Source: http://www.law.cornell.edu/supremecourt/text/265/189
Timestamp: 2014-12-29 06:59:22
Document Index: 258491570

Matched Legal Cases: ['§ 6336', '§ 6336', '§ 6336', '§ 6336', '§ 6336', '§ 6336']

UNITED STATES v. SUPPLEE-BIDDLE HARDWARE CO. | LII / Legal Information Institute
Supreme Court aboutsearch liibulletin subscribe previews UNITED STATES v. SUPPLEE-BIDDLE HARDWARE CO.
265 U.S. 189 (44 S.Ct. 546, 68 L.Ed. 970)
Argued: April 9, 1924.
Argument of Counsel from page 190 intentionally omitted
Argument of Counsel from page 191 intentionally omitted
The Revenue Act of 1918, which was passed February 24, 1919 (
40 Stat. 1057, c. 18), in prescribing the income to be taxed, deals first with individuals, from section 212 to section 228 (Comp. St. Ann. Supp. 1919, §§ 6336 1/8 f-6336 1/8 n), inclusive. Then follow provisions for the rate of income tax on corporations, beginning with section 230 (Comp. St. Ann. Supp. 1919, § 6336 1/8 nn). Section 233(a), being Comp. St. Ann. Supp. 1919, § 6336 1/8 p, says that 'In the case of a corporation subject to the tax imposed by section 230 the term 'gross income' means the gross income as defined in section 213,' with certain exceptions not here material. Section 213 (Comp. St. Ann. Supp. 1919; § 6336 1/8 ff) defines the gross income for individuals as follows:
'That for the purposes of this title (except as otherwise provided in section 233) the term 'gross income'
'(a) Includes gains, profits, and income derived from salaries, wages, or compensation for personal service * * * of whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from interest, rent, dividends, securities, or the transaction of any business carried on for gain or profit, or gains or profits, and income derived from any source whatever; * * * but
The Treasury Department, construing these sections, held that the proceeds of insurance policies, paid to a beneficiary which was a corporation, were not exempted and were included as 'gains * * * from any source whatever.' Under this ruling the appellee was forced to pay a tax of $84,737.95 on the proceeds of the two policies of $97,947.28. The Commissioner of Internal Revenue reduced this amount by $29,584.06 in accordance with the powers conferred upon him by sections 327 and 328 of the Revenue Act of 1918 (Comp. St. Ann. Supp. 1919, §§ 6336 7/16 j, 6336 7/6 k) to reduce the rate of taxation in cases of unusual hardship. There remained, however, the sum of $55,153.89, which tax the appellees paid under protest, and for this, with interest, the Court of Claims gave judgment to the appellee.
It is earnestly pressed upon us that proceeds of life insurance paid on the death of the insured are in fact capital and cannot be taxed as income under the Sixteenth Amendment. Eisner v. Macomber, 252 U. S. 189, 207, 40 Sup. Ct. 189, 64 L. Ed. 521, 9 A. L. R. 1570; Merchants' Loan & Trust Co. v. Smietanka, 255 U. S. 509, 518, 41 Sup. Ct. 386, 65 L. Ed. 751, 15 A. L. R. 1305. We are not required to meet this question. It is enough to sustain our construction of the act to say that proceeds of a life insurance policy paid on the death of the insured are not usually classed as income.
Life insurance in such a case as the one before us is valid and is not a wagering contract. There was certainly an insurable interest on the part of the company in the life of Biddle. Mutual Life Insurance Co. of New York v. Board, 115 Va. 836, 80 S. E. 565, L. R. A. 1915F, 979; Keckley v. Coshocton G. Co., 86 Ohio St. 213, 99 N. E. 299, Ann. Cas. 1913D, 607; Mechanics' National Bank v. Comins, 72 N. H. 12, 55 Atl. 191, 101 Am. St. Rep. 650; United Security Life & Trust Co. v. Brown, 270 Pa. 264, 113 Atl. 443. Life insurance in such a case is, like that of fire and marine insurance, a contract of indemnity. Central Bank of Washington v. Hume, 128 U. S. 195, 9 Sup. Ct. 41, 32 L. Ed. 370. The benefit to be gained by death has no periodicity. It is a substitution of money value for something permanently lost, either in a house, a ship, or a life. Assuming, without deciding, that Congress could call the proceeds of such indemnity, income, and validly tax it as such, we think that, in view of the popular conception of the life insurance as resulting in a single addition of a total sum to the resources of the beneficiary, and not in a periodical return, such a purpose on its part should be express, as it certainly is not here.
This view is strengthened by the fact that under section 402, p. 1097, of the same Revenue Law of 1918 (Comp. St. Ann. Supp. 1919, § 6336 3/4 c), a decedent's estate tax is levied, with rates ranging from 1 per centum to 25 per centum on the net estate which is made to include (paragraph f) 'the amount receivable by the executor as insurance under policies taken out by the decedent upon his own life; and to the extent of the excess over $40,000 of the amount receivable by all other beneficiaries as insurance under policies taken out by the decedent upon his own life.' The result of the construction put by the government upon sections 233, 230 and 213 would be to impose a double tax on the proceeds of the two policies in this case over and above $40,000; i. e., an income tax and an estate tax. Such a duplication, even in an exigent war tax measure, is to be avoided, unless required by express words.