United States v. Sullivan

W.D. Pennsylvania

United States v. Sullivan

203 F. Supp. 1

CourtDistrict Court, W.D. Pennsylvania

DecidedFebruary 2, 1962

DocketCiv. A. 17402, 17747

StatusPublished

Cited by11 cases

This text of 203 F. Supp. 1 (United States v. Sullivan) is published on Counsel Stack Legal Research, covering District Court, W.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

United States v. Sullivan, 203 F. Supp. 1 (W.D. Pa. 1962).

Pincite

Opinion

JOHN L. MILLER, District Judge.

These two actions were instituted by the Government against certain taxpayers to foreclose liens for unpaid Federal income taxes assessed against the defendant taxpayers. The Government seeks to enforce such liens by collecting the cash value of each of the life insurance policies issued by the defendant companies on the lives of the taxpayers.

These actions having been tried by the Court without a jury, the Court makes the following findings of fact and conclusions of law.

FINDINGS OF FACT UNITED STATES OF AMERICA vs. WILLIAM L. KANN, et al. CIVIL ACTION NO. 17747

1. This action was authoiúzed and sanctioned by the Commissioner of Internal Revenue, a delegate of the Secretary of the Treasury, and was brought under the direction of the Attorney General of the United States.

2. On April 30, 1951, the Commissioner of Internal Revenue made a jeopardy assessment against defendants William L. Kann and Stella H. Kann for income taxes for the years 1936 to 1941, inclusive, in the amount of $233,196.88, with fraud penalties for said years totaling $155,999.30 and accrued interest to the date of assessment amounting to $117,048.69, the total amount assessed being $506,244.87.

3. On November 2, 1949, the said William L. Kann and Stella IT. Kann filed a petition with the United States Tax Court for a review of said deficiencies. The decision of the Tax Court on said petition is reported in the case of Kann v. Commissioner, 18 T.C. 1032. The decision of the Tax Court was affirmed on appeal: 210 F.2d 247 (3rd Cir. 1953), cert. den. 347 U.S. 967, 74 S.Ct. 778, 98 L.Ed. 1109 (1954).

4. On May 5, 1951, the District Director of Internal Revenue filed notice of tax lien in the sum of $497,217.70 covering the above-mentioned jeopardy assessments of income taxes, penalties and interest for the years 1936 to 1941, inclusive, with the Prothonotary of Allegheny County, Pennsylvania, at Pittsburgh, Pennsylvania.

5. Defendant Stella H. Kann, wife of defendant William L. Kann, died on March 9, 1961, leaving a will which was duly admitted to probate by the Register of Wills of Allegheny County, Pennsylvania, and letters testamentary thereon were granted to said William L. Kann, as executor, and he now is qualified and is acting as such.

6. On July 13, 1961, William L. Kann, individually and as Executor of the Estate of Stella H. Kann, deceased; William L. Kann and Stanley Kann, Trustees ; and Pittsburgh Crushed Steel Company, all defendants, and the United States, plaintiff, entered into a “Stipulation Re Settlement” in this case whereby the United States settled its claim for taxes against these particular defendants, and discharged the lien described above against all property and rights to property belonging to these defendants, except to the extent that such lien applied against the cash surrender value of life insurance policies involved in this case in an amount equal to the outstanding loans on such policies as of the date of the entry of this suit (March 24, 1959).

7. On July 13, 1961, William L. Kann, individually and as Executor of the Estate of Stella H. Kann, deceased; William L. Kann and Stanley Kann, *3 Trustees; and Pittsburgh Crushed Steel Company, all defendants, and the United States, plaintiff, entered into a “Stipulation of Dismissal,” whereby the parties agreed that this action be dismissed with prejudice, except that the government reserved its right to proceed on its claim against the defendants “in an amount equal to the outstanding loans on said policies as of the date of entry” of this suit (March 24, 1959). By stipulation, the action against Penn Mutual Life Insurance Company and Guaranty Trust Company was dismissed with prejudice,

8. No request for the cash surrender value of the policies involved in this case has ever been received by the insur-anee company defendants,

9. The following policies were issued by the defendant companies insuring the lives of either William L. Kann or Stella H. Kann:

*4 10. Each of the policies was delivered in Pennsylvania and was owned by either William L. Kann or Stella H. Kann.

11. Some of the policies had from time to time, both prior and subsequent to the tax assessment herein and filing of notice of tax lien, been assigned to various financial institutions, not parties to this action, as collateral security to secure loans made by said financial institutions to either William L. Kann or Stella H. Kann. All such assignments were released not later than December 1955.

12. Each of the policies was of the level premium type, wherein the amount of the premium exceeded the actuarially predicted mortality expense of the companies in the early years of the policy, being designed to create certain reserve or non-forfeiture values in each of the policies

13. Each of the policies contains a provision for the use of such reserve or non-forfeiture values by the owner prior to the death of the insured for policy loans. Such provisions are substantially similar to that contained in the policies issued by New York Life:

“LOANS. — After three full years’ premiums have been paid and before default in the payment of premium, the Company, upon receipt of this Policy and a Loan Agreement satisfactory to the Company, will advance to the Insured on the sole security of this Policy any amount which, with interest, shall be within the limit of the Cash Surrender Value of this Policy. Interest on the loan will be at the rate of six per cent per annum payable annually on the anniversary of the Policy. Any existing indebtedness to the Company on this policy, including accrued interest thereon, will be deducted from the amount of said loan. If interest is not paid when due it shall be added to the principal. All or any part of the indebtedness may be repaid at any time before default in payment of any premium or within the grace period. Failure to repay such indebtedness or to pay interest will not avoid the Policy, but whenever the amount of the total indebtedness equals the Cash Surrender Value, the Policy shall become void one month after the Company shall have mailed notice to the last known address of the Insured and of the assignee of record, if any.”

14. Each of the policies issued by Prudential, Manufacturers, New England and Reliance (Lincoln) contains a provision for the use of such reserve or non-forfeiture values for premium loans. Such provisions are substantially similar to that contained in the policy issued by Northwestern:

“Upon request of the Insured, and Assigns if any, made prior to default in premium payment and remaining unrevoked, any premium thereafter falling due and not paid will be charged as a premium loan with interest at the rate of six per cent, per annum, payable annually, provided the then cash surrender value is sufficient to cover such loan. If the cash surrender value is not sufficient to cover the premium then due but is sufficient to cover a semiannual or a quarterly installment of the annual premium, then such semi-annual or quarterly premium shall be charged in like manner but in no case shall premium for less than one quarter be charged under this provision.

Free access — add to your briefcase to read the full text and ask questions with AI