UNITED STATES
v.
RYERSON ET AL., EXECUTORS
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The Supreme Court reversed a Circuit Court of Appeals decision regarding the valuation of single-premium life insurance policies for gift-tax purposes, holding that the cost of replacing the policies at the donor's then-current age, rather than their cash-surrender value, is the proper valuation method. The Court reasoned that replacement cost better reflects both the insurance and investment value of the policies, particularly when significant time has elapsed between issuance and the gift transfer and when the donor's age or health condition makes replacement difficult or expensive.
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Mr. Justice Douglas delivered the opinion of the Court.
The question here is the same as that in Guggenheim v. Rasquin, ante, p. 254. Consequently the decision of the Circuit Court of Appeals holding that cash-surrender value on the dates of the gifts was the proper method of valuing single-premium life insurance policies for gift-tax purposes (114 F. 2d 150) must be reversed, unless the elapse of time between the issuance of the policies and the making of the gifts calls for a different result. The single-premium policies here involved were taken out by the insured in 1928 and 1929. They were assigned as gifts in December, 1934, when the insured was 79 years old. The cost of the policies was less than their cash-surrender value at the dates of the gifts. But the cost of replacing the policies at the then age of the insured would have been in excess of their cash-surrender value. We think that such cost of replacement, as held by the District Court, is the best available criterion of the value' of the policies for the purposes of the gift tax. The elapse of time between issuance and assignment of the policies does not justify the substitution of cash-surrender value for replacement cost as the criterion of value. We cannot assume with respondents that at the dates of the gifts the policies presumably had no insurance, as distinguished from investment, value to the donor. Here, as in the case where the issuance of the policies and their assignment as gifts are simultaneous, cash-surrender value reflects only a part of the value of the contracts. The cost of duplicating the policies at the dates of the gifts is, in absence of more cogent evidence, the one criterion which reflects both their insurance and investment value to the owner at that time. Cf. Vance on Insurance (2d ed.) pp. 332-333; Speer v. Phoenix Mutual Life Ins. Co., 36 Hun 322. The fact that the then condition of an insured’s health might make him uninsurable emphasizes the conclusion that the use of that criterion will result in placing a minimum value upon such a gift.
Reversed.
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United States v. Cartwright, 411 U.S. 546 (U.S. 1973)…transferred with the ownership of the mutual fund shares.9 For this argument, heavy reliance is placed on this Court’s decisions in Guggenheim v. Rasquin, 312 U. S. 254 (1941); Powers v. Commissioner, 312 U. S. 259 (1941); United States v. Ryerson, 312 U. S. 260 (1941), which held that the cash-surrender value of a single-premium life insurance policy did not necessarily represent its only taxable value for federal gift tax purposes [*555].10 In Guggenheim,, the lead case, the taxpayer purchased single-prem…
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Mearkle's Estate v. Commissioner of Internal Revenue, 129 F.2d 386 (3d Cir. 1942)…nal authority that for gift tax purposes, the value of a paid up life insurance policy is the current cost of such policy at the time of the gift. Guggenheim v. Rasquin, 1941, 312 U.S. 254, 61 S.Ct. 507, 85 L.Ed. 813; United States v. Ryerson, 1941, 312 U.S. 260, 61 S.Ct. 479, 85 L.Ed. 819; followed by this Court in Houston v. Commissioner of Internal Revenue, 3 Cir., 1941, 124 F. 2d 518. Conceding, as they must, the force of these decisions, the taxpayers contend that they do not control here. In the gift…
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Harris v. Commissioner of Internal Revenue, 178 F.2d 861 (2d Cir. 1949)…1002, Title 26 U.S.C.A, . § 812 (b), Title 26 U.S.C.A. . Commissioner of Internal Revenue v. Bristol, 1 Cir., 121 F. 2d 129. . Treasury Regulations 79—Article 2 (5). . Guggenheim v. Rasquin, 312 U.S. 204, 61 S.Ct. 507, 80 LEd. 813; U. S. v. Ryerson, 312 U.S. 260, 61 S.Ct. 479, 85 L.Ed. 819. . 2 Cir., 156 F. 2d 929, 931. . 2 Cir., 163 F. 2d 131, 174 A.L.R. 199. . 2 Cir., 176 F. 2d 233, 234. . Goldman v. Goldman, 282 N.Y. 296, 26 N.E. 2d 265. . 2 Cir., 101 F. 2d 9.…
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- United States v. Ryerson, 114 F.2d 150 (7th Cir. 1940)