TAXATION - INCOME TAX - INSURANCE - AMOUNTS RECEIVED BY STOCKHOLDERS UNDER LIFE INSURANCE CONTRACT

A corporation took out several policies of insurance on the life of its president, naming itself as beneficiary. Later, reserving the right to hypothecate the policies, it assigned them to a trustee who agreed to distribute the proceeds of the policies to the stockholders of record at the time of the president's death. At the death of the president the proceeds were paid by the insurance companies to the trustee who then paid them pro rata to the stockholders. At this time the corporation had on hand earnings equivalent to the amount of distribution, and there was no showing that any of these earnings were made before March 1, 1913.

The stockholders were taxed on the distributions and paid under protest. The board of tax appeals confirmed the findings of the commissioner. Held, that the stockholders did not receive the distributions under a contract of insurance, but as dividends of the corporation, and that the proceeds received by the stockholders were therefore not exempt under section 22 (b) (1) of the Revenue Act of 1934. Golden v. Commissioner of Internal Revenue, (C. C. A. 3d, 1940) 113 F. (2d) 590.