Court Opinion

ID: 4497617
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:15:31.3799+00
Date Added: 2024-06-11T14:54:15.085154
License: Public Domain

*1150OPINION.
Tyson :
This case involves the amount of $6,000 distributed under a retirement pay or pension trust, which amount had been previously assigned by petitioner, as shown in our findings of fact, to the benevolent fund. The only question presented is whether this amount so distributed by the service annuity trust is taxable to petitioner, the assignor. The applicable statute is set put in the margin.1
■ Petitioner contends that, having irrevocably assigned to the trustees of the benevolent fund all of the annual pension receivable by him during his lifetime in the future for services performed in the past, he has transferred all of his right in the retirement pay, or pension, that such right is a property right, that the income receivable therefrom was not conditioned upon the performance of any further services by the petitioner, and that he is not taxable upon the amount paid to his assignee. He further contends that, since the payments in 1934 were from the income or corpus of a trust, his assignment effected the transfer therefore of his beneficial interest in the trust, and that the income therefrom paid to his assignee is not taxable to him.
The respondent contends that the retirement pay, or pension, which petitioner was entitled to receive as a retired employee of the *1151company was taxable to Mm under section 165 of the Revenue Act of 19342 and, if not, that it was nevertheless taxable to him as earned income within the meaning of the applicable statute, regardless of the fact that it was irrevocably assigned by petitioner to a benevolent trust for the uses and purposes of the trust.
No contention is made by respondent that the amount here involved should be included in the income of petitioner because of the application of either section 166 or 167 of the Revenue Act of 1934 to the trust by which petitioner created the benevolent fund.
There is no question raised as to the validity of the assignment or its enforceability as between the parties. So, regarding the assignment as valid between the parties, the question remains whether the assignor is taxable on the amount paid the assignee.
Under the service annuity system of the company, the retirement pay, or pension, to a retired employee was based on services theretofore performed and varied in amount according to the length of service of the employee and the salary paid him during the last five years of his employment. Such retirement pay, or pension, is to be regarded as additional compensation for past services within the meaning of the applicable statute. Cf. Lucas v. One Fibre Brush Co., 281 U. S. 115; Fisher v. Commissioner, 59 Fed. (2d) 192; Noel v. Parrott, 15 Fed. (2d) 669; certiorari denied, 273 U. S. 754; Botchford v. Commissioner, 81 Fed. (2d) 914, affirming 29 B. T. A. 656; Levey v. Helvering, 68 Fed. (2d) 401; James H. Anderson, 31 B. T. A. 197, affirmed per curiam, 79 Fed. (2d) 979; George S. Williams, 36 B. T. A. 974.
The question of whether compensation for personal services can be so assigned as to relieve the “earner”’ from income tax thereon has often been before this Board and the courts, and the decisions are not all in harmony and are somewhat difficult of classification. It is, however, settled that income to be earned in the future as compensation for personal services can not be assigned by an anticipatory agreement so as to relieve the assignor of the tax, Lucas v. Earl, 281 U. S. 111, and that a member of a partnership can not assign future earnings to a nonpartner and thereby escape the tax. Burnet v. Leininger, 285 U. S. 136. But where the income assigned is to be received as compensation for services rendered entirely in the past by the assignor and the right to receive it has become fixed and deter*1152mined in him before assignment, it has been generally held that the assignor is relieved from tax thereon because his assignment is that of a property interest. Hall v. Burnet, 54 Fed. (2d) 443; certiorari denied, 285 U. S. 552; Commissioner v. Ross, 83 Fed. (2d) 18, affirming 30 B. T. A. 496; cf. Nelson v. Ferguson, 56 Fed. (2d) 121; certiorari denied, 286 U. S. 565; Helvering v. Seatree, 72 Fed. (2d) 67; Shanley v. Bowers, 81 Fed. (2d) 13; Byrnes v. Commissioner, 89 Fed. (2d) 243; Julius E. Lilienfeld, 35 B. T. A. 391; and Fontaine Fox, 37 B. T. A. 271.
By the instrument of May 8, 1912, the company established a fund to be used solely for the payment of retirement benefits, or pensions, to its retired employees for their long and faithful services. After his retirement on October 1, 1913, petitioner was duly placed on the service annuity roll and thereby became entitled to an annual retirement pay, or pension, during his lifetime to be paid from the fund and later additions made thereto, including those made under the instrument of December 31, 1929, by which the Peoples Gas Light & Coke Co. service annuity trust was created by the company for the purpose of giving employees “better assurance as to the payment of service annuity allowances granted, or to be granted.” Petitioner’s right to receive the pension during his lifetime thus became fixed and definite and constituted such a property right as was subject to the assignment he made to the benevolent fund.
Accordingly, under the authorities last above cited, we are of the opinion that the irrevocable assignment of January 21, 1920, by petitioner to the trustees of the benevolent fund of all the retirement pay, or pension, which would have otherwise been thereafter receivable by him from the company constituted an assignment of a property interest which had become fixed and determined in petitioner prior to the time the assignment was made and that the retirement pay, or pension, here involved and received by petitioner’s assignee was in no degree dependent upon continued activity of the petitioner to produce it. See Bowery v. Commissioner, 70 Fed. (2d) 713; Rossmoore v. Commissioner, 76 Fed. (2d) 520; Matchette v. Helvering, 81 Fed. (2d) 73; Shanley v. Bowers, supra; and Commissioner v. Ross, sufra; Horst v. Commissioner, 107 Fed. (2d) 906.
The decision in Gerald A. Eubank, 39 B. T. A. 583, is not controlling here, for the facts there involved are clearly distinguishable from the facts in the instant case. There, the taxpayer assigned merely a contingent right to receive presently unmatured, unascer-tainable renewal commissions which the insurance company would not become obligated to pay until the policyholders had made future premium payments, none of which might ever be made, and, further, *1153the insurance company retained the right to offset against renewal commissions as they became payable any then existing debt of the assignor to the company. There, the subject matter of the assignment was a chose in action the rights under which were entirely contingent upon the happening of uncertain future events in the respects mentioned. In the instant case, the taxpayer assigned a presently existing absolute right to pension payments from a fund created for that sole purpose and neither the assignor’s right nor the obligation of the trustees of that fund to pay such pension was contingent upon the happening of any future events.
Having held, as we have, that the assignment of the petitioner to the trustees of the benevolent fund was that of a property interest, it follows that, as further contended by petitioner, it was also an assignment of his beneficial interest in the trust created by the company and thus comes within the rule announced in the following cases: Blair v. Commissioner, 300 U. S. 5; Byrnes v. Commissioner, supra; and Ellen S. Booth, 36 B. T. A. 141.
We think that the contention of respondent that section 165 of the Revenue Act of 1934 applies here is not sound. As we view that section, it was the intention of Congress to thereby tax to the dis-tributee of a pension fund the amount actually distributed or made available to him during the taxable year. Here, petitioner, after the assignment of his right to retirement pay, or pension, was no longer entitled to any distribution and no amount was actually distributed or made available to him during the taxable year. The amount of the retirement pay, or pension, here involved was actually available only to petitioner’s assignee, the trustees of the benevolent fund, who had the legal right to it and to whom it was actually distributed.
We conclude that the respondent erred in including in petitioner’s income the amount of $6,000 here involved.
Reviewed by the Board.

Decision will be entered wnder Rule 50.

DisNey dissents.

 Revenue Act of 1934.—
SEC. 22. GROSS INCOME.
(a) General Definition. — “Gross Income” 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 ; * * *

 SEC. 165. EMPLOYEES’ TRUSTS.
A trust created by an employer as a part of a stock bonus,, pension, or profit-sharing plan for the exclusive benefit of some or all of bis employees, to wbieb contributions are made by such employer, or employees, or both, for the purpose of distributing to such employees the earnings and principal of the fund accumulated by the trust in accordance with such plan, shall not be taxable under section 16Í, but the amount actually distributed or made available to any distributee shall be taxable to him in the year in which so distributed or made available to the extent that it exceeds the amounts paid in by him. * * *