The opinion of the court was delivered by: BYERS
This is an action at law in which recovery is sought of certain alleged overpayments of Federal estate taxes in connection with the estate of Henry C. Folger, deceased.
The decedent died on June 11, 1930, a resident of this district and on June 10, 1931, his executrix filed a Federal estate tax return; these issues concern certain contested items, as to all of which the tax was paid under protest; recovery as to them is now sought.
There are no issues of fact, and the evidence is to be found in the pleadings and stipulations of facts, corporate records concerning the issuance of the stock hereinafter referred to, and sundry stock certificates.
The questions may be conveniently stated as follows:
I. Was the death benefit paid by the Standard Oil Company of New York to Mr. Folger's wife part of his estate and taxable as such?
The answer turns upon the construction applicable to a "Plan for Annuities and Insurance as amended, effective July 1, 1926," promulgated by the Standard Oil Company of New York, of which the decedent was an employee and officer for many years. It has to do with annuities payable to employees who become eligible for retirement or annuity upon reaching a certain age and after having rendered a stated term of service to the company.
Part Two, Section 2, deals with the amount of payments upon retirement and the method; it is not disputed that the decedent was in receipt of such an annuity following his retirement, which occurred on February 29, 1928, namely, the sum of $81,500.00 per year, payable in equal monthly installments. No question arises in reference to that aspect of the plan.
Issue is made, however, with reference to a death benefit treated in Part Three, the pertinent provisions of which are:
"The beneficiaries of all employees of one year's continuous active service and the beneficiaries of all annuitants retiring on or after July 1, 1919, shall without contribution on their part be eligible to death benefits in accordance with and subject to the conditions and exceptions of the following plan:
(The maximum benefit was twelve months' full pay, which applied in this case.)
"Section 2, Subdivision B. Annuitants.
"The amount of death benefits payable under this section of the plan to the beneficiaries of annuitants retiring on or after July 1, 1919, subject to the conditions and exceptions hereinafter provided, shall be equal to 12 months' full pay at the rate which the annuitant was receiving at the time of his death."
"Section 3. Method of Payments.
"A. All employees and all annuitants retiring on or after July 1, 1919, shall immediately designate in writing the name of the beneficiary or beneficiaries to whom the death benefits are to be paid and file same with the Company. Any such employee or annuitant shall have the privilege of revoking such designation or changing it at discretion by filing such revocation or new designation with the Company. If the name of no beneficiary shall have been filed or, if filed, the death of such beneficiary precedes the death of such employee or annuitant, such death benefits shall lapse, it being the intention of this plan that no one, except such designated beneficiary or beneficiaries surviving such employee or annuitant, shall have any claim for or be entitled to such death benefits or any part thereof."
"Section 4. Deduction on Account of Liability under Compensation or Other Laws.
"Should this Company be liable to make payments to the estate or dependents of any deceased employee, or to any other person, under any State or Federal Compensation statute or other law making the Company liable because of the death of the employee, the amount which the Company is obligated to pay on account of said death will be deducted from the amount which would otherwise be payable to the beneficiaries hereunder, and in such case no payment will be made under this plan until the extent of such liability is determined."
"Part Four: General Rules."
"Section 2. Other Provisions.
"The annuities and benefits herein provided for are voluntary grants by the Company and this plan shall not be construed as giving any employee the right to be retained in the service of the Company, or any right or claim to an annuity or death benefits to his beneficiaries after discharge from the service of the Company.
"The Company reserves the right at any time at its discretion to withdraw or modify this plan, either as to annuities or death benefits.
"Death benefits will be paid in accordance with the plan as it is in effect at the date of the death of the employee or annuitant.
"When once an annuity has accrued and been granted as a regular allowance, it will be continued for the life of the annuitant, subject, however, to the provisions of this plan as it is in effect at the time such annuity is granted."
The decedent had designated his wife, Emily C. J. Folger, as the beneficiary to whom should be paid the death benefit contemplated by the plan, and commencing August 1, 1930, she duly received in twelve equal monthly installments the total sum of $81,500.00 pursuant to said plan.
The value of the last-named sum at the time of the death of the decedent was $79,791.63, which the Commissioner of Internal Revenue included as part of the gross and net estates of the said decedent, and the legality of such inclusion now requires determination.
The applicable statute is the Revenue Act of 1926, Section 302, 44 Stat. 70 (26 U.S.C.A. § 411 (a) which reads:
"Sec. 302. The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, ...