The opinion of the court was delivered by: GRIM
This is an action to recover estate taxes which were paid under protest. Two separate matters are involved. The first is a death benefit paid under an employee's retirement plan. The second has to do with dividends declared before, but paid after, death.
Harry E. Barnett, with whose estate we are here concerned, died testate May 17, 1950. Plaintiff is an executor.
For a long time prior to December, 1943, Barnett owned half the outstanding stock of Atmore & Son, Inc., and was its Secretary-Treasurer. This situation continued until December, 1948, when he sold his stock. He continued thereafter until his death as an employee of the corporation.
On December 15, 1943, Atmore & Son, Inc., adopted an employees' retirement plan whose purposes were stated thus:
'* * * to provide eligible employees with a retirement income at retirement in addition to any income to which they may be entitled under any Federal and State law and which will also provide certain supplemental benefits in event of death, will contribute to the contentment and feeling of security of its employees and will improve the quality and continuity of their services to the company.'
Funds for the payment of retirement income and death benefits were to be provided by a life insurance policy on each participant, or, where insurance was not 'readily available', by an annuity contract. The company provided all the money required to administer the plan and for the premiums on the insurance policies and annuity contracts, except that certain major stockholders paid part of the premiums on their policies or contracts.
The plan provided that participants had the power to designate and change the person to whom the death benefits were to be paid.
Provision was made whereby the employee on leaving his employment voluntarily might (depending on the length of his participation in the plan) purchase the policy or annuity contract affecting him for its cash value, receive a specified percentage of its cash surrender value, or receive a policy for a reduced amount.
The retirement plan was carried out by means of a trust agreement between the company and three individual trustees. The agreement provided for the creation of a retirement committee whose members were to be appointed by the company's Board of Directors.
As Secretary of the corporation, Barnett signed the original trust agreement and two amendments to it. He was also one of the three trustees and signed the agreement and three amendments to it in that capacity. He was also a member of the retirement committee and was authorized by that committee to sign all policy applications.
Barnett became a participant in the employee's retirement plan. He was uninsurable, and life insurance was not 'readily available', to him. Consequently, an annuity contract was obtained from a life insurance company, naming Barnett as the annuitant his daughter, 'if living, otherwise * * * the executors or administrators of the annuitant' as the persons to receive the death benefits. The annuity contract's issue date was December 15, 1943, and its maturity date December 15, 1951, when Barnett would have been 70 years old. The annuity contract provided that if Barnett should die before maturity the total of the premiums paid in to the date of death would go to the named beneficiary. His lifetime monthly income under the contract upon retirement at 70 would have been $ 28.18. The annual premiums of $ 524.79 each were paid during Barnett's life. To comply with the 30% rule alluded to in footnote 1, Barnett contributed the following amounts to the payments of the premiums:
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