The Mutual Life Insurance Company of New York v. United States

This case presents for our consideration problems resulting from the levy by a District Director of Internal Revenue upon a life insurance policy of a delinquent taxpayer, with a demand upon the insurer for payment of the policy’s cash surrender value. The United States has brought this action for foreclosure of tax lien against the taxpayer, Albert Salerno, a resident of Las Vegas, Nevada, and against appellant which had, in 1951, issued a policy of insurance upon Salerno’s life.

Notice of Tax Lien in favor of the Government against all of taxpayer’s property was filed with appellant June 19, 1958. Notice of Levy and Demand was served upon appellant and demand was made for payment of the policy’s cash surrender value on February 11, I960. On that date the cash surrender value of the policy was $660.96. In the fall of 1960, the premium upon the policy falling due and remaining unpaid by or on behalf of Salerno, appellant, pursuant to the terms of the policy’s provision for “automatic premium loans,” resorted to a “loan” against the policy’s cash value for payment of the premium. The policy’s surrender value was accordingly reduced to $494.59.

This action was brought in May,…