480
OFFICE OF THE AmORNEY GENERAL OF TEXAS
AUSTIN
Ronorable Georga ii. Sheppard
Comptroller 0r Public :i.oooutlts
Austin, Texas
Dear Mr. Sheppard:
Opinion No. O-5294
aeeigned by him
aotment or the
the rstention or
oontrol by deoedent.
our letter 0r Iday 4,
1943, are them:
upon his own lire various
eoedent transferred all
poliolen to his tire and
t to the cash surrseder
e oaiw for a loan, to surrender
beaaiioiarfea or to obtain a
. All prwuma on suoh polloles
he ooamaity runds 0r himsalr and
oontsntion that swh polioies 6re 8Ub-
noe tax is predioated upon two proposltions:
"1. The 1&6aauz'e or taxability is ths payment
or premiuma by the insured and not the possession or legal
ineidente of' ownsrahlp at death.
"2. The bsnefiolarles ot the proceeds of
these policies did not cone into posaeaeion or enjoyment
or said prooaeds until the death or the lnaurea.*
-
481
IIonorabls George B. Sheppard, page 2
You request the opinion ot thlm depudlsnt
ldri6illg you whether you should inolude the prooee48,;of ruoh
poliaierr in the final inherltaaos tar rrport and oom~ute the
tax thereon.
Artiole 7117, V. A. C. S., laaofar (18 it
undertakes to tax the prooeeds of inruranoo polloler pqablo
to nand bonofloiarlea, wa8 enacted in X939. It reada, in part,
as follows:
*All property within the jPrf8dlotlon of thl8
State, real or perronrl, oorperato or lnoorponto, and 8ny
interest thoroin, inoluding proport~ paa8lng under a general
p o wer o flppolntmont eurollred br the deoedont by will,
inoludlng the proo*ods of iir0 inmmanoe to the rxtuat or
the mount rooairable br the exeoutor or adminlstrator..~
iuaroao6 taken out by the beambat upon hla owa lit*,
the laws of doeoent and
or any other State, or by dead, g?ant, rale or gift aado or
iatendod to take em0t in pomau8ion or enjoyment after the
death of the grantor or donor, #hall, upon par&&g 80 or for
the wo of any L)(L~SOII,, . ., bo subjaot to a tax . . .*
(Ergheilr ouris)
Artas pointing out that the prorlalona of
Artiole 7117, rhioh levies an inherltanoo tax upon the prooeeds
or lnsuranor ~polfoie8, ir praotloelly identloal wltih the pro-
tledon of the Federal ostate tax atatutm whloh wae la roreo
at the time of the pasrage or the 1939 aaendnent to Artiole
7117, the Texas Supreme Court, in the oaaa of BPI6km.m Y. Emaoa,
169 8. W. (26) 962, oaidc
“. . . The sontrolling temm or the Fedora1
atatute are identical with the Texaras statute. The Toxa8
statute having been literally taken rrom the Federal statute,
Honorable George E. Sheppard, pega 3
In that ea8e the Supmmo Court ldbpted the
oonstruatlon or this statute given to the FedWal Statute by
the United State6 Supreme Oourt in l&a& f, Oommie~loner of
Int. Rev., 304 !I.9. 264. 58 8. Ct. 880, 82 L. Ed. 1331, 118
A, L. R. 319, where the Oourt held that only that portion of
the life inauranoe paid iOr by the deoedant was *taken out by
the deoedwt upon his own liie” within the terma of the statute.
pewever, at the time or the pnaraga of the 1939 am#adaent to
the Texan Statute end at ths time of tha Supreme Court’i~
droirion of the Blaokmon base, numerous other oaaea aon8fruing
the Federal Statute haa been deoided by the Federal aourtta.
In the oa6e of Lawellfn T, Frlok, 268 0. 9.
2)8, 45 s. at. 487, 69 L. Ed. 934, t)n laitoa States summa
Oourt had berore it the ldantloal taot8 and-the ldentioel
qu8tion hare under oonaldarat1on. In thet oaa#a the oourt,
lttar rtatlng th8t there was &rave doubt of the mar of
Qoagera to anaot a law that would rtteotuall~ tax a trnrrar
ron8ummated batora ltr lnaotment, and in koldlng suah tntWat
not taxable mde thll, rtetementr
*blot 0al.y are suoh doubts avOida by oon-
atruin& the statute en referrlag only to txanrartlon#
taking plaoo after it we8 peamad, but the goneral prinolpla
‘that law8 are not to be oonaldrre6 aa applyling to @asa
whloh aroI)ebetore their pa88a@* 18 preaervad, when to
disregard it would be to impose an unexpeated llablllty
that, if known, might hare induoed those ooaoarned to
avoid it, and to use their money in other way@.*
&gain, in the oaee of Bin&am t. United States,
296 u. S. 211, 80 I,. JH. 160, )68. Ot. 180, the Supreme aourt
Xtat emphatioally deoluttd that the Federal St8tUta 6&d not
raaeh the prooeads OS inauranoe pollolw where awh pollolm~
had been aerlgnad prior to lte anaotmant, eryingr
“The principles BO raoently announoed by this ‘,
oourt in Helrering Y. St. Louis U&ion Trust Co., ante,
p. 39, ana Beaker Y. St. Louis Union Trust Co., ante, p. 48;
are dsol8lte of the ease In razor of the taxpayers. Those
prinolples establlah that the title ana porrsas8ion of the
benerlolary were fixed by the tarma of the poliofe~! and
aeeignmenta thereor, beyond the power of the lnoured to
afroot, many years be&ore the clot in question here wa8
p4SPSd. No interest paseed to the benerioiary aa tha
result o? the death of the innurad.* ~pharii~ OurI))
Honorable George H. Sheppard, page 4
Under the Texas law in force at the time
this statute was waoted
Laor ah ~rmuranoe
tha sseignagnc .
polioy (absent the rasenation of the right tq @hangs the
beneficiary)ia a oompletad traneaotionwhloh ?estm in the
rrsignee oomplete and perfeat titla and rest8 in muohrs8ignae
the title to the prooeade of suoh inaumhoe. Burg68 v. Rew
York Life Ina. Co., 53 S. u. 602. Oanneequantly, aiaoe tit10
ma alroady tested In the assignob&at the time of the parsage
OS the 1939 amendment,nothlag pamed to the as&mm there-
after, either by aots or the deosdent or by his do&h. See
yriok and B3inghamoaaer, ouprs.
Under the ruli115of the Suprema Oourt in
Blaolmm 1. &snBOn, SUplW, our etatut must ba oonotrued in
the came manner that the Fedsral~Statutefrom whioh it wa8
adoptedwas oonrrtruad at the time or ita pamage. The Friek
antIBingham oases represmt the ooswfruofion of the Fe&oral
Statute at the time of the anaotmentof the 1939 mwm6mant
to Article 7u7. We, therefore,advise you that the prooaedm
of ineuranoe polidleewhloh wore aaelgned,without rwervatlon,
prior to the anaotmmt of the 1939 amndmnt to Artlola 7U7,
and in rhloh deoebent never thereafteraoquired an lntarest,
are not taxable under the provisionsOS Artiole 7117, V. A. C. 5.
Truatlng that the above fully answer your
inquiry,we am
tours very truly
ATVCWEY ORNERALOF TEXAS
Fowler Roberto
Aesietant