Commissioner v. Estate of Noel, 380 U.S. 678 (1965)

Commissioner of Internal Revenue v. Estate of Noel

No. 503

Argued April 1, 1965
Decided April 29, 1965
380 U.S. 678

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Syllabus

Just prior to boarding an airplane which later crashed in flight, decedent applied for flight insurance policies, naming his wife as beneficiary. The policies, which granted the insured the right to assign them or to change the beneficiary, were handed to the wife, who was paid their face value following the decedent’s death from the crash. The petitioner determined that the proceeds should have been included in the estate tax return pursuant to 26 U.S. C. §2042 (2), which requires inclusion of amounts received by beneficiaries from insurance on the life of the decedent if, at his death, he possessed any of the incidents of ownership. The Tax Court sustained the Commissioner’s ruling, but the Court of Appeals reversed, distinguishing life insurance, payable inevitably, from accident insurance, which covers an evitable risk.

Held:

1. In accordance with longstanding and consistent administrative interpretation deemed to have the effect of law, as applied to this substantially reenacted statute, these insurance policies were on the "life of the decedent" within the meaning of § 2042(2). Ackerman v. Commissioner, 15 B.T.A. 635, followed. Pp. 680-682.

2. For estate tax purposes decedent possessed incidents of ownership at the time of his death, without regard to his ability to exercise them at any given moment, as he had the power of assignment of the policy or to change the beneficiary. Pp. 682-684.

332 F.2d 950, reversed.