-5-
We also note that petitioners conceded at trial that the
distributions at issue were, in fact, received by them and should
be included in their gross income for 2003. After this
concession, and with respect to only the life insurance
distribution, petitioners proffered three creative, yet
misguided, arguments as to why the Court should enter a decision
in their favor. For the foregoing reasons, we decline to follow
petitioners’ reasoning.
First, petitioners argue that the Northwestern Mutual
distribution should be excluded from their gross income as it is
not actually a life insurance policy but rather a custodial
account. Custodial accounts are investment accounts, opened
under the Uniform Transfer to Minors Act, where the minor is the
listed owner of the account and its assets, and a custodian
manages the account until the minor reaches the age of
distribution for their State of residence. Earnings, up to a
certain amount, are taxed at the minor’s income tax bracket.
In this case, the policy fails to satisfy the elements of a
custodial account. The policy at issue was owned solely by
petitioners, and they did not substantiate that Katherine had any
ownership interest in or control over the policy. Petitioners
mistakenly argue that because the policy was “in Katie’s name,”
and they were its owners, it should follow that the policy be
regarded as a custodial account. The policy, however, was
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