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The case of Shwab, Executor of Dickel v. Doyle, United States Collector of Internal Revenue for the Fourth Collection District of Michigan in 1921 revolved around a dispute over estate taxes. The executor (Shwab) argued that certain deductions should be allowed from the gross estate before calculating the tax due under federal law. These deductions included debts owed by the deceased and funeral expenses among others. However, Doyle as U.S collector disagreed with this interpretation and insisted on taxing based on the total value without any deductions. The Supreme Court ruled in favor of Shwab stating that such allowable claims against an estate were indeed deductible when computing net taxable estates under federal law at that time. This ruling clarified how to calculate net taxable estates for purposes of determining federal inheritance taxes.
The dissenting opinion in the case of Shwab v. Doyle argued that the estate tax should not be applied to life insurance proceeds paid upon death, even if those proceeds were payable to an executor or administrator and used for payment of debts and expenses. The justice disagreed with the majority's interpretation of Section 302(g) of the Revenue Act which imposed a tax on transfers intended to take effect at or after death. He contended that this provision did not apply because there was no transfer from decedent; rather, it was a contract between decedent and insurer whereupon his death, insurer would pay a sum certain either directly to beneficiaries named by him or into his estate for distribution according to law. Thus, he believed such payments were exempt from taxation under Section 303(a)(1), which excluded amounts receivable by beneficiary other than executor as insurance under policies taken out on life of decedent.