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HERRICK v. UNITED STATES

October 21, 1952

HERRICK et al.
v.
UNITED STATES



The opinion of the court was delivered by: GALSTON

This is a motion by the plaintiffs, as executors of the estate of Ethelbert Ide Low, for a summary judgment, pursuant to Rule 56 of the Federal Fules of Civil Procedure, 28 U.S.C.A. At the hearing on the motion, heave was granted to the defendant to move orally for summary judgment in their favor. The plaintiffs have filed affidavits in support of its motion. The defendant has not filed any opposing affidavits and makes no contention that the facts as set forth in support of the plaintiff's motion are not true.

The facts relevant to the motions are essentially as follows:

 Ethelbert Ide Low died on October 19, 1946. He was then a resident of Nassas County, New York. The plaintiffs, as executors, duly filed an estate tax return and made payment of a tax in the sum of $ 331,044.19 Subsequently, the executors deposited $ 40,000 with the Collector of Internal Revenue for the First District of New York, to be applied to the extent required in payment of such additional estate tax as might be shown to be due and payable, and the balance to be refunded. Thereafter, the Commissioner of Internal Revenue, upon audit of the estate tax return, determined the tax to be #341,726.44. The complaint alleges that the larger sum was determined

 'by including as taxable property the said joint and survivor annuity * * and taxing the same at $ 10,782.25; such determination resulted in a deficiency assessment of $ 10,782.25 * * which said deficiency of $ 10,782.25 was deducted from the amount deposited with the Collector, * * * and a refund of $ 29,317.75 was made to the plaintiffs as such Executors by the said Collector.'

 This allegation is admitted by the defendant's answer.

 The joint and survivor annuity referred to in the complaint had been included in the insurance schedule of the tax return as a non-taxable item, as follows:

 'Retirement Pension: Decedent for many years was an officer of the Home Life Insurance Company, 256 Broadway, New York, New York. Under the provisions of the 'Retirement Plan for Salaried Employees of Home Life Insurance Company', which has been approved by the Superintendent of Insurance of the State of New York and which has been held to be fully qualified under Section 165, I.R.C., by the Commissioner of Internal Revenue, he was entitled to receive upon reaching his Normal Retirement Date (age 65) either a pension for life, or alternatively, a smaller pension payable to the survivor for life. The decedent chose the latter alternative on April 30, 1945, his Normal Retirement Date under the Retirement Plan, which choice was thereafter irrevocable. However, due to the world war, he did not retire and continued to work until his death on October 19, 1946. Under this alternative pension his widow, Gertrude H. Low, born May 13, 1882, is entitled to receive a monthly income of $ 541.84 for the rest of her life.'

 Subsequent to the application of the fund deposited with the Collector to the fund deposited with the Collector to the payment of the assessed deficiency, a claim for refund of the tax attributable to the annuity was filed, but the Commissioner disallowed it.

 This action was then instituted in the district court, pursuant to 28 U.S.C.A. § 1346, providing that jurisdiction lies where the amount claimed is in excess of $ 10,000 and the Collector to whom the payment was made is not in office, to recover the sum of $ 10,782.25 together with interest thereon.

 The pension and retirement plan in question was adopted by the decedent's employer in 1940. Costs of benefits applicable to past services were to be paid for entirely by the employer; while costs of benefits applicable to service after membership in the plan were to be shared jointly by employee and employer, the greater part of the cost to be assumed by the employer.

 The decedent's election to receive a joint and survivor retirement annuity was made under paragraph XII of the plan, which provides, in material part, as follows:

 'A member in active service at his normal retirement date may, at that time, elect to receive, instead of the regular Service Retirement Annuity, a Joint and Survivor Retirement Annuity of a reduced amount for himself and his wife, commencing at his retirement on or after that date. Such reduced amount shall be payable to them jointly while both are living and two-thirds ( 2/3 's) of such reduced amount will be payable thereafter to the survivor while living.

 'If the member, upon request of the Board of Directors, continues in active service after the normal retirement date, such Joint and Survivor Retirement Annuity will not commence until he actually retires. * * *.'

 The Government claims that the value of the joint and survivor annuity is includible as part of the decedent's gross estate under section 811(c)(1)(B) of the Internal Revenue Code, as amended by section 7 of the Technical Changes Act of 1949, 26 U.S.C.A. 811(c)(1)(B). This section provides that the gross estate of a decedent shall include the value at the time of his death of property to the extent of any interest therein of which he had made a transfer by trust or otherwise, 'under which ...


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