Estate of Montgomery v. Commissioner
United States Tax Court
56 T.C. 489 (1971)
- Written by Eric Miller, JD
Facts
Lafayette Montgomery created two irrevocable trusts for the benefit of his grandchildren. Montgomery purchased a combined life-annuity and life-insurance package from National Life Insurance Company (National). The annuity policy, for which Montgomery paid a premium of $2.2 million, was to give Montgomery roughly $272,000 per year over the remaining years of his life. The life-insurance policies were for a combined $2 million. Montgomery assigned the life-insurance policies to the two irrevocable trusts—$1 million each—and total yearly premiums of $265,000 were paid through the trusts. Following Montgomery’s death, the commissioner of the Internal Revenue Service (defendant) determined that the proceeds of the life-insurance policies were includable in Montgomery’s gross estate under § 2039 of the tax code. The estate (plaintiff) contested this determination in United States Tax Court, pointing to a parenthetical exception in § 2039 for life-insurance proceeds.
Rule of Law
Issue
Holding and Reasoning (Withey, J.)
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