exemption from taxation are to be narrowly construed, I am constrained to hold that plaintiff is not entitled to refund of taxes paid upon the income received from the Girard Life Insurance Company.
For similar reasons, plaintiff's claim with respect to the income received from the New York Life Insurance Company policies must fail. Under the three policies taken out by her husband in this company there was no option given to the beneficiary to elect a particular method of payment in the event that the insured failed to make such election. The agreement of this company to permit plaintiff to choose installment payment cannot give her the benefit of the statutory exemption with respect to amounts received "under a life insurance contract paid by reason of the death of the insured."
The final argument made by the plaintiff with respect to the proceeds of those four policies cannot prevail. This argument is that, in view of the fact that plaintiff may die before she receives an amount equal to the face amount of the policy, all sums received by her should be considered as repayment of principal only, until such time as she has received the face amount of the policy. The power of the government to collect income taxes may not under the law be deferred by such an arrangement made by the taxpayer. The Commissioner relies upon the regulations referred to earlier in this opinion dividing the amount received from life insurance policies as a result of the death of the insured into principal and increment according to certain formulae and taxing the increment annually. This position, however, is inconsistent with his previous argument that the plaintiff may not take advantage of the exemption of section 22(b) (1) because the amounts received by her under these policies do not constitute "amounts received under a life insurance contract paid by reason of the death of the insured", but constitute rather amounts received under an independent contract between new parties. If this be so, plaintiff is not subject to the regulations relied upon by the Commissioner. Under section 22(b) (2) of the Internal Revenue Code, 26 U.S.C.A. Int.Rev.Code, § 22(b) (2), however, there is excluded from gross income proceeds of annuities to the extent that the amounts received annually exceed three per cent of the consideration, and to that extent only. With respect therefore to the proceeds of the supplementary contracts by which plaintiff exercised an option not given to her by the original policies of insurance upon her husband's life, these sums are in the nature of receipts from annuity agreements and appear to be within the provisions of section 22(b) of the Internal Revenue Code.
For this reason plaintiff's motion with respect to the proceeds received from the four policies in question must be denied.
With respect to the proceeds of the six policies which granted the plaintiff, as beneficiary, the right to elect installment payments if the insured made no election during his lifetime, judgment may be entered for plaintiff upon her motion.