*792 1. Prior to 1918 the decedent, who died in 1931, had taken out three insurance policies on his life, irrevocably naming his wife, May Billings, as beneficiary. Held, that the proceeds of the policies were not a part of the decedent's gross estate.
2. The decedent took out an insurance policy on his life in 1921, naming his estate as beneficiary and reserving the right to change the beneficiary. In 1931 the policy was split into three policies and on June 24, 1931, the decedent in contemplation of death assigned the policies to others. Held, that the proceeds of the policies are includable in the gross estate.
*1148 This proceeding is for the redetermination of a deficiency in estate tax in the amount of $68,206.37. The petitioners allege that the respondent erred in the determination of the deficiency (1) by including in the gross estate for purposes of Federal estate tax the proceeds of policies of insurance which were taken out by the decedent prior to the effective date of the Revenue Act*793 of 1918; (2) in determining that the proceeds of insurance policies taken out by the decedent during his life, under the terms of which the decedent did not reserve the right to change the beneficiary, and under the terms of which the decedent retained no legal incidents of ownership, should be included in the gross estate; (3) in determining that the insurance policies taken out by the decedent during his lifetime and thereafter irrevocably assigned to named beneficiaries should be included in the gross estate for purposes of Federal estate tax; (4) in determining that the policies irrevocably assigned as aforesaid were assigned in contemplation of death; and (5) in not allowing proper credit against the Federal estate tax as determined by him as aforesaid for state inheritance and estate taxes.
FINDINGS OF FACT.
The decedent, Richard Billings, died a resident of Woodstock, Vermont, on December 3, 1931, and the petitioners are the duly appointed and qualified executors of his estate. The petitioners filed a Federal estate tax return for the decedent's estate in the office of the collector of internal revenue at Burlington, Vermont.
There were 32 insurance policies upon the*794 life of the decedent, the proceeds of all of which were payable to May Billings, the decedent's wife at the date of death. The proceeds of such policies in the amount of $538,462.43 were paid to and received by May Billings. In each of these policies the decedent had the right up to the date of death to change the beneficiary. The respondent has included in the gross estate the proceeds of these policies in excess of $40,000.
In addition to the aforesaid policies of insurance there were the following policies upon the life of the decedent, all of which were noted in the estate tax return filed:
| Item number in schedule C of | Description of | Amount of |
| Federal estate tax return | policy | proceeds |
| 63 | Bankers Life Co., policy No. | |
| 406418, issued May 26, 1917 | $10,911.00 | |
| 64 | Fidelity Mutual Life Insurance | |
| Co., policy No. 266404, issued May | ||
| 17, 1916. | 23,318.01 | |
| 66 | Provident Life & Trust Co. of | |
| Philadelphia, policy No. 231997, | ||
| issued March 3, 1915. | 12,553.89 |
*1149 In the above policies the wife of the decedent, May Billings, was named beneficiary and the decedent reserved no right to change the beneficiary. May Billings survived*795 the decedent and received the proceeds of these policies following her husband's death. In Bankers Life Co. policy No. 406418 (item 63) the decedent had the right during his lifetime without the consent of the beneficiary (1) to require payment of the proceeds in 20 equal annual payments, together with a further payment of one-half of said proceeds, or (2) to leave the proceeds on deposit with the company at 3 1/2 percent interest, the principal amount to be paid at the death of the beneficiary to the latter's executors of administrators, or (3) to require payment of the proceeds in fixed monthly payments for 10, 15, 20, or 25 years, and thereafter for life based upon the life expectancy of the beneficiary.
In Fidelity Mutual Life Insurance Co. policy No. 266404 (item 64) the decedent had the right during his lifetime without the consent of the beneficiary (1) to leave the proceeds on deposit with the company at not less than 3 percent interest per annum, the principal amount to be paid upon the death of the beneficiary to the latter's executors or administrators; or (2) to direct payment of the proceeds in equal installments of from 2 to 25 years; or (3) to direct payment of the*796 proceeds in fixed annual installments based upon the life expectancy of the beneficiary.
In Provident Life & Trust Co. of Philadelphia policy No. 231997 (item 66) the decedent had the right without consent of the beneficiary to require the proceeds of the policy to be paid (1) in yearly installments guaranteed for from 2 to 30 years, or (2) in yearly installments guaranteed for 10, 15, 20, or 25 years, and with yearly income thereafter during the lifetime of the payee based upon his or her life expectancy, and to direct that the person entitled to receive any such installments should have no right to commute the same for cash.
In the determination of the deficiency the respondent has included the proceeds of these policies in the gross estate.
In addition to the above mentioned policies there were three policies upon the life of the decedent as follows:
| Description of policy | Proceeds |
| Missouri State Life Insurance Co., policy No. IN239504, | |
| assigned to Aline J. Boyce | $10,896.20 |
| Missouri State Life Insurance Co., policy No. IN239505, | |
| assigned to Laura M. Pelton | 10,896.20 |
| Missouri State Life Insurance Co., policy No. IN239506, | |
| assigned to Mrs. Perry Warren | 10,896.20 |
*797 The above insurance was originally taken out on January 1, 1921, as one policy payable to the decedent's estate, but in June 1931 it was divided into three policies which were irrevocably assigned on June 24, 1931, to the respective persons named above. The respondent *1150 has included the proceeds of these policies in the gross estate upon the ground that the assignments constituted transfers of property made in contemplation of death. They were so made.
The cause of the decedent's death is shown by the death certificate as chronic cardiac valvular disease - duration six years, with acute myocardial failure - duration one year, one month, and two days - as the contributing cause. The decedent executed his last will and testament on July 2, 1931.
On December 28, 1932, and November 9, 1933, the petitioners paid the State of Vermont estate and inheritance taxes aggregating $63,064.29.
Federal estate tax in the amount of $16,296.78 was paid on December 3, 1932. The petition to the Board of Tax Appeals was filed September 20, 1935.
OPINION.
SMITH: The first question presented by this proceeding is whether the proceeds of 32 life insurance policies which were*798 paid to May Billings, the beneficiary, in the amount of $538,462.43 formed a part of the gross estate of the decedent. The decedent had the right to change the beneficiary of these policies up to the date of death. Petitioners have made no argument, either orally or written, in support of their contention upon this point. This Board and the courts have long held that, regardless of the date on which the policies were taken out, the proceeds of insurance on a decedent's life are properly includable in his gross estate where he has retained until his death the power to change the beneficiaries. Chase National Bank v. United States,278 U.S. 327">278 U.S. 327; Reinecke v. Northern Trust Co.,278 U.S. 339">278 U.S. 339; Heiner v. Grandin, 44 Fed.(2d) 141; certiorari denied, 286 U.S. 561">286 U.S. 561; H. T. Cook et al., Executors,23 B.T.A. 335">23 B.T.A. 335; affd., 66 Fed.(2d) 995; Jacob K. Newman et al., Executors,29 B.T.A. 53">29 B.T.A. 53; and Louise C. Moore, Executrix,33 B.T.A. 108">33 B.T.A. 108. The proceeds of these 32 policies constituted a part of the gross estate of the decedent.
*799 With regard to the policies referred to as items 63, 64, and 66 of the estate tax return, the petitioners contend that, inasmuch as these policies were taken out before the effective date of the Revenue Act of 1918 (February 24, 1919) and were made payable to an irrevocably named beneficiary, they may not be included in the gross estate. The petitioners cite Bingham v. United States,296 U.S. 211">296 U.S. 211, and Industrial Trust Co. v. United States,296 U.S. 220">296 U.S. 220, in support of this contention. The cited cases stand for the proposition that where insurance policies were taken out prior to the effective date of the Revenue Act of 1918 and prior to such date the decedent had no *1151 interest in the policies such as the right to change the beneficiary, or to borrow money on the policies, or to surrender them without the consent of the beneficiary, the proceeds of the policies are not subject to Federal estate tax.
In Industrial Trust Co. v. United States, supra, the facts were that the decedent died in 1930. He had taken out a policy in 1892, the proceeds of which were payable to the wife of the decedent as sole beneficiary*800 if living, and, if not living, to the surviving children of the decedent. In 1912 the policy became a paid-up policy, requiring no further payment of premiums. No power was reserved to change beneficiaries, borrow on the policy, or surrender it. The Court stated:
The case of Lewellyn v. Frick,268 U.S. 238">268 U.S. 238, 45 S. Ct. 487">45 S.Ct. 487, 69 L. Ed. 934">69 L.Ed. 934, arose under the Revenue Act of 1918. This case arises under the Act of 1926, § 302(g), 26 USCA § 411(g), which is the same as section 402(f) of the former act (40 Stat. 1097). Subdivision (h) of the 1926 Act, 26 USCA § 411(h), however, provides that subdivisions (b), (c), (d), (e), (f), and (g) shall apply to "transfers, trusts, estates, interests, rights, powers, and relinquishment of powers, as severally enumerated and described therein, whether made, created, arising, existing, exercised, or relinquished before or after the enactment of this Act [February 26, 1926]." Whether any of these terms apply to an amount receivable by a beneficiary, under a policy such as we have here, is fairly debatable. See *801 Wyeth v. Crooks (D.C.) 33 F.(2d) 1018, 1019. If any of them do apply, the provision is open to grave doubt as to its constitutionality, and the rule of the Frick case controls.
The respondent contends that the above cited decisions are not determinative of the present issue, since the decedent retained:
* * * until his death powers of control over the economic benefits thereof sufficient to support the tax. In the Bankers Life Company policy and the Fidelity Mutual policy the decedent had the power during his lifetime to direct that the proceeds should be retained by the company during the life of the beneficiary and upon the latter's death to be paid over to the executor or administrator of the beneficiary. In all three of the policies the decedent had the power to direct payment of the proceeds in fixed annual installments or in installments during the lifetime of the beneficiaries based upon his or her life expectancy and to deprive the beneficiary of any right to commute these annual installments for cash. * * *
Section 302 of the Revenue Act of 1926 provides in part:
SEC. 302. The value of the gross estate of the decedent shall be determined*802 by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated -
* * *
(c) To the extent of any interest therein of which the decedent has at any time made a transfer, * * * in contemplation of * * * his death, except in case of a bona fide sale for an adequate and full consideration in money or money's worth. * * *
* * *
(g) *1152 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.
(h) Except as otherwise specifically provided therein subdivisions (b), (c), (d), (e), (f), and (g) of this section shall apply to the transfers, trusts, estates, interests, rights, powers, and relinquishment of powers, as severally enumerated and described therein, whether made, created, arising, existing, exercised, or relinquished before or after the enactment of this Act.
The incidence of the estate tax is upon the value of the net estate of the decedent which passes by reason*803 of his death. In the determination of that value it is provided that there shall be included in the gross estate the value at the time of death of all property, real or personal, tangible or intangible, wherever situated, to the extent of the decedent's interest therein. Where the decedent has the right to change the beneficiary of a policy or to surrender the policy without the consent of the beneficiary he has a valuable interest in the policy which may properly be included in the gross estate. Chase National Bank v. United States, supra.The inclusion in the gross estate of the proceeds of life insurance policies was sustained in the Chase National Bank case upon the theory that the decedent up to the date of death had control of the insurance to the extent that he could name the beneficiary. The Court stated:
* * * As it is the termination of the power of disposition of the policies by decedent at death which operates as an effective transfer and is subjected to the tax, there can be no objection to measuring the tax or fixing its rate by including in the gross estate the value of the policies at the time of death, together with all the other interests*804 of decedent transferred at his death. * * *
In the proceeding at bar the decedent did not have such an interest. The mere right to say when the proceeds of the insurance policies should be paid to the beneficiary does not amount to a control of the proceeds. They irrevocably belonged to the beneficiary from the date the policies were taken out.
We are of the opinion that the proceeds of these policies did not constitute a part of the gross estate of the decedent.
The third question presented by this proceeding is whether the proceeds of the three policies issued by the Missouri State Life Insurance Co. should be included in the gross estate of the decedent. These policies were payable to the estate of the decedent, with the right in the decedent to change the beneficiary. He assigned these policies to named persons on June 24, 1931, or within six months from the date of death. The respondent held that the assignment was in contemplation of death. At the time the decedent was suffering from a chronic cardiac valvular disease. The petitioners have *1153 offered no evidence to show that the assignment was not made in contemplation of death. We accordingly hold*805 that they were so assigned.
Each assignment states that it is made "for value received." The determination of the respondent was, however, to the effect that there was no consideration paid by the assignees for the assignments of the policies and in the absence of proof to the contrary it must be held that they were assigned without consideration.
The petitioner's argument upon this point is that insurance policies on the life of a decedent, payable to the insured's estate but with the right on the part of the insured to change the beneficiary, which are assigned to named persons without consideration in contemplation of death, may not be included in the gross estate under section 302(c) of the Revenue Act of 1926; that insurance policies on the life of a decedent are includable in the gross estate by virtue of subdivision (g) of section 302 and may not be included by virtue of any other subdivision; and that the term "assignee" is not comprehended by the phrase "all other beneficiaries" contained in subdivision (g). In support of the last proposition the petitioners cite *806 Guettel v. United States,67 Ct.Cls. 613.
The decedent unquestionably had a valuable property right in the Missouri State Life Insurance Co. policies up to the time that they were assigned by him to named persons on June 24, 1931. Section 302(c) covers all kinds of property owned by a decedent. We are of the opinion that there is no merit in the contention of the petitioners that life insurance policies on the life of a decedent may not be included in the gross estate when assigned without consideration to named persons in contemplation of death. If this were so, it would be possible for an insured to assign policies of life insurance payable to his estate in contemplation of death and thereby eliminate the proceeds of the policies from his gross estate. We are of the opinion that such a construction of the statute is not tenable.
In Guettel v. United States, supra, a policy was taken out in 1920 payable to the estate of the decedent. On March 25, 1920, the decedent assigned this policy to his wife. The Court of Claims in its opinion states that the assignment was for a valuable consideration, although it has made no finding to that*807 effect. The court held, however, that it could not be included in the gross estate, saying:
The language "all other beneficiaries," used in the statute, can not be fairly construed as applying to the assignee of a policy payable to a designated beneficiary. Such a construction would be an unwarranted extension of the meaning of the statute here involved. * * *
We find ourselves in disagreement with this proposition. It appears to us that the phrase "all other beneficiaries" contained in *1154 subdivision (g) is broad enough to include an assignee where the policy was assigned to a named person or persons without a valuable consideration.
In Frick v. Lewellyn,298 Fed. 803, 807, the court stated:
* * * None of the policies passed from the decedent's estate by will, descent, or distribution; nor can it be held that any of the policies were transferred in contemplation of death within the meaning of paragraph (c) of section 402, as all transfers occurred more than two years before the decedent's death. If a transfer without consideration, within the period of two years, is deemed to be in contemplation of death, unless the contrary be*808 shown, it would seem that a transfer prior to that time would be presumed not to have been so made, and there is nothing before the court to overthrow this presumption as to transfers of any of the policies in question.
The Supreme Court has said that the dominant purpose of subdivision (c) requiring the inclusion in the gross estate of transfers in contemplation of death or intended to take effect at or after death was to reach substitutes for testamentary dispositions of property and thus to prevent the evasion of estate tax. United States v. Wells,283 U.S. 102">283 U.S. 102, 116; Milliken v. United States,283 U.S. 15">283 U.S. 15; Nichols v. Coolidge,274 U.S. 531">274 U.S. 531, 542.
The legal conception of policies of life insurance as property is firmly established. Frick v. Lewellyn, supra.
The petitioners also argue that to include the proceeds of the assigned policies in the gross estate would be contrary to the provisions of the Constitution of the United States. We are of the opinion that there is no merit in this contention. See *809 Chase National Bank v. United States, supra.
We are of the opinion that the respondent did not err in including the proceeds of these three policies in the gross estate of the decedent.
The final question in issue in this proceeding is whether the respondent erred in not allowing proper credit against the Federal estate tax for state inheritance and estate taxes. The parties have stipulated that the petitioners paid the State of Vermont state inheritance taxes aggregating $63,064.29. In the petition it is alleged that the respondent also allowed only $2,102.84 representing the transfer tax paid to the State of New York, whereas proof of credit was filed with the respondent in the amount of $2,122.84. An inspection of the deficiency notice would indicate that the correct amount was $2,122.84. Proper credit will be allowed in the final settlement of the deficiency.
Reviewed by the Board.
Judgment will be entered under Rule 50.