Court Opinion

ID: 9454573
Source: CourtListenerOpinion
Date Created: 2023-08-04 18:50:07.921743+00
Date Added: 2024-06-11T17:34:10.255931
License: Public Domain

ALDISERT, Circuit Judge
(dissenting).
I disagree with the majority’s interpretation of what I consider to be the clear and unsophisticated language of the Annuity Estate Tax Statute, § 2039 and its implementing Tax Regulation 20.2039 (1) (b) (ii).
The statute subjects to inclusion in the taxable estate, proceeds from “such contract or agreement, an annuity or other payment [which] was payable to the decedent, or [which] the decedent possessed the right to receive * * * either alone or in conjunction with another for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death.”
The pertinent tax regulation provides that “[A]n annuity ‘was payable’ to the decedent if, at the time of his death, the decedent was in fact receiving an annuity or other payment, whether or not he had an enforceable right to have the payments continued.” The decedent “possessed the right to receive an annuity or other payment if, immediately before his death, the decedent had an enforceable right to receive payments at some time in the future, whether or not, at the time of his death he had a present right to receive payments.”
The two plans which were combined by the Commissioner of Internal Revenue to justify the imposition of the tax involved a retirement plan for the benefit of the decedent, and a survivorship plan for the benefit of a named beneficiary. At those critical moments which controlled the theory of tax imposition, neither plan qualified for taxation under the plain and ordinary meaning of the language of the statute and regulation.
With respect to the retirement plan, the only plan of the two under which the decedent himself could benefit, the critical moment is “at the time of his death”. At the time of Mr. Gray’s death he was not retired. He was still working. He was receiving his ordinary salary from the company. He had not put in the requisite years to qualify for the retirement *1113plan.1 He was not “in fact receiving an annuity or other payment”.
Because the decedent in his lifetime was not receiving an annuity or other payment, we must then inquire whether he “possessed the right to receive” the benefits of any plan. Another equally critical time is set forth in the tax regulations for this contingency: “if immediately prior to his death the decedent had an enforceable right to receive payments at some time in the future”. Under the survivorship plan he had no right to receive anything in the future, for this plan, by its very terms, was not for his benefit but for someone else, to-wit, a designated beneficiary. Similarly the decedent had no enforceable right to receive the benefits of his retirement plan “immediately before his death,” because at that moment he had not qualified under the appropriate years of service to be eligible.
To declare as a matter of law that he had an enforceable right to receive such payments in the future is also to declare as a matter of law that any participant in any retirement program will live long enough to participate in the plan, will be healthy long enough to remain on the job, and will never leave his present employment for another position with another employer. Common sense and experience dictate otherwise.
Accordingly, it cannot be said that the decedent possessed the right to receive the annuity or other payment under the terms of either plan.
In this posture, I believe that one conclusion becomes inescapable: because there was no annuity payable to the decedent at the time of his death under the retirement plan, and because the decedent “immediately before his death” had no enforceable right at some time in the future, under either the retirement or survivorship plans, it is inappropriate to justify taxation on the theory of combining the plans.
The effort of the majority to find support for the Commissioner’s action is a masterful endeavor, expressed in comprehensive and scholarly form. This became necessary because of the extreme difficulty of reconciling the language of the statute and the tax regulation with Example 6 of Tax Regulation 20.2039 (l)-2
This formidable task of reconciliation evinces inordinate concern with the sanctity of descriptive commentary at the expense of clear statutory language. Here indeed is the exemplary tail wagging the statutory dog. Because Example (6) is not complete, it is neither a correct statement of the regulations, nor, without more, a proper reflection of the language of the statute upon which the regulation is based. This example is deceptive, because under certain circumstances— where the terms of the specific combined plans meet the requirements of the statute — its conclusion may be true. But to make a blatant pronouncement that any combination of retirement and annuity plans will subject the value of the annu*1114ity to an inclusion in the employee’s gross estate is to be dangerously simplistic. Example (6) overlooks the absolute necessity that either or both of the plans comply with the basic language of the statute. For the Commissioner to rely upon this example affixed as an appendage to a purely interpretative regulation, when the specific terms of the plans involved are not within the ambit of the taxing statute is to impose taxation beyond that authorized by law. It is the language of the statute and the appropriate regulations implementing the statute which must control, not an improvidently-worded example.
With the view I take of this case, it does not become necessary to discuss other serious problems involved, especially the extremely challenging questions of contractual enforceability and third party beneficiaries.
I would reverse the judgment of the district court and enter judgment in favor of the taxpayer.

. Government’s brief: “As a 20-year employee of Socony, the decedent, if he had reached retirement age under the Retirement Annuity Plan, would have been entitled to receive for the remainder of his life annuities or payments thereunder.”

. “Example (6). The employer made contributions to two different funds set up under two different plans. One plan was to provide the employee, upon his retirement at age 60, with an annuity for life, and the other plan was to provide the employee’s designated beneficiary, upon the employee’s death, with a similar annuity for life. Each plan was established at a different time and each plan was administered separately in every respect. Neither plan at any time met the requirements of section 401(a) (relating to qualified plans). The value of the designated beneficiary’s annuity is includible in the employee’s gross estate. All rights and benefits accruing to an employee and to others by reason of the employment (except rights and benefits accruing under certain plans meeting the requirements of section 401(a) (see § 20.2039-2)) are considered together in determining whether or not section 2039(a) and (b) applies. The scope of section 2039(a) and (b) cannot be limited by indirection.”