§2042 — Proceeds of life insurance
65 cases·22 followed·12 distinguished·1 criticized·1 limited·29 cited—34% support
Statute Text — 26 U.S.C. §2042
The value of the gross estate shall include the value of all property—
To the extent of the amount receivable by the executor as insurance under policies on the life of the decedent.
To the extent of the amount receivable by all other beneficiaries as insurance under policies on the life of the decedent with respect to which the decedent possessed at his death any of the incidents of ownership, exercisable either alone or in conjunction with any other person. For purposes of the preceding sentence, the term “incident of ownership” includes a reversionary interest (whether arising by the express terms of the policy or other instrument or by operation of law) only if the value of such reversionary interest exceeded 5 percent of the value of the policy immediately before the death of the decedent. As used in this paragraph, the term “reversionary interest” includes a possibility that the policy, or the proceeds of the policy, may return to the decedent or his estate, or may be subject to a power of disposition by him. The value of a reversionary interest at any time shall be determined (without regard to the fact of the decedent’s death) by usual methods of valuation, including the use of tables of mortality and actuarial principles, pursuant to regulations prescribed by the Secretary. In determining the value of a possibility that the policy or proceeds thereof may be subject to a power of disposition by the decedent, such possibility shall be valued as if it were a possibility that such policy or proceeds may return to the decedent or his estate.
Treasury Regulations
- Treas. Reg. §Treas. Reg. §20.2042-1 Proceeds of life insurance
- Treas. Reg. §Treas. Reg. §20.2042-1(a) In general.
- Treas. Reg. §Treas. Reg. §20.2042-1(b) Receivable by or for the benefit of the estate.
- Treas. Reg. §Treas. Reg. §20.2042-1(c) Receivable by other beneficiaries.
65 Citing Cases
Petitioner attempts to distinguish Kaufman on the ground that she paid the tax for the years in issue herself, out ofthe proceeds ofinsurance on Mr. Hale's life. Although the insurance proceeds were part ofMr. Hale's gross estate for Federal estate tax purposes, see sec. 2042 (and apparently for Tennessee inheritance tax purposes as well), the insurance proceeds were not part ofMr.
Petitioner attempts to distinguish Kaufman on the ground that she paid the tax for the years in issue herself, out ofthe proceeds ofinsurance on Mr. Hale's life. Although the insurance proceeds were part ofMr. Hale's gross estate for Federal estate tax purposes, see sec. 2042 (and apparently for Tennessee inheritance tax purposes as well), the insurance proceeds were not part ofMr.
Although the Notice of Deficiency asserts that the life insurance proceeds are includible in the gross estate pursuant to section 2042(1), by timely Amended Answer respondent contends that the life insurance proceeds should be included in the gross estate pursuant to section 2031 and, in the alternative, section 2042(2) through the application of Maryland state law.
From this we conclude that neither the regulation nor section 2042 governs our valuation of the split-dollar arrangement we have to analyze.
* * * Thus, ifdecedentpossessed at his death any incidents ofownership in the Reliastar policy, the entire $2,495,000 death benefit is includible in the value of the gross estate pursuant to section 2042(2).
Section 2042 provides that-the value of the- gross estate shal lude the value of all property (1) to the extent of the amount receivablŠ by the executor as insu'rance under policies on the life of the dece'dènt' and (2)' to the extent of the amount receivable by all other beneficiaries as insurance' under policies on th
A variable contract based on a segregated asset account “shall not be treated as an annuity, endowment, or life insurance contract for any period * * * for which the investments made by such account are not, in accordance with regulations prescribed by the Secretary, adequately diversified.” Sec. 817(h)(1). Under these regulations, a sep
Section 2042 governs the treatment of life insurance proceeds and provides in relevant part as follows: SEC. 2042. PROCEEDS OF LIFE INSURANCE. The value of the gross estate shall include the value of all property-- * * * * * * * (2) Receivable By Other Beneficiaries.--To the extent of the amount receivable by all other beneficiaries as insurance un
l. In the notice of deficiency herein, respondent determined that the exclusion of one-half the life insurance proceeds, as reported by the estate, was improper, and that the full amount of $1,347,882 was includable in decedent's gross estate under section 2042. In the case now before us, petitioner urges that 50 percent of the life insurance proceeds was excludable from the gross estate of decedent, that portion allegedly being the community property of Mrs. Street, who was the survivor. OPINIO
The investor control doctrine While ownership of the assets in the separate accounts of a variable life insurance policy is assumed to belong to the insurance company, a policyholder will be considered the owner for tax purposes if his “incidents of ownership over those assets become sufficiently capacious and comprehensive”. Webber v. C
nclude: (1) Ms. Atwell, who received the brokerage accounts as the survivingjoint tenant in ajoint tenancy with rights ofsurvivorship, - 18 - [*18] see sec. 2040, and who received the proceeds oflife insurance policies insuring Mr. Sacks' life, see sec. 2042; (2) Ms. Parker, who received the Bayside residence as the surviving tenant in ajoint tenancy with rights ofsurvivorship, see sec. 2040; (3) Ira Sacks, who received the proceeds ofa bank account as the survivingjoint tenant in ajoint tenancy
2042.9 A variable contract based on a segregated asset account "shall not be treated as an annuity, endowment, or life insurance contract for any period * * * for which the investments made by such account are not, in accordance with regulations pre- scribed by the Secretary, adequately diversified." Sec. 817(h)(1). Under these re- gulations,
2042(2); Estate ofPerl v. Commissioner, 76 T.C. 861, 863 (1981). Respondent determined that the estate is liable for additions to tax for failure to timely file a return pursuantto section 6651(a)(1) and failure to timely pay tax pursuantto section 6651(a)(2). Paragraphs (1) and (2) ofsection 6651(a) provide that a taxpayer shall be subject to
ide of the provisions of this Will or any codicil to it which is includible in my estate for the purpose of determining such tax, including, but not limited to, any tax on property includible under section 2041 (relating to life insurance proceeds), section 2042 - 5 - (relating to powers of appointment), or section 2044 (relating to qualified terminable interest property) of the Internal Revenue Code, or any comparable provision of state law, but excluding, however, any tax imposed by section 20