Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 55-63

1955-1 C.B. 227

Sec. 101

IRS Headnote

Payments to beneficiaries or estates of staff members and military observers killed in the service of the United Nations are exempt from Federal income tax under section 22(b)(1)(A) of the Internal Revenue Code of 1939 where the United Nations purchases life insurance, listing itself as beneficiary, solely to meet such payments and is, in effect, only a conduit of the insurance to such beneficiaries or estates.

Full Text

Rev. Rul. 55-63

Advice has been requested whether payments made to the beneficiaries or estates of staff members and military observers killed in the service of the United Nations are exempt from Federal income tax under section 22(b)(1)(A) of the Internal Revenue Code of 1939 where the United Nations purchases life insurance, listing itself as beneficiary, solely to meet such payments and is, in effect, only a conduit of the insurance to the beneficiaries or estates.

Pursuant to a policy adopted by the United Nations, the beneficiaries of staff members and military observers killed in the service of the United Nations in specified areas are guaranteed certain death benefit payments. Solely for the purpose of meeting such payments, the United Nations purchases insurance on the lives of its staff members and military observers, listing itself as beneficiary, and in the event of their death the proceeds which the United Nations receives from the insurer are paid either to the beneficiaries of the decedent or to his estate depending upon the circumstances involved.

Section 22(b)(1) of the Code of 1939 provides in part, as follows:

(b) EXCLUSIONS FROM GROSS INCOME.-The following items shall not be included in gross income and shall be exempt from taxation under this chapter chapter 1 of the Code :

(1) LIFE INSURANCE, ETC.-Amounts received-

(A) under a life insurance contract, paid by reasons of the death of the insured; * * *

In Raymond J. Moore et al. v. Commissioner , 45 B.T.A. 1073, acquiescence, C.B. 1943, 17, which involved the purchase of combination life insurance and annuity contracts on the lives of certain employees by a trustee for the purpose of making death benefit payments to the beneficiaries of the employees, the United States Board of Tax Appeals said, in considering the death benefits feature of the policies to determine the taxability of the insured employees, that from a practical standpoint the trustee was no more than a conduit from the insurer to the insured's beneficiaries. In substance, each petitioner, insofar as the death benefits feature was concerned, and militiary observers killed in the policy as if it were taken out by him upon his life, and therefore, was taxable on the premium allocable to the death benefits.

In view of the foregoing, it is held that payments made to beneficiaries or estates of staff members and military observers killed in the service of the United Nations are exempt from Federal income tax under section 22(b)(1)(A) of the Code as the proceeds of life insurance where the United Nations purchases life insurance, listing itself as beneficiary, solely to meet such payments and is, in effect, only a conduit of the insurance to the beneficiaries or estates