The opinion of the court was delivered by: GRIESA
OPINION UPON RECONSIDERATION
This is a tax collection action brought pursuant to Sections 6332(c)(1) and 7401 of the Internal Revenue Code of 1954, as amended, 26 U.S.C. §§ 6332(c)(1), 7401. The Government claims that Equitable failed to honor a levy pursuant to Section 6332(b) of the Code, 26 U.S.C. § 6332(b), upon the interest of a taxpayer in his life insurance policy.
The Government moves for judgment on stipulated facts. Equitable moves to dismiss the complaint for failure to state a valid claim. It is agreed that the sole issue to be determined by the court is one of law, and that there are no factual issues to be tried.
On February 25, 1976 I issued an opinion denying the Government's motion, granting Equitable's motion, and dismissing the complaint. On March 24, 1976 I granted the Government's motion to reopen the case and reconsider the motions.
Upon reconsideration, I adhere to my original ruling and dismiss the action.
A taxpayer by the name of John C. Hill was the owner of an insurance policy issued by Equitable. Hill had tax deficiencies assessed against him on September 18, 1970 and October 1, 1971. On September 20, 1972 the Government served a notice of levy on Equitable with respect to Hill's interest in his insurance policy. Hill was notified of this levy. As of the date of the levy, the cash loan value of the policy was $1,475.00 -- an amount less than Hill's tax deficiencies.
Under the relevant statute Equitable had 90 days -- i.e., until December 20, 1972 -- before it was required to satisfy the levy. An insurance premium owed by Hill came due on October 12, 1972. Hill did not pay the premium on that date or at any subsequent time. Under the terms of the policy, there was a 31-day grace period, at the expiration of which the policy lapsed. The policy thus lapsed on November 12, 1972.
The policy included a provision, "Options on Lapse," which had the effect that within three months of the date of default, October 12, 1972, Hill could elect to surrender the policy for its net cash value or convert the value of the policy into paid-up life insurance or the equivalent value in extended term insurance. In the absence of any action by the insured, at the end of the three-month option period, January 12, 1973, conversion to term insurance would be automatic. Hill took no action to expressly exercise any option.
By a letter dated December 18, 1972, the Government advised Equitable that the notice of levy to attach the "cash loan value" of Hill's policy had not been satisfied and requested payment of "any remittance that may be due."
Equitable declined to make payment to the Government pursuant to the tax levy, asserting that there was no cash loan value as of the date payment was due.
When the motions were originally submitted, the Government's sole argument was that the critical date for determining what should be paid under the levy was the date of the notice of levy. Equitable contended that the relevant date was when the Government demanded payment. For ...