Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 56-48

1956-1 C.B. 561

Caution: Superseded by Rev. Rul. 67-162

Full Text

Rev. Rul. 56-48

Where an insurance company does not have actual notice or knowledge of the existence of a Federal tax lien (as distinguished from constructive notice given by the filing of a notice of lien as prescribed in the Internal Revenue Code of 1954) and in the absence of negligence or fraud, the company will not incur liability to the Government in making payments to an insured or beneficiary, against whom a Federal tax lien is outstanding, to the extent of his interest in a life insurance contract. This ruling is equally applicable to so-called policy loans which are deemed in reality mere advances of sums due the insured, under decisions such as Board of Assessors of the Parish of Orleans, The City of New Orleans v. New York Life Insurance Company, 216 U. S. 517.

Where an insurance company does have actual notice or knowledge of the existence of a Federal tax lien against a beneficiary or insured, the principles under which adverse interests in or to property or rights to property are entitled to protection may be applicable. In such cases, if the person against whom the lien is outstanding fails to take appropriate action to obtain its release, or to obtain a discharge of the property from the lien, the company may protect itself against the possibility of liability to the Government by notifying the District Director of Internal Revenue of the facts and requesting advice as to the action to be taken to enforce the lien, meanwhile withholding payment of the sum in question.