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LUCAS V. ALEXANDER, 279 U. S. 573 (1929)

U.S. Supreme Court

Lucas v. Alexander, 279 U.S. 573 (1929)

Lucas v. Alexander

No. 481

Argued April 12, 1929

Decided May 20, 1929

279 U.S. 573


1. A respondent in certiorari who did not seek review for himself is not entitled to question the correctness of the decree of the court below. P. 279 U. S. 576.

2. Semble that the amount realized by an insured, over and above premiums paid, when, by exercising an option in his policy, he receives in his lifetime the amount of the policy plus accumulated dividends, is within the provisions of § 213 of the Revenue Act of 1918 taxing "gains or profits and income derived from any source whatever," and not exempted as such by any other provision of the Act. Id.

3. That part of the gain so received which is attributable to and accrued during the period before the effective date of the Sixteenth Amendment (February 25, 1913), and of the first law taxing the income of individuals (March 1, 1913), must be deemed an accretion to capital not taxable by the income tax acts enacted after the Amendment. P. 279 U. S. 577.

4. In determining what part of such total gain accrued to the taxpayer after March 1, 1913, provisions of the taxing statute enacted as aids in arriving at the answer must be so construed as to avoid doubts as to its constitutionality. Id.

5. The purpose of ascertaining the value of a taxpayer's property on March 1, 1913 (Revenue Act of 1918, § 202(A)(1)), is to measure that part of his total gain which had arisen or accrued after the enactment of any of the statutes taxing income, and thus to arrive at his gain taxed as income. Value as of that date may be disregarded unless it serves that purpose. P. 279 U. S. 578.

6. In applying § 202(A)(1) to an insurance policy having no market value, which was liquidated by the insured, its value on March , 1913, need not be determined by making a prediction as of that time based upon an estimate of future possibilities; the 1913 value is, at most, but a method of allocating a known income to the periods in which it actually accrued. P. 279 U. S. 579.

Page 279 U. S. 574

7. The taxpayer insured his life in 1899 under deferred dividend policies which he fully paid up by 1908. Dividends were payable only if he were living and the policies in force twenty year from date of issue. At the end of that period (1919), exercising an option, he discontinued the insurance and received the face value of the policies and the accumulated dividends.

Held, construing and applying § 202(A)(1) of the Revenue Act of 1918,

(1) That the value of the policies as of March 1, 1913, was not their cash surrender or loan value on that date, nor was the taxable gain the amount by which the proceeds of the policies exceeded the total premiums paid. P. 279 U. S. 578.

(2) That (upon the evidence presented and for the purposes of this case), the value which had accrued on March 1, 1913, could be taken as the total of the insurance reserve liability and dividend accumulations provisionally apportioned to the policies on the company's books at that date. P. 279 U. S. 580.

27 F.2d 237 affirmed.

Certiorari, 278 U.S. 594, to review a judgment of the circuit court of appeals which affirmed a judgment recovered by A. J. A. Alexander in the district court, 21 F.2d 68, in an action for money illegally collected as income taxes. The present respondents were substituted in this Court, as executors, after the plaintiff's death.

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