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September 28, 1965

F. Willard Griffith and Theodora A. Griffith, Plaintiffs
United States of America, Defendant

Wortendyke, District Judge.

The opinion of the court was delivered by: WORTENDYKE

This is a civil action for refund of income taxes and interest paid by the plaintiffs, husband and wife, for the years 1953 through 1960, plus interest thereon in accordance with 28 U.S.C. § 2411(a). This Court has jurisdiction under 28 U.S.C. §§ 1340 and 1346(a)(1) and 26 U.S.C. § 7422.

 The parties have stipulated the facts and I find, in accordance therewith, as follows:

 (1) Plaintiffs filed timely joint income tax returns for the calendar years 1953 through 1960, setting forth in each return the sum of $12,000.00 as alimony payments to Mr. Griffith's former wife, Florence H. Griffith, and claiming as deductions premium payments upon an insurance policy upon Mr. Griffith's life, as additional alimony payments to his former wife.

 (2) The Commissioner of Internal Revenue determined that the premium payments were not deductible and assessed additional tax amounts and interest for the tax years in question, which were duly paid.

 (3) On June 29, 1962 plaintiffs filed timely claims for refund of overpayments for the years 1953 through 1960 in a total amount of $25,067.55; and on April 2, 1964 the Commissioner duly notified the plaintiffs of his disallowance of their claims.

 (4) Prior to the marriage of the present plaintiffs, Mr. Griffith (hereinafter taxpayer) had been married to Florence H. Griffith; but on July 12, 1946 taxpayer and his then wife, Florence, each with the advice of independent counsel, executed a written agreement providing for alimony and for the support and maintenance of the wife and children born of the marriage in contemplation of a divorce a vinculo. A true copy of the agreement is annexed to the stipulation. *fn1" The agreement between the parties became effective by its terms upon the entry of the final decree in favor of Mr. Griffith in the then pending divorce proceeding, and, with the approval of the Court, were merged in and attached to the decree nisi and regarded as incident to that and the final decree.

 (5) A decree nisi, dissolving the marriage of taxpayer and Florence, was entered in the Court of Chancery of the State of New Jersey on July 17, 1946, and a copy of the aforesaid agreement was annexed to and incorporated by reference in that decree. A final divorce decree between the parties was entered on October 18, 1946. A true copy of the decree nisi and a true copy of the final divorce decree between the parties are also attached to the stipulation.

 (6) Pursuant to his written application dated April 30, 1946 a life insurance policy was issued by Home Insurance Company on taxpayer's life, number 537,796, in the face amount of $100,000.00 and a copy of that policy is also attached to the stipulation. *fn2"

 (7) Taxpayer paid to the insurance company, during the years 1953 through 1960, in accordance with this agreement, the premiums required by the terms of the policy, less the amounts of dividends accruing thereon.

 (8) On July 8, 1946 taxpayer wrote to the Commissioner of Internal Revenue requesting a ruling letter upon the question of whether alimony payments, inclusive of premiums upon the life insurance policy in question, would be deductible from taxpayer's taxable income. In response to that letter of inquiry, a Deputy Commissioner of Internal Revenue wrote to taxpayer, under date of July 10, 1946, advising him, in part, as follows: "The Bureau holds that the periodic payments as set forth in the proposed agreement which are made subsequent to a decree of divorce constitute an allowable deduction from your gross income and are includible in the gross income of your wife since the agreement is incident to the divorce decree."

 (9) On August 21, 1946 taxpayer requested the insurance company to apply dividends to reduce the amount of premiums payable upon the policy, and taxpayer regularly paid the net premiums thereon until June 8, 1961, when he advised the insurance company that he would make no further premium payments upon the policy and that the company should look to his former wife for further premium payments if she should desire to continue the insurance in force.

 (10) On October 20, 1960, Florence H. Griffith borrowed the then existing cash value of the policy from the insurance company. The loan was in the amount of $26,100.00 less interest of $657.27. Thus, she received from the insurance company $25,442.73.

 (11) On August 26, 1961 the policy was continued under the extended term provisions for the non-payment of premium, and on July 31, 1962, ...

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