Commissioner v. Stern,
357 U.S. 39 (1958)

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U.S. Supreme Court

Commissioner v. Stern, 357 U.S. 39 (1958)

Commissioner v. Stern

No. 311

Argued April 7, 1958

Decided June 9, 1958

357 U.S. 39


Because the assets of the estate of respondent's husband were insufficient to meet his liability for income tax deficiencies found to have been due before his death, the Commissioner proceeded under § 311 of the Internal Revenue Code of 1939 against respondent as the beneficiary of life insurance policies held by him and on which he had retained the right to change the beneficiaries and to draw down the cash surrender values. There were no findings that he had paid any of the premiums with intent to defraud his creditors, or that he was insolvent at any time prior to his death, and no tax lien had attached.

Held: the laws of Kentucky, where respondent and her husband resided, govern the question of respondent's liability, and create no liability of respondent to the Government in the circumstances of this case. Pp. 357 U. S. 40-47.

1. Section 311 neither creates nor defines a substantive liability, but merely provides a new procedure by which the Government may collect taxes. Pp. 357 U. S. 42-44.

2. There being no federal statute creating or defining liability of respondent in this case, and Congress having manifested no desire for uniformity of liability, the creation of federal decisional law to further uniformity of liability in such cases would be unwarranted, and the existence and extent of liability should be determined by state law until Congress speaks to the contrary. Pp. 357 U. S. 44-45.

3. Congress having imposed no liability on respondent and no tax lien having attached, the Government's substantive rights in this case are precisely those which other creditors would have under Kentucky law, and respondent is not liable to the Government because Kentucky law imposes no liability against respondent in favor of her husband's creditors in the circumstances of this case. Pp. 357 U. S. 45-47.

242 F. 2d 322 affirmed.

Page 357 U. S. 40

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