*223 Decision will be entered under Rule 50.
Life insurance which to the extent of decedent's payments of the premiums prior to 1941 is includible in gross estate only in the event of the retention by decedent of an "incident of ownership" (Revenue Act of 1942, section 404, amending
*597 OPINION.
By this proceeding petitioner seeks a redetermination of a deficiency in estate tax in the amount of $ 8,037.98. The decedent died on January 3, 1943. The estate tax return was filed with the collector of internal*224 revenue for the fourteenth collection district of New York.
The primary question is the propriety of the inclusion of the proceeds of three insurance policies in decedent's estate.
The case was submitted upon a stipulation of facts, and the facts so stipulated are hereby found accordingly. Only those facts which we regard as pertinent to our disposition of the case will be repeated here.
*598 On decedent's death, the three policies resulted in an aggregate of $ 27,294.60 to be paid to named beneficiaries. These policies were issued November 22, 1918, and specifically named decedent's son and two daughters as the respective beneficiaries. The policies provided that decedent was without the right to change the beneficiaries.
In each of the three policies there was the following provision:
Death of Beneficiary Before Insured: Change of Beneficiary. -- If any beneficiary die before the Insured, the interest of such beneficiary shall vest in the Insured, unless otherwise provided herein.
If the interest of a beneficiary shall have vested in the Insured, or if the right to change the beneficiary has been reserved, the Insured, if there be no existing assignment of this Policy, *225 may, from time to time, while this Policy is in force, designate a new beneficiary, with or without reserving the right to change the beneficiary, by filing written notice thereof at the Home Office of the Company accompanied by this Policy for suitable endorsement hereon. Such change shall take effect upon the endorsement of the same on the Policy by the Company.
Decedent paid all the premiums which were paid on the policies of insurance. The parties agree that the amount of $ 1,679.30 represents that portion of the total proceeds of the three policies which is attributable to premiums paid after January 10, 1941.
Respondent's primary position is that the provisions of
The parties agree that subsections (A) and (B) of
*599 Petitioner, however, relies upon section 404 (c), Revenue Act of 1942, which provides:
(c) Decedents to Which Amendments Applicable. -- The amendments made by subsection (a) shall be applicable only to estates of decedents dying after the date of the enactment of this Act; *227 but in determining the proportion of the premiums or other consideration paid directly or indirectly by the decedent (but not the total premiums paid) the amount so paid by the decedent on or before January 10, 1941, shall be excluded if at no time after such date the decedent possessed an incident of ownership in the policy.
The possibility of the insurance being vested in decedent, should he outlive the designated beneficiaries, would constitute a reversionary interest and, consequently, an "incident of ownership," 3 but petitioner resorts to the language in the amendment to
In the first place, the inclusion of the statement demonstrates the legislative assumption that without such an exception, a reversionary*228 interest would be reasonably includible as an incident of ownership, since otherwise the statutory language would perform no function.
If, however, the language be viewed as doubtful, justifying resort to legislative history, the conclusion thus indicated by the face of the statute is found to be confirmed. In the form in which the 1942 Act originated in the House, there was no mention of a reversionary interest. H. R. 7378, 77th Cong., 2d sess., *229 introduced July 14, 1942. The report of the Ways and Means Committee stated, with reference to the section here pertinent, that a reversionary interest is not an incident of ownership. H. Rept. No. 2333, 77th Cong., 2d sess., p. 163. The Senate Finance Committee (S. Rept. No. 1631, 77th Cong., 2d sess., p. 234, 235-236), added the provision which was adopted by the Senate and agreed to in conference, stating that "Your committee bill has added a provision designed to take reversionary interests out of the category of 'incident of ownership' for the purpose of applying *600
Subsection (c) states that the amendments made by this section are applicable only to estates of decedents dying after the date of the enactment of this act. The House bill contains a special rule with respect to payments made by the decedent on or before January 10, 1941, the date of approval of*230
Respondent's regulations state:
* * *
Regulations 105, section 81.27, as amended by
Decision will be entered under Rule 50.
Footnotes
1. (g) Proceeds of Life Insurance.
* * * *
(2) Receivable by other beneficiaries. -- To the extent of the amount receivable by all other beneficiaries as insurance under policies upon the life of the decedent (A) purchased with premiums, or other consideration, paid directly or indirectly by the decedent, in proportion that the amount so paid by the decedent bears to the total premiums paid for the insurance, or (B) 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. For the purposes of clause (A) of this paragraph, if the decedent transferred, by assignment or otherwise, a policy of insurance, the amount paid directly or indirectly by the decedent shall be reduced by an amount which bears the same ratio to the amount paid directly or indirectly by the decedent as the consideration in money or money's worth received by the decedent for the transfer bears to the value of the policy at the time of the transfer. For the purposes of clause (B) of this paragraph, the term "incident of ownership" does not include a reversionary interest.↩
2. This sum includes the amount of $ 1,679.30, being the amount attributable to premiums paid between January 10, 1941, the effective date of
T. D. 5032↩ , and January 3, 1943, the date of decedent's death, conceded by petitioner to be taxable.3.
T. D. 5032, 1941 C. B. 427↩, 429 .4. Obviously a typographically erroneous substitution for 811 (g) (2) (B), since that is the only reference in the provision "added" in "your committee bill."↩