dissenting: I respectfully dissent.
The essential question presented here is the scope of the power to tax incomes. Employing almost the exact words of the Sixteenth Amendment, section 61(a) of the Internal Revenue Code of 1954 defines gross income as meaning “all income from whatever source derived.” Its predecessor, section 22(a) of the 1939 Code, defined the same term as including “gains or profits and income from any source whatever.” In enacting the income tax, Congress is presumed to have intended to exercise its power to tax incomes to the fullest extent permitted by the Sixteenth Amendment {Eisner v. Macomber, 252 U.S. 189, 203 (1920)), subject only to such limitations and qualifications as the Congress has itself provided specifically by way of exclusions, deductions, credits, or other statutory adjustments. Since nowhere in the revenue laws does there appear any specific or even implied exclusion from gross income of the types of commissions involved here, the majority opinion must be based on the conclusion that those commissions are not “income” in the constitutional sense. With this conclusion, I disagree. Aside from nice questions of whether the commissions represent compensation for services, can there be any substantial doubt that this taxpayer has realized gain by their receipt? I think not. The majority opinion assumes that the commissions represent an “economic benefit” to this taxpayer. Of course, “gain” in the theoretical economic sense does not necessarily connote “gain” within the scope of the income tax. Unrealized appreciation in the value of a capital asset would be a case in point. But here there is no lack of realization, and here the amount of gain is not theoretical or conjectural but actual in terms of dollars and cents. Within the common understanding of the term, the commissions represented gain to this taxpayer and, thus, constitute income within the meaning of section 61(a).
Having found that an employer-employee relationship did not exist under the facts of this case, the majority has concluded that the payments in question are not compensatory but represent reductions in cost and, thus, are not income. I believe that this conclusion is faulty on three grounds.
First, I know of no rule to the effect that payments for services are not compensatory in the absence of an employer-employee relationship. I assume that the commissions this taxpayer receives with respect to insurance sold on the lives of others are compensatory and represent taxable income even though he may not be an employee of the companies concerned. Does the majority suggest that the payments here in question were gifts? The record would hardly support such a conclusion. Clearly, the commissions were paid by the companies concerned because the taxpayer placed policies of insurance with them.
Secondly, I know of no rule to the effect that reductions in cost cannot be compensation. The majority refers to the case of a brush salesman whose contract of employment permits him to make purchases at a price less the ordinary commission. There may be persuasive policy reasons for not subjecting such benefits to the income tax, but I think it is far from clear that they could not constitutionally be taxed. Such reductions in cost may be de minimis under some circumstances but could well be substantial in others. I certainly cannot subscribe to the majority’s dictum that they cannot be taxed. In this connection, it may be observed that these and other forms of so-called “fringe benefits” are assuming growing significance in our economic system, and I believe that this Court should not suggest hastily that such benefits are insulated from the taxing power.
Thirdly, while I have no doubt that these payments represented compensation, I know of no rule to the effect that receipts are “income” only if compensatory, although the majority appears to assume the existence of such a rule. Section 61(a) simply lists “[cjompensation for services, including fees, commissions, and similar items” as one example of what is included in the term “income.” The report of the Committee on Ways and Means on the 1954 Code contains the following statement with respect to section 61:1
This section corresponds to section 22(a) of the 1939 Code. While the language in existing section 22(a) has been simplified, the all-inclusive nature of statutory gross income has not been affected thereby. Section 61(a) is as broad in scope as section 22(a).
Section 61(a) provides that gross income includes “all income from whatever source derived.” This definition is based upon the 16th Amendment and the word “income” is used in its constitutional sense. Therefore, although the section 22(a) phrase “in whatever form paid” has been eliminated, statutory gross income will continue to include income realized in any form. Likewise, no change is effected by the elimination of the specific reference to compensation of the President and judges of courts of the United States, and the compensation of such individuals will continue to be taxed in the same manner as that of other taxpayers. In view of the fact that certain types of income are excluded from gross income by other sections of the income tax subtitle of the new code, section 61(a) contains a clause excepting such income from the general definition of gross income.
After the general definition there has been included, for purposes of illustration, an enumeration of 15 of the more common items constituting gross income. It is made clear, however, that gross income is not limited to those items enumerated. Thus, an item not named specifically in paragraphs (1) through (15) of section 61(a) will nevertheless constitute gross income if it falls within the general definition in section 61 (a).
The committee report quoted above makes abundantly clear that taxable income includes “income realized in any form.” Thus, the essential question is not whether the payments are compensatory in some narrow, technical sense but whether the taxpayer realized gain by their receipt.
The majority opinion points out that the internal revenue ruling in effect in 1954 was limited by its terms to cases where an employer-employee relationship existed. In support of that position, the ruling cited Eisner v. Macomber, supra. If that was in fact the intended construction of the ruling, then it was based on a mistake of law and the Commissioner was not bound by it. Automobile Club v. Commissioner, 353 U.S. 180 (1957). Certainly, as I have attempted to point out above, the power to tax is not so limited as such a construction assumes and Eisner v. Macomber does not stand for such a principle. However, I believe that the 1954 ruling should be construed as referring not simply to the technical common law relationship of employer and employee but as intended to refer to contractual arrangements for services, including those of employer-employee. This interpretation is borne out by the revised ruling issued in 1955 which I consider to have been simply a clarification of the prior ruling.
The majority opinion clearly implies that a different result would be reached if the taxpayer had in fact been an employee. However, it concludes that he was a broker, the distinction being based apparently on the fact that he sold insurance for more than one company. I believe that such disparate tax treatment in such closely analogous circumstances is untenable in principle and in practice, and that the palpable inconsistency of result demonstrates the illogic of the majority’s conclusion. If such commissions would be taxable compensation when received by an agent serving one company, I am unable to see how they somehow assume a different character in the hands of an individual selling insurance for several companies.
Finally, I am not persuaded by the analogies which the majority opinion seeks to draw from the treatment of stock brokers or of real estate brokers who purchase on their own account. These examples do not seem in point to me. If they did pay a commission on their purchases, it would only be to themselves, a transfer from one “pocket” to another. Here, the commissions are not payable by the insurance agent to himself but are paid to him pursuant to a contractual obligation by the very companies on whose behalf he sells insurance. In any event, even if proper examples could be cited, tlie mere fact that other types of receipts are not taxed, either by virtue of legislative or administrative action, does not confer upon the courts the power to extend such exclusions to other receipts on the basis of some supposed requirement of fairness. That is not the judicial function.
The Commissioner’s determination should be sustained.
H. Kept. No. 1337, 83d Cons., 2d Sess., pp. A18, A19. To same effect see the report pf the Committee on Finance, S. Rept. No. 1622, 83d Cpng., 2d Sess., pp. 168, ‡69,