concurring: Petitioners herein would have us posit our decision on certain purportedly abiding principles which they claim prior cases have made into articles of faith, i.e., that a taxpayer may not be taxed on income which he cannot legally claim as his own, and that merely providing the source of income or the mere ability to designate who performs the income-producing services are insufficient touchstones of taxability. An examination of the decided cases, however, reveals that these so-called articles of faith represent no more than semantic rationalizations designed to sustain a result dictated by the particular factual situation involved. I would not, as the majority appears to have done, indulge in further propagation and thereby add to the confusion with which the decided cases already abound. I take my cue from the admonition of Mr. Justice Holmes that “general propositions do not decide concrete cases” (see Lochner v. New York, 198 U.S. 45, 76 (1905) (dissenting opinion)) and would reach the majority result simply by answering these essentially factual questions:
(1) Did the approximately 8.4 percent of the payments received by National from Republic and not allocated by respondent to petitioners constitute adequate compensation for the reinsurance risk? I think it did. Petitioners offered no evidence to dispute the adequacy of tbe 8.4 percent in tbis regard. Indeed, the testimony of Arthur J. Cade, the former executive vice president of Republic, set forth in footnote 15 to the majority opinion, points to the likelihood that no reinsurance risk compensation whatsoever was intended. National had no claims or underwriting department or salaried employees except its attorney who acted as office manager and received $20 per month. I think it is clear therefore that the allocated payments in excess of 8.4 percent were commissions paid by Republic as compensation for services rendered with respect to credit life insurance business.
(2) Who performed the services which were thus compensated? Clearly, petitioners did. Their employees informed the customers of the availability of credit life insurance, prepared the papers relating to such insurance, handled refunds of premiums, completed the claim form in the event of death, and, after attaching a death certificate, forwarded the same to Guardian or Beneficial. Petitioners’ employees received the premiums, segregated them, and deposited them in bank accounts in the branch office cities in the name of Guardian or Beneficial. Each week, petitioners’ employees forwarded the insurer’s copies of the register sheets, evidencing the issuance of the policies, to either Guardian or Beneficial for transmission to Republic. Guardian and Beneficial were simply conduits for forwarding to Republic the papers prepared by petitioners; additionally, they prepared and sent to Republic a monthly report showing the amount of premiums collected, the amount of premiums refunded, and the net difference.
To be sure, at least one employee of each Indiana branch office of petitioners held a license as an Indiana life insurance agent for Republic. But, as far as the record reveals, this had no more than symbolic significance. Petitioners hired, controlled, and paid all the branch office employees involved in the handling of the credit life insurance; no part of the expenses relating to such employees or the services they performed was charged to Republic, National, Guardian, or Beneficial. Petitioners’ argument that such services on the part of its employees were negligible is beside the point. It may well be that no significant services on the fart of anyone were required in connection with the writing of credit life insurance activities. But, if such were the case, it would not follow that the income should remain with other parties, who did nothing, as against allocating such income to the petitioners, whose activities certainly produced the business.
The factual situation outlined is equally applicable to respondent’s allocation to petitioners of 50 percent of the net premiums paid to Guardian and Beneficial during the period January 1 to June 30,1958, except that the possibility of identifying such payments as compensation for the risk of reinsurance is concededly not involved.1
Under the foregoing circumstances, it cannot be gainsaid that petitioners performed the services for which the payments involved herein were made. Petitioners cannot avoid taxability on the allocated amounts simply because the payments were made to someone else. In none of the cases relied upon by petitioners, with one possible exception, did the taxpayer in fact perform the sendees for which the allocated payments were made. In each, as petitioners themselves point out on brief, the taxpayer was simply in “the position to have performed the services for which the income was paid hut chose not to do so.” (Emphasis added.) At best, those cases stand for the proposition that the mere 'possibility of performance of services by the taxpayer does not sustain an allocation of payment by respondent. They do not hold that taxability cannot be imposed where the taxpayer actually performs the services. The possible exception is Nichols Loan Corporation of Terre Haute, T.C. Memo. 1962-149, reversed on other grounds 321 F. 2d 905 (C.A. 7, 1963). But it is significant that neither in the opinion of this Court nor that of the Court of Appeals was there any reference to section 482 and the opinion of this Court makes clear that its decision was based on a “consideration of all the evidence.” In any event, if that case can be viewed as requiring a contrary result herein, I would not follow it.
Nor can petitioners take shelter from the application of section 482 simply because a violation of Indiana law was the genesis of the business purpose of the arrangements herein. I will assume, for the purposes of argument, that direct receipt of the commissions by petitioners would have violated Indiana law and also that the actual arrangements satisfied the requirements of that law, although the record herein is not clear as to whether either of these conditions existed. Section 482 empowers respondent to allocate “in order clearly to reflect income.” The presence of actual receipt of, or the legal right to receive or obtain, the allocated income is not always a necessary prerequisite to the application of that section. L. E. Shunk Latex Products, Inc., 18 T.C. 940 (1952), does not hold otherwise. In that case, the taxpayer was caught in a vise imposed by the OPA regulations. The hard fact was that, by virtue of those regulations, it could not have charged any higher price to a wholly independent distributor than it did to the distributor which was under common control with it.2 In short, the OPA regulations conclusively established an “arm’s-length” price which the taxpayer actually charged its distributor. The taxpayer had no other choice except to forfeit the economic benefit, which respondent sought to tax, by selling its manufactured goods to an independent distributor. We were not disposed to impose such forfeiture and therefore held that, under such circumstances, section 482 could not properly be applied. In the instant case, the Indiana law left petitioners with a clear-cut alternative. The way was open to them to adopt arrangements under which National, Guardian, and Beneficial rather than petitioners themselves would, in fact, perform the services for Which Republic made payment in the allocated amounts. Under such arrangements, petitioners could have continued to receive the same economic benefit.
It does not follow, as petitioners seem to assume, that, because they may have put sufficient flesh on the bones of National, Guardian, and Beneficial to avoid problems under Indiana law, respondent is necessarily precluded from establishing different poundage requirements to support his allocation under section 482. At the very least, petitioners, as they concede, had the burden of proving that respondent was arbitrary in so doing. In this respect, they have, in my opinion, failed to carry the day.
'Since the respondent’s action can be sustained under section 482, I see no purpose to be served by discussing the applicability of section 61. Indeed, I see good reason for not entering the mare’s nest of the decided cases under that section. See Teschner, “Anticipation of Income,” 41 Ind. L. J. 587 (1966); cf. Eustice, “Contract Rights, Capital Gain, and Assignment of Income — The Ferrer Case,” 20 Tax L. Rev. 1 (1964).
DawsoN, J., agrees with this concurring opinion.The fact that respondent made no allocation from National to Guardian or Beneficial In respect of the post-1958 period Is -beside the point. It Is entirely possible that respondent was overly generous In not allocating all of the 1958 payments to petitioners.
We carefully pointed out timt there was no evidence that the taxpayer could have obtained an upward modification of the prices established by the OPA regulations.