldstein, Tax Aspects of Corporate Business
Use of Life Insurance, 18 Tax L, Rev? 133,(1963).
3.)
Internal Revenue Code Sec. 261+(a)(l).
)
Rev. Rul. 66-203, 1966-2 Cum. Bull. 10^.
5.)
"Incidents of ownership" is not defined in this
paper but a concise discussion appears in Simmons
supra note 1 at p. 20.
6.)
Internal Revenue Reg. Sec. 1.26^-l(b).
7.)
Joseph Nussbaum, 19 B.T.A. 868 (1930).
8.)
Rev. Rul. 70-117, 1970-1 Cum. Bull. 308 Merrimac
Hat Corp., 29 B.T.A. 690 T W 5 k T °
9.)
Internal Revenue Code Sec. 701.
10.) J. H. Parker, 13 B.T.A. 115 at 116 (1928).
11.) Internal Revenue Reg. Sec. 1.26^-1(b).
12.) Rev. Rul. 73, 1953-1 Cum. Bull. 63.
13.) Alexander E. Yarnell, 9 T.C. 616 ( 1 9 W » aff'd per
curiam, 170 F.2d 272 (3d Clr., 19^8), 37 A.F.T.R. 355.
1^.) Ernest J. Keefe, 15 T.C. 9^7 (1950).
15.) Nussbaum, supra note 7.
16.) Keefe, supra note l*k
17.) Clarence W. Mc Kay, 10 B.T.A. 9^9 (1928).
18.) Yarnell, supra note 13.
19.) Internal Revenue
\
Sec. l„26^-l(a).
20.) Central Hanover Bank & Trust Co. v. Commissoner
of Internal Revenue, 159 F.2d 167 at 169, 35 A.F.T.R.
652 (2d Clr., 19^7)o
Harrison v. Northern Trust Co., 317 U.S. 476 (1942).
Yarnall, supra note 13.
Wilcox Investment Co., 3 T.C. 458 (1944).
Rev. Rul. 66-203, supra note 4$ Rev. Rul. 70-148,
1970-1 Cum. Bull. 60.
Omaha Elevator Co., 6 B.T.A. 8i7 (1927).
Peerless Patern Co., 29 B.T.A. 767 (193*0.
0. D. 659, 3 Cum. ftull. 192 (1920).
Rev. Rul. 69-661, 1969-2 Gwm. Bull. 265.
Burrnett V. Clark, 287 U.S. 410 (
).
Mary E. Cappon, 28 B.T.A. 357 (1933).
Rev. Rul. 70-117, 1970-1 Cum. Bull. 30.
Atlas Heating and Ventilating Co,, 18 B.T.A. 389 (1929)
Edward D. Lacy, 4l T.C. 329 (196*0, acq. 1964-2 Cum.
Bull. 6.
Rev. Rul. 59-184,1959-1 Sum. Bull. 65? Prunier v.
Commissioner of Internal=5?£venTre-r 248 F.29 818,
52 A.F.T.R. 093, (1st Clr., 1957).
Atlas Heating and Ventilating Co., supra note 32,
Code, supra note 9,
Casale v. Commissioner of Internal Revenue, 247 F.2d
440, 52 A.FoT.R. 122 (2d Clr,, 1957).
Rev. Rul0 59-184, 1959-1 Gum. Bull. 65.
Rev„ Rul. 61-134, 1961-2 Cum. Bull. 251.
^0.) Internal Revenue Code Sec. 101(a)5 Internal
Revenue Reg. Sec. 1.101-l(a)§ United States v.
Supplee-Biddle Hardware Co., 265 U.S. I89.
lH.) Internal Revenue Code Sec. 101(a)(2).
^2.) Internal Revenue Code Sec. 101(a)(2)(B).
^3.) Ducros v. Commissioner of Internal revenue, 272 F.2d
^A.F.T.R.2d 2855(0th Clr. , 1959).
kk.) United States v. Supplee-Biddle Hardware Co, supra
note 40; Emelold Co. v. Commissioner of Internal
Revenue, I89 F.2d 230(3rd Clr., 1951).
^5.) Code, supra note ^0,
Internal Revenue Code Sec„ 702(b).
^•7.) Internal Revenue Reg. Sec. 1.101-l(b) (3).
k8.) Rev. Rul. 68-300, 1968-1 Cum. Bull. 159.
^9.) Cummings v. Commissioner of Internal Revenue, 73F.2d
^77J
A.F.T.R. 736 (1st Cir.v 193*0§ Isaac May,
20 B.T.A. 282 (1930)? Rev. Rul. 71-79, 1971-1 Cum.
Bull. 112.
50.) Salmonson v. United States, 11 A.F.T.R.2d 1568 (D.C.
Wash. 2963)$ but see Rhodes v. Gray, k A.F.T.R.2d
5382 (D.C. Ky., 1959) and Rev. Rul. 55-63, 1955-1
Cum. Bull. 227*
51.) Code, supra note kOi Doran v. Commissioner of Internal
Revenue, Zk6 F.2d 93^. 52 A.P.T.R.
(9th Cir., 1957).
52.) Doran, supra note 51.
53.) Golden v. Commissioner of Internal Revenue, 113 F.2d
590, 25 A.F.T.R. ^29 (3rd Cir., 19^0).
54.) Ducros, supra note
55.) Ducros, supra note kj,
56.) Rev. Rul. 61-13^, 1961-2 Cum. Bull. 250.
57.) Golden, supra note 53.
428
:OU
58.) Ducros, supra note 43.
59.) Golden, supra note 53.
60.) Doran, supra note 51.
61.) Golden, supra note 53.
62.) Internal Revenue Code Sec. 316(a)(1).
6 3 . ) Ducros, supra note 43.
64.) Rev. Rul., supra note 56.
6 5 . ) Internal Revenue Code Sec. 2042 (2).
66.) Estate of Frank H. Knipp, 25 T.C. 153 (1955); Estate
of George Herbert Atkins, 2 T.C. 332 (1943).
6?.) Code, supra note 655 Hall v. Wheeler, 174 F.Supp.
4l8„ 4 A.F.T.R.2d 6032 91959)? Estate of Grant H.
Piggott, T.C. Memo. 1963-61, aff'd 340 F.2d 829,
15 A.F.T»R.2d 1310 (6th Clr,, 1965).
68.) Note Howard F, Infante, T.C. Memo 70,206 (1970),
In this case the Tax Court held that a provision in
69.) the agreement which prohibited the policy owner
from surrendering the policy, borrowing aganist
the policy, or changing the beneficiary of the policy
with out the insured's consent did not give the
insured incidents of ownership in the policy.,
70.) Estate of Ray E. Tompkins, 13 T.C. 1054 (1949),
acq. in 1950-1 Cum. Bull. 5.
71.) Estate of D. J. Kennedy, 4 B.T.A. 330 (1926).
• 72.) Rev. Rul. 59-60, Sec. 4.02(b), 1959-1 Cum, Bull.
237s Newell v. Commissioner of Internal Revenue,
66 F.2d 102, 12 A.F.T.Ro 936 (7th Cir., 1933).
73.) Internal Revenue Reg. Sec. 20.2042-l(c)(2).
7 4 . ) Rev. Rul0 71-463, I.R0B. 1971-^2, p„ 25.
7 5 . ) Rev. Rul„ 72-167? XqR.B. 1972-15* P» 19.
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