The opinion of the court was delivered by: STEWART
The parties have stipulated most of the pertinent facts in this case. They have attached to their stipulation three affidavits setting forth what certain witnesses would testify if called and have submitted cancelled checks purporting to show payments of the premiums of the insurance policy in question. From these sources we find the following facts:
1. This matter arises under the Internal Revenue Laws of the United States by reason of the rejection of a claim for refund by the Commissioner of Internal Revenue in the amount of $ 932.22, together with interest, filed by the plaintiffs for the alleged overpayment of Federal estate taxes in the Estate of Henry Fried, deceased.
2. Morris Fried and Rose Moskowitz, the plaintiffs, were the executors of the estate of Henry Fried, who died on May 16, 1944, a resident of McKeesport, Pennsylvania. His will was probated in the Orphans' Court of Allegheny County, Pennsylvania, at No. 3611 of 1944.
3. On or about August 2, 1945, the plaintiffs filed a Federal Estate Tax Return indicating a tax of $ 4,561.97, which was paid to Stanley Granger as the duly qualified Collector of Internal Revenue for the 23rd District of Pennsylvania.
4. Thereafter an audit of the return was made by the commissioner's office and a deficiency in Estate Tax of $ 4,631.80 was determined, which additional tax was paid, together with interest in the sum of $ 233.87, or a total of $ 4,865.67, on June 19, 1946.
5. On or about April 4, 1929, the decedent, Henry Fried, made application with the New York Life Insurance Company for two policies of life insurance, one in the among of $ 20,000 naming the decedent's estate as beneficiary, and one in the amount of $ 5,000 naming decedent's grandson, Merle Jack Joskowitz, a minor as beneficiary.
6. A policy, No. 16-610-888, in the sum of $ 5,000 was issued by the New York Life Insurance Company on April 10, 1929 on the life of Henry J. Fried, naming Merle J. Joskowitz, grandson of the insured, as beneficiary. It is this policy which is involved in this action.
7. On or about August 17, 1932, January 20, 1936 and February 10, 1942, loans were made by the New York Life Insurance Company on this policy. These loans were applied for and were granted in the name of the insured. Joseph Moskowitz signed the name of the insured on the loan applications which were obtained for the purpose of paying premiums.
8. Upon the death of the decedent, the policy in the possession of Joseph Moskowitz, father of the minor beneficiary, was surrendered to the New York Life Insurance Company and they paid the net amount of $ 3,852, being the fact amount less the premium loans, to Joseph Moskowitz as trustee for Merle J. Moskowitz, in accordance with the beneficiary endorsements on the policy.
9. Decedent, Henry Fried, retained the power under the policy to change the beneficiary, to surrender or cancel the policy, to assign the policy and obtain from the insurer a loan against the surrender value of the policy.
11. This policy was included in the Estate Tax Return filed by the Executors and the Federal Estate tax paid thereon. The claim for refund requested the return of the tax paid by reason of ...