*927 The amount receivable on life insurance policies on the life of a decedent and payable to his wife may not be included in the decedent's gross estate under section 302(g) of the Revenue Act of 1926, where the policies were taken out by and for the benefit of and were owned by a corporation in which the decedent was a stockholder, officer, and director.
*3 The Commissioner determined a deficiency of $8,847.84 in estate tax. The sole issue for decision is whether the Commissioner erred in including in the gross estate $50,000 representing the proceeds of two policies of insurance on the life of the decedent.
FINDINGS OF FACT.
The decedent was one of several brothers who managed a retail store in the city of Washington, D.C. The store was owned by a corporation known as William Hahn & Co. The stock of the corporation was closely held by members of the Hahn family. The principal stockholders were the decedent and his brothers Edwin and Gilbert Hahn. They were also directors and the principal officers of the corporation.
The corporation decided*928 in 1927 to take out policies of life insurance upon the lives of these officers. Insurance was taken in the amount of $50,000 on the life of each. The policies were taken out by the corporation. The corporation paid all premiums on the policies. It had exclusive possession of the policies. The insured was not permitted to borrow on the policies or to surrender them for cash. The purpose in taking out the insurance was to assure each family of enough to live on in case any of the officers died. A substantial part of the income of each was from his salary as an *6 officer of William Hahn & Co.The corporation took this means of avoiding embarrassing demands which might otherwise be made for dividends by members of the family of any officer who might die. The policies were payable either to the family or estate of the insured, as the assured might direct. He could not otherwise change beneficiaries.
Two policies on the life of the decedent were in effect at the time of his death. They resulted from conversions of the original policies taken out as above described and were substitutes for those original policies. Each was for $25,000. The original beneficiary was*929 the insured's executors or administrators, but the beneficiaries had been changed to the insured's wife, if living, otherwise, his two children. The wife was living and received the proceeds of the policies. The policies did not indicate on their face that the insured was in any way restricted in the use of the policies or that he was not the absolute owner of them.
The Commissioner included the amount of the proceeds in the decedent's gross estate under section 302(g) of the Revenue Act of 1926.
OPINION.
MURDOCK: Section 302(g) of the Revenue Act of 1926 includes in the gross estate "the excess over $40,000 of the amount receivable by all other beneficiaries [than the executor] as insurance under policies taken out by the decedent upon his own life." That provision does not cover these policies, since they were not taken out by the decedent. Furthermore, he did not own the policies and actually had none of the indicia of ownership such as possession, power to pledge, or power to surrender. He had a limited power to name and change the beneficiary, but that was only with the approval of the owner, William Hahn & Co. The Commissioner erred in including the value of these*930 policies in the decedent's gross estate.
Decision will be entered under Rule 50.