Duffy v. Mutual Benefit Life Ins. Co.,
272 U.S. 613 (1926)

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U.S. Supreme Court

Duffy v. Mutual Benefit Life Ins. Co., 272 U.S. 613 (1926)

Duffy v. Mutual Benefit Life Insurance Company

No. 108

Argued October 21, 22, 1926

Decided November 29, 1926

272 U.S. 613


1. The legal reserve of a mutual life insurance company, consisting of premiums paid by the members, and earnings upon premiums invested, is "invested capital," within the war excess profits tax

Page 272 U. S. 614

provision of the Revenue Act of 1917, which (§ 207(a)) define invested capital, in the case of a corporation or partnership, as

"(1) Actual cash paid in, (2) the actual cash value of tangible property paid in other than cash, for stock or shares of such corporation or partnership . . . and (3) paid in or earned surplus and undivided profits used or employed in the business,"

etc. P. 272 U. S. 617.

2. A legal reserve so constituted, and used for the double purpose of security and investment, is not a liability, though carried as such on the books, but is assets of the company. P. 272 U. S. 618.

3. Until the maturity of a policy, the policy holder is simply a member of the corporation, with a relation to it analogous to that of a stockholder to a joint stock company: upon the maturity of the policy, he becomes a creditor with an enforceable right. P. 272 U. S. 618.

4. Assuming that, in § 207(a), supra, the words "actual cash paid in" are qualified by the clause "for stock or shares in such corporation or partnership," the premiums paid by the policy holders of a mutual life insurance company are cash paid for "shares" in the corporation. P. 272 U. S. 619.

3 F.2d 1020 affirmed.

Certiorari (268 U.S. 686) to a judgment of the circuit court of appeals which affirmed a judgment of the District Court (295 F. 881) against Duffy, Collector of Internal Revenue, in an action by the Insurance Company to recover the amount of an additional income tax assessment, which had been paid by the Company under protest.

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