dissenting: I think that the taxation to this petitioner of the cost of the annuity contract, less the amount recovered by the purchaser, goes beyond the permissible limit of either the general provisions of Internal Revenue Code section 22 (a) or the specific provisions of section 22 (b) (2) (B).
The respondent’s determination, which is sustained by the majority opinion, was made under the broad sweep of the provisions of section 22 (a), which section includes compensation for personal services in whatever form paid. Where compensation is paid in something other than money, the measure of the amount to be taken into income is the fair market value of the property that is taken in payment. Section 29.22 (a)-3, Regulations 111. This raises a question of the fair market value of the annuity contract at the time of its receipt by the petitioner in 1943. Some cases have used the cost of replacement of the contract as the measure of value. See Oberwinder v. Commissioner, 147 F. 2d 255. That method of valuation has been used by the Supreme Court in determining the value of single premium insurance policies for gift tax purposes. Guggenheim v. Rasquin, 312 U. S. 254. In that case the Court made it clear that it took into consideration the entire bundle of rights comprehended within the policy that was the subject of the gift, which included the right of surrender for cash, the right of retention of the policy for its investment virtues, and the right to receive the face amount of the policy upon the death of the insured. I have some doubt as to whether the criterion for measuring the value of an insurance policy for gift tax purposes is necessarily the same for determining the value of an annuity contract in the hands of a recipient for the purpose of computing the amount of his taxable income. I am inclined to the view that in the latter case a better standard is the amount that could be obtained by the recipient in a willing seller-willing buyer market. Whichever is the proper method, a practical approach to the problem compels an examination into what this petitioner received in the taxable year. He received only the right to a monthly payment for as long as he lived. The contract had no investment value, no loan value, and no value dependent upon the life of another, as in the case of Guggenheim v. Rasquin, supra. In view of the restrictions against ‘‘commutation, anticipation or encumbrance” there could not be any willing seller-willing buyer market in any realistic sense. The trend of decisions in recent times has been away from the view expressed by Judge Learned Hand in Bedell v. Commissioner, 30 F. 2d 622, that “it is absurd to speak of a promise to pay a sum in the future as having a ‘market value,’ fair or unfair.” Nevertheless, it is still a sound rule that taxation is an eminently practical matter, and under any practical view this petitioner did not receive anything which had any marketable value.
I also tbink that the majority opinion is contrary to the spirit of legislation dealing with the taxation of employees’ annuities, and to the provisions of the statute that came into effect with the Revenue Act of 1942. The respondent in this case questions whether the annuity can be regarded as an employee’s annuity because of the fact that the employer was the beneficiary at the time of purchase. But certainly the findings of fact establish that the purpose of the arrangement was to provide the petitioner with an annuity after retirement from active-service, and under any fair interpretation of the facts, the contract should be regarded as an employee’s annuity contract.
The trend of Congressional enactments over a period of years has been to defer taxation of employee’s annuities until the proceeds are received or made available to the employees. In the Revenue Act of 1942, Congress specifically provided that with respect to contracts purchased by an employer, other than pursuant to a qualified plan, only the amount contributed by the employer after the employee’s rights became nonforfeitable should be included in the employee’s income. Section 162, Revenue Act of 1942, which added paragraph (B) to section 22 (b) (2) of the Code. As this petitioner’s employer did not make any contribution towards the purchase of the contract after the petitioner’s rights became nonforfeitable, no amount should be included in the petitioner’s income in excess of the amount distributed to him in the taxable year.
Van Fossan, Johnson, and Rice, //., agree with'this dissent.