Fidelity-Philadelphia Trust Co. v. Smith
United States Supreme Court
356 U.S. 274 (1958)
- Written by Eric Miller, JD
Facts
Mary Haines purchased three policies in single transactions, each combining a life-insurance policy (payable to her children) with a life-annuity policy (payable to Haines). The policies provided that, in the event of Haines’s premature death, the prepaid annuity premiums would combine with the prepaid insurance premiums to equal the insurance proceeds to be paid. Each of the annuity policies could have been purchased separately from the insurance policies for the same amounts. Haines assigned all right, title, and interest in the policies to Fidelity-Philadelphia Trust Company (plaintiff). After Haines’s death, the Internal Revenue Service (IRS) determined that the annuity proceeds should be included in Haines’s gross estate as retained income, relying on Internal Revenue Code (IRC) § 811, which applies to retained interests in estate property. [Editor’s Note: This provision is now IRC § 2036.] Fidelity-Philadelphia brought suit in federal district court, which found in favor of the taxpayers. IRS collector Francis Smith (defendant) appealed to the United States Court of Appeals for the Third Circuit, which reversed. The United States Supreme Court granted certiorari.
Rule of Law
Issue
Holding and Reasoning (Warren, C.J.)
Dissent (Burton, J.)
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