TAXATION - INCOME TAX - EXEMPTION OF PROCEEDS OF INSURANCE POLICIES PAYABLE IN THE FORM OF AN ANNUITY

Plaintiff was the beneficiary of a life insurance policy payable in equal installments over a period of twenty years. The deferred payments had been substituted for payment of the face amount of the policy through an option in the policy exercised by the insured a short time before his death. The Commissioner of Internal Revenue included in gross income the amount by which each payment exceeded one-twentieth of the face amount of the policy on the theory that this excess was interest and hence not within the statute exempting insurance from gross income. Plaintiff sued to recover the tax paid.

Held, for the commissioner, on the ground that Congress in enacting the statute in question intended to exempt only the face amount of the policy. Kaufman v. United States, (D. C. Va. 1941) 40 F. Supp. 505.