                                                                              480


           OFFICE OF THE AmORNEY         GENERAL      OF TEXAS
                                AUSTIN




Ronorable Georga ii. Sheppard
Comptroller   0r Public :i.oooutlts
Austin,   Texas
Dear Mr. Sheppard:
                           Opinion    No. O-5294



                                                     aeeigned by him
                                                     aotment or the
                                                      the rstention  or
                                                   oontrol by deoedent.
                                                    our letter   0r Iday 4,
1943,    are them:
                                          upon his own lire various
                                          eoedent transferred    all
                                           poliolen   to his tire and
                                          t to the cash surrseder
                                     e oaiw for a loan, to surrender
                                      beaaiioiarfea    or to obtain a
                                  . All prwuma       on suoh polloles
                                  he ooamaity     runds 0r himsalr and

                           oontsntion  that swh polioies  6re 8Ub-
                        noe tax is predioated  upon two proposltions:
                       "1. The 1&6aauz'e or taxability is ths payment
        or premiuma by the insured and not the possession     or legal
        ineidente  of' ownsrahlp at death.
                       "2. The bsnefiolarles   ot the proceeds of
        these policies   did not cone into posaeaeion  or enjoyment
        or said prooaeds until   the death or the lnaurea.*
                                                                                    -

                                                                              481


IIonorabls   George B. Sheppard,   page 2


                    You request    the opinion ot thlm depudlsnt
ldri6illg you whether you should inolude      the prooee48,;of ruoh
poliaierr in the final  inherltaaos    tar rrport and oom~ute the
tax thereon.

                    Artiole   7117, V. A. C. S., laaofar  (18 it
undertakes to tax   the prooeeds of inruranoo    polloler pqablo
to nand bonofloiarlea,      wa8 enacted in X939. It reada, in part,
as follows:
                       *All property within the jPrf8dlotlon        of thl8
      State,    real or perronrl,      oorperato or lnoorponto,     and 8ny
      interest    thoroin,    inoluding   proport~ paa8lng under a general
      p o wer  o flppolntmont eurollred      br the deoedont by will,
      inoludlng     the proo*ods     of iir0 inmmanoe to the rxtuat or
      the mount rooairable         br the exeoutor or adminlstrator..~
      iuaroao6 taken       out by the beambat      upon hla owa lit*,



                       the laws of doeoent   and
      or  any other State,    or by dead, g?ant, rale or gift aado or
      iatendod   to take em0t     in pomau8ion   or enjoyment after the
      death of the grantor or donor, #hall, upon par&&g 80 or for
      the wo of any L)(L~SOII,, . ., bo subjaot to a tax . . .*
       (Ergheilr   ouris)

                      Artas pointing    out that the prorlalona   of
Artiole   7117, rhioh levies    an inherltanoo    tax upon the prooeeds
or lnsuranor    ~polfoie8, ir praotloelly    identloal  wltih the pro-
tledon of the Federal ostate tax atatutm         whloh wae la roreo
at the time of the pasrage or the 1939 aaendnent to Artiole
7117, the Texas Supreme Court, in the oaaa of BPI6km.m Y. Emaoa,
169 8. W. (26) 962, oaidc
                      “. . . The sontrolling    temm   or the Fedora1
      atatute are identical  with the Texaras statute.       The Toxa8
      statute having been literally  taken rrom the       Federal statute,
Honorable       George E. Sheppard,   pega   3

                       In that ea8e the Supmmo Court ldbpted the
oonstruatlon     or this statute   given to the FedWal Statute    by
the United State6 Supreme Oourt in l&a& f, Oommie~loner of
Int. Rev.,     304 !I.9. 264. 58 8. Ct. 880, 82 L. Ed. 1331, 118
A, L. R. 319, where the Oourt held that only that portion         of
the life    inauranoe   paid iOr by the deoedant was *taken out by
the deoedwt      upon his own liie” within the terma of the statute.
pewever, at the time or the pnaraga of the 1939 am#adaent to
the Texan Statute      end at ths time of tha Supreme Court’i~
droirion    of the Blaokmon base, numerous other oaaea aon8fruing
the Federal Statute      haa been deoided by the Federal aourtta.
                        In the oa6e of Lawellfn     T, Frlok,    268 0. 9.
2)8, 45 s. at. 487, 69 L. Ed. 934, t)n           laitoa States    summa
Oourt   had berore   it the ldantloal     taot8 and-the ldentioel
qu8tion    hare under oonaldarat1on.         In thet oaa#a the oourt,
lttar rtatlng    th8t there was &rave       doubt of the mar    of
Qoagera to anaot a law that would           rtteotuall~ tax a trnrrar
ron8ummated batora ltr lnaotment,         and in koldlng suah tntWat
not taxable mde thll, rtetementr
                       *blot 0al.y are suoh doubts avOida    by oon-
        atruin& the statute     en referrlag only to txanrartlon#
        taking plaoo after it we8 peamad, but the goneral prinolpla
         ‘that law8 are not to be oonaldrre6 aa applyling to @asa
        whloh aroI)ebetore their pa88a@* 18 preaervad,        when to
        disregard it would be to impose an unexpeated llablllty
        that,  if known, might hare induoed those ooaoarned to
        avoid it,  and to use their money in other way@.*
                  &gain,   in the oaee of Bin&am t. United States,
296 u. S. 211, 80 I,. JH. 160, )68. Ot. 180, the Supreme aourt
Xtat emphatioally deoluttd   that the Federal St8tUta 6&d not
raaeh the prooeads OS inauranoe   pollolw   where awh pollolm~
had been aerlgnad prior to lte anaotmant,    eryingr
                          “The principles   BO raoently   announoed by this ‘,
        oourt   in Helrering     Y.  St. Louis U&ion Trust Co., ante,
        p. 39, ana Beaker Y. St. Louis Union Trust           Co., ante, p. 48;
        are dsol8lte of the ease In razor of the taxpayers.                Those
        prinolples    establlah     that the title  ana porrsas8ion of the
        benerlolary    were fixed by the tarma of the poliofe~! and
        aeeignmenta     thereor,    beyond the power of the lnoured to
        afroot,    many years be&ore the clot in question        here wa8
        p4SPSd.     No interest     paseed to the benerioiary     aa tha
        result    o? the death of the innurad.*       ~pharii~      OurI))
Honorable        George   H. Sheppard, page 4


                       Under the Texas law in force at the time
this   statute   was waoted
                                           Laor ah ~rmuranoe
                               tha sseignagnc      .
polioy      (absent the rasenation of the right tq @hangs the
beneficiary)ia a oompletad traneaotionwhloh ?estm in the
rrsignee oomplete and perfeat titla and rest8 in muohrs8ignae
the title to the prooeade of suoh inaumhoe. Burg68 v. Rew
York Life Ina. Co., 53 S. u. 602. Oanneequantly, aiaoe tit10
ma alroady tested In the assignob&at the time of the parsage
OS the 1939 amendment,nothlag pamed to the as&mm       there-
after, either by aots or the deosdent or by his do&h. See
yriok and B3inghamoaaer, ouprs.
                   Under the ruli115of the Suprema Oourt in
Blaolmm 1. &snBOn, SUplW, our etatut must ba oonotrued in
the came manner that the Fedsral~Statutefrom whioh it wa8
adoptedwas oonrrtruad   at the time or ita pamage. The Friek
antIBingham oases represmt the ooswfruofion    of the Fe&oral
Statute at the time of the anaotmentof the 1939 mwm6mant
to Article 7u7. We, therefore,advise you that the prooaedm
of ineuranoe polidleewhloh wore aaelgned,without rwervatlon,
prior to the anaotmmt of the 1939 amndmnt to Artlola 7U7,
and in rhloh deoebent never thereafteraoquired an lntarest,
are not taxable under the provisionsOS Artiole 7117, V. A. C. 5.
                           Truatlng that the above fully answer your
inquiry,we am
                                                tours very truly

                                         ATVCWEY ORNERALOF TEXAS




                                                     Fowler Roberto
                                                           Aesietant
