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Third. On July 5, 1898, the two companies heretofore referred to consolidated and merged into one company, the People's Insurance Company not having up to this time issued any policies of insurance. The reorganization of these two companies was made, and the Franklin Life Insurance Company was the name adopted for the new corporation. All of the policy holders in the old Franklin Life Insurance Company doing business on the assessment plan were allowed to exchange their policies of insurance to any of the forms issued by the reorganized company. In other words, they were allowed to change their insurance from assessment insurance to insurance written upon any one of the old-line company plans.

And the question is submitted, Are these new policies subject to taxation?

In reply, I have to inform you that I am of the opinion that no taxation accrues under these circumstances unless new insurance is written. If a policy holder in the old company, holding a policy for $5,000, exchanges it for a policy in the reorganized company, for the same amount, no new insurance has, in my opinion, been written, nor has any taxable assignment of a policy of insurance been made.

While the above is not technically reinsurance, it is yet not the writ ing of new insurance.

In a letter from T. C. Roseberry, secretary of the Franklin Life Insurance Company, under date of June 9, he informs me that when old policies have been exchanged for new ones in the reorganized company these new policies have indorsed thereon the fact that they are issued in lieu of old policies in the former company, which policies were duly stamped or were not subject to taxation (having been issued prior to the passage of the war-revenue act), according to the circumstances attending each particular case. It is proper and necessary that such indorsements should be placed upon the policies issued by the reorganized company; otherwise it would be impossible to state from the face of the policy whether it represented new insurance or not.

If by the exchange of these policies the insurance is increased, the policy should have stamps affixed on a basis of the increased insurance, but if no increase is made, the policy holder simply receiving the insurance in the same amount, but on a different plan, no taxation will accrue as herein stated. * * *

Respectfully,

G. W. WILSON, Commissioner.

Mr. JAMES W. MCGINNIS, Revenue Agent, Chicago, Ill.

(207.)

Schedule A-Life insurance policies.

Exemption of fraternal and beneficiary life associations from tax on their policies or

certificates.

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington, D. C., September 5, 1900.

The following correspondence is published for the information of internal-revenue officers.

G. W. WILSON, Commissioner.

BOSTON, August 27, 1900.

SIR: Representatives of the National Fraternal Congress are in session here in Boston, and desire to know by telegraph whether or not any decision affecting the taxation of policies or certificates issued by these societies has been rendered by you during August, and if so, cause a copy of such ruling to be mailed immediately in addition to telegraph. JAMES D. GILL, Collector.

Respectfully,

Hon. G. W. WILSON, Commissioner.

WASHINGTON, D. C., August 29, 1900. No ruling has been made during August or recently by this office affecting the taxation of policies or certificates of life insurance issued by fraternal or beneficiary societies, such as the Ancient Order of United Workmen and kindred organizations.

This office has always ruled that such organizations were exempt under the law, and does not contemplate imposing any taxation on their policies or certificates.

G. W. WILSON, Commissioner.

JAMES D. GILL, Collector of Internal Revenue, Boston, Mass.

(208.)

Stamp tax-Policies of installment accident insurance.

The stamp under the war-revenue act must be affixed to the policy of insurance, and not to the application.

The amount of tax is to be ascertained by the aggregate of the premiums for the entire year.

[Opinion of Attorney-General.]

DEPARTMENT OF JUSTICE, Washington, D. C., September 5, 1900. SIR: I have the honor to acknowledge the receipt of your letter of December 2, 1898, transmitting a copy of a letter of the Commissioner of Internal Revenue dated November 30, 1898, in which you request my opinion as to the proper method of stamping certain applications and policies of installment accident insurance issued by the Travelers Insurance Company. You state that the party desiring the insurance makes a written application to have the policy written for four consec

utive periods of two, two, three, and five months, respectively, each being covered by a distinct premium to be paid, respectively, from his wages. He simultaneously gives an order upon the paymaster of the corporation by which he is employed, whereby he assigns a sufficient sum from his wages to pay these four premiums. After receiving the application, the Travelers Insurance Company issued a single policy to the insured for the principal sum mentioned as the full amount of insurance in the application. The application expressly stipulates that แ "the policy shall embrace four separate insurance contracts, and shall remain in force after the first insurance period only as continued by payments of premium for the consecutive periods following," and the assignment blank contains the statement that "the payments named in this assignment are premiums for separate and independent contracts for consecutive periods of two, two, three, and five months; and each shall apply only to its corresponding insurance period." The insurance company claims the right to affix the revenue stamps required by the act of June 13, 1898, upon the application instead of the policy, and it contends that the amount of the stamp shall be determined separately for each of the four successive periods during which the contract runs. The Commissioner of Internal Revenue, on the other hand, has ruled that, although the payments are made in installments, the entire amount of the premium is and has been fully determined at the time of issuing the policy, and, as the policy is for a stated period and a fixed premium, it should be stamped when delivered for the four terms of insurance included therein.

Two questions, therefore, are suggested by your inquiry:

1. Should the stamp required by the act of June 13, 1898, be affixed to the policy of insurance, or to the application for such policy?

2. Should the amount thereof be such as is required by the entire premiums to be paid during the period of one year for which the policy of insurance runs, in the aggregate, or may the stamp duty be divided into four parts and separately affixed with each successive payment during the periods in question?

As to the first question, I would advise you that the act of Congress requires a stamp to be affixed to the "policy of insurance, or other instrument, by whatever name the same shall be called." It is true that in the present case the application is expressly made a part of the policy, and it is, therefore, true that the application and assignment of wages do form a part of the entire contract of insurance. Nevertheless, the term, "policy of insurance," as used in the act of Congress, is a technical word with a well ascertained meaning, and ordinarily applies to the specific instrument by which the company agrees to pay a certain amount upon conditions therein stated. The application does not of itself insure, and a policy of insurance may not be granted as applied for. To the extent that its statements, if false, may invalidate the policy it forms a part of the contract of insurance, but it is not commonly

regarded as the policy, but only an instrument of writing preceding and accompanying it. I am, therefore, of opinion that Congress intended that the stamp should be affixed to the policy of insurance and not to the preliminary application.

As to the second question, there can no longer be any doubt in view of the case of Buckalew v. United States (102 Fed. Rep., 320), in which the circuit court of appeals for the fifth circuit decided upon facts which are precisely those set forth in your inquiry that the policy was a policy issued for one year, and that, therefore, the amount of tax to be affixed when the policy was delivered was to be ascertained by the aggregate of the premiums, even though the premiums for the entire year were payable in four installments.

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The subjoined opinion of the Attorney-General, relative to the pledging of collateral securities and the instruments used therein, is published for the information of all concerned.

G. W. WILSON, Commissioner.

DEPARTMENT OF JUSTICE, Washington, D. C., March 20, 1900.

The SECRETARY OF THE TREASURY.

SIR: I have the honor to acknowledge the receipt of yours of November 10, 1899, inclosing copy of a letter received by you from the Commissioner of Internal Revenue, in which you ask my opinion upon the two following questions:

"1. Whether the transaction detailed in his (the Commissioner's) letter is subject to tax as a pledge under the provisions of the paragraph in Schedule A headed 'Mortgage or pledge.'

2. If your opinion should be in the negative on the first proposition, your opinion is requested as to whether stock pledged as security for loans may not properly be taxed under the first paragraph of Schedule A."

Accompanying the Commissioner's letter is a copy of an instrument, which is as follows, and which presents the facts involving the transaction upon which the opinion is desired:

"Know all men by these presents, That the undersigned, in consideration of financial accommodations given, or to be given, or continued to

the undersigned by National Bank of the City of New York, hereby agree with the said bank, that whenever the undersigned shall become or remain, directly or contingently, indebted to the said bank for money lent, or for money paid for the use or account of the undersigned, or for any overdraft or upon any indorsement, draft, guarantee, or in any manner whatsoever, or upon any claim, the said bank shall then and thereafter have the following rights, in addition to those created by the circumstances from which such indebtedness may arise against the undersigned, or his or their executors, administrators or assigns, namely:

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"1. All securities deposited by the undersigned with said bank, as collateral to any such loan or indebtedness of the undersigned to said bank, shall also be held by said bank as security for any other liability of the undersigned to said bank, whether then existing or thereafter contracted; and said bank shall also have a lien upon any balance of the deposit account of the undersigned with said bank existing from time to time, and upon all property of the undersigned of every description left with the said bank for safe-keeping or otherwise, or coming to the hands of said bank in any way, as security for any liability of the undersigned to said bank now existing or hereafter contracted.

"2. Said bank shall at all times have the right to require from the undersigned that there shall be lodged with said bank as security for all existing liabilities of the undersigned to said bank, approved collateral securities to an amount satisfactory to said bank and upon the failure of the undersigned at all times to keep a margin of securities with said bank for such liabilities of the undersigned, satisfactory to said bank, or upon any failure in business or making of an insolvent assignment by the undersigned, then and in either event all liabilities of the undersigned to said bank shall at the option of said bank become immediately due and payable, notwithstanding any credit or time allowed to the undersigned by any instrument evidencing any of the said liabilities.

"3. Upon the failure of the undersigned either to pay any indebtedness to said bank when becoming or made due, or to keep up the margin of collateral securities above provided for, then and in either event said bank may immediately, without advertisement and without notice to the undersigned, sell any of the securities held by it as against any or all of the liabilities of the undersigned, at private sale or broker's board, or otherwise, and apply the proceeds of such sale as far as needed toward the payment of any or all of such liabilities, together with interest and expenses of sale, holding the undersigned responsible for any deficiency remaining unpaid after such application. If any such sale be at broker's board or at public auction, said bank may itself be a purchaser at such sale, free from any right or equity of redemption of the undersigned, such right and equity being hereby expressly waived and released. Upon default as aforesaid, said bank may also apply toward the payment of the said liabilities all balances of any deposit account of the undersigned with said bank then existing.

"It is further agreed that these presents constitute a continuing agreement applying to any and all future as well as to existing transactions between the undersigned and said bank.

"Dated New York, the

day of

189-."

I think that I sufficiently answered the first question in the opinion which was rendered to you on the 21st of September, 1898. The instrument upon which the opinion was based in that case differed from

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