concurring: I accept the result reached by the majority since the Commissioner never sought to allocate the proceeds from the sale of the calves between those calves which were deliverable at the date of the decedent’s death and those not so deliverable.1 However, I disagree with the majority’s opinion. Such opinion appears to indicate that, as a matter of law, none of the proceeds from the sale of the calves is income in respect of a decedent since some of such proceeds do not constitute such income. Such opinion overlooks the basic proposition that under section 691, income earned by a decedent is to be subject to the income tax and not exempt from such tax by giving it a stepped-up basis under section 1014(a). The Court finds that two-thirds of the calves were deliverable on the date of the decedent’s death, and as to those calves, virtually all of the income from their sale was earned during the lifetime of the decedent. I agree that the income attributable to the sale of the other one-third is not income in respect of a decedent, but that fact should not have the effect of exempting all the proceeds from the sale of the calves from income tax.
In Davison’s Estate v. United States, 292 F.2d 937 (1961), the Court of Claims was concerned with whether crop rentals in cash or in kind should be treated as income in respect of a decedent. After reviewing the circumstances leading to the enactment of section 126 of the Internal Revenue Code of 1939, the predecessor of section 691, that court declared at page 941:
Certainly the Congress has been concerned with removing discrimination between cash and accrual method taxpayers, and with avoiding the unfair bunching problems which arose under prior law when all sums due to a decedent were accrued to him on the date of his death. But the congress has also been concerned with retrieving lost revenue. Section 126 is intended to further the general purpose of the Internal Revenue Code that all income should pay a tax. We think it clear that the intent of the Congress in enacting this section continued to be, as stated by the Supreme Court in Enright, “to cover into income the assets of decedents, earned during their life and unreported as income.” 312 U.S. at page 644, 61 S.Ct. at page 782. The income in respect of a decedent provision represents an attempt to implement these policies in a manner which reduces the importance of death in the actual collection of the revenue. * * *
In view of that understanding of the purpose of the predecessor of section 691, the court held that the crop rentals earned during the life of the decedent were income in respect of a decedent even though the amount to be realized from a sale of the crop rentals in kind could not be ascertained at the date of the decedent’s death and even though such amount would vary with changes in market conditions after the decedent’s death.
The boundaries of the concept of income in respect of a decedent are difficult to stake out precisely, but the circuit courts have generally emphasized the question of whether the income was earned during the life of the decedent. Income so earned is treated as income in respect of a decedent even though the decedent had no fully vested right to receive the income at the time of his death. For example, in Commissioner v. Linde, 213 F.2d 1 (9th Cir. 1954), the decedent, during his lifetime, produced grapes and delivered them to a cooperative for conversion into wine and for sale. The Ninth Circuit relied on the Supreme Court’s opinion in Helvering v. Enright, 312 U.S. 636 (1941), and held that the decedent’s share of the proceeds of the sale of the grapes was income in respect of a decedent since such income had been earned during the lifetime of the decedent, since such income would have been received by and taxed to him had he lived, and since the court believed that the purpose of section 691 and its predecessor was to assure that such income would not avoid taxation as a result of the death of the decedent. 213 F.2d at 5. The Ninth Circuit rejected the conclusion of the Tax Court that such proceeds were not income in respect of a decedent because the sale had not taken place during the lifetime of the decedent and because the decedent therefore had no right to such income at the time of his death.
For the reasons embraced by the Ninth Circuit in Linde, the Second Circuit held in O’Daniel’s Estate v. Commissioner, 173 F.2d 966 (1949), that a bonus paid on account of the services performed by a decedent was income in respect of a decedent even though the bonus was not allocated until after his death and there was no right to it at the time of his death. The court said at page 968: “It seems apparent from what we have already said that ‘the right * * * acquired by the decedent’s estate from the decedent’ which is referred to in Section 126(a)(1)(A) is not necessarily a legally enforceable right but merely any right derived through his services rendered while living.” See also Bausch’s Estate v. Commissioner, 186 F.2d 313 (2d Cir. 1951).
In Riegelman’s Estate v. Commissioner, 253 F.2d 315 (2d Cir. 1958), the decedent was a member of a law partnership, and after his death, his estate had a right to share in the profits of the partnership, not only for work performed before his death, but also for some work performed after his death. The Second Circuit found that the right to all such profits was income in respect of a decedent, even for the work performed after his death, since the right to such profits was attributable to the services rendered by the decedent to the partnership. The court said at page 319: “The payments were not gifts, nor were they attributable to anything done by Riegelman’s estate. They were the fruits of the man’s professional activity during his lifetime;”
United States v. Ellis, 264 F.2d 325 (2d Cir. 1959), also involved a partnership agreement in which the estate of a deceased partner was given a right to share in the partnership profits for a period of 10 years after his death. The court held that the share of the profits received by the estate was income in respect of a decedent because: “This contract did not result from any bargain between the surviving partners and Ellis’ estate but stemmed solely from Ellis’ efforts and bargaining position during his lifetime” (264 F.2d at 327.) In such situation, there was no way of knowing, at the death of Mr. Ellis, the amount of the income which would be earned by the partnership and which would be received by the estate.
The issues in this case can be more easily understood if we simplify the facts: Suppose the seller had agreed to sell two calves, one deliverable on November 1, and the other on December 15, and payment was not to be made until both calves had been delivered. If a calf had in fact been delivered on November 1, it is clear that the proceeds from the sale of that calf would be income in respect of a decedent. Trust Co. of Georgia v. Ross, 392 F.2d 694 (5th Cir. 1967), cert. denied 393 U.S. 830 (1968); Commissioner v. Linde, 213 F.2d 1 (9th Cir. 1954); Estate of Sidles v. Commissioner, 65 T.C. 873 (1976), affd. without opinion 553 F.2d 102 (8th Cir. 1977). Similarly, even if the one calf had not been delivered on November 1, but if it was deliverable at the date of the decedent’s death, it is clear that substantially all of the conditions of the sale would have been performed before the date of the decedent’s death and that the proceeds from the sale of the calf should be treated as income in respect of a decedent. Trust Co. of Georgia v. Ross, supra; Estate of Sidles v. Commissioner, supra. Although there were many more calves involved in this case, the applicable principles are the same, and the proceeds attributable to the calves which were deliverable at the time of the decedent’s death should be treated as income in respect of a decedent.
As to the two-thirds of the calves which were deliverable at the date of the decedent’s death, his efforts had earned a right to the income from their sale. Such right was “the fruits of the man’s * * * activity during his lifetime” (Riegelman’s Estate v. Commissioner, 253 F.2d at 319) and “stemmed solely from * * * [the decedent’s] efforts” (United States v. Ellis, 264 F.2d at 327). As to those calves, actual delivery of the calves to the purchaser was all that was required to complete the sale. We do not know why none of the calves was delivered before the death of the decedent, but whether those calves were delivered was wholly within the control of the decedent and those managing his affairs. It was their decision not to deliver the calves before his death, and their decision not to perform that ministerial act of delivery should not result in the income from the sale of such calves being exempt from income tax.2 The opinion of the majority may lead some persons to conclude that in similar situations it is advisable to postpone the completion of a sale in order to avoid the income tax.
The effect of the opinion of the majority is to exempt from income tax the proceeds of the sale of all the calves simply because some of them were not deliverable at the time of the decedent’s death. In other words, because one-third of the calves were not yet ready for delivery, none of the income earned during the lifetime of the decedent is to be subject to the income tax. In my judgment, such a result clearly frustrates the purpose of section 691. Davison’s Estate v. United States, 292 F.2d at 941.
The conclusion of the majority cannot be justified by any administrative difficulties involved in allocating the proceeds of the sale. It is true that we may not be able to identify the actual calves which were deliverable at the time of the decedent’s death and that, therefore, we do not know the prices brought by them. It is also true that such calves gained some additional weight after the death of the decedent. As a result of these circumstances, it may be impossible to ascertain the exact amount of income earned during the life of the decedent; yet, these difficulties should not result in exempting all of such income from taxation.
In construing the predecessor of section 691, the Supreme Court held in Helvering v. Enright, 312 U.S. 636 (1941), that the fact that the exact amount earned by the decedent cannot be determined should not frustrate the provision; the Court said at page 645:
The completion of the work in progress was necessary to fix the amount due but the right to payment for work ordinarily arises on partial performance. Accrued income under § 42 for uncompleted operations includes the value of the services rendered by the decedent, capable of approximate valuation whether based on the agreed compensation or on quantum meruit. * * *
Similarly, when a court is convinced that a taxpayer is entitled to a deduction, it is generally not denied him merely because he cannot establish the precise amount thereof. Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930); Merians v. Commissioner, 60 T.C. 187 (1973). A similar approach should have been adopted in this case.
Drennen, Dawson, Tannenwald, and Chabot, JJ., agree with this concurring opinion.Had this case been presented to me, I would have given serious consideration to requesting the parties to consider an allocation of the proceeds and offering them a further trial if necessary to present additional evidence relating to a proper allocation of the proceeds. It might have been preferable to pursue such a course rather than to proceed to announce and apply an unsound construction of see. 691. However, the question of whether to decide the case as presented or to request further development of it is a matter of judicial discretion, and I accept Judge Hall’s decision on this matter.
Here, we are not dealing with the sale of an indivisible product, such as a house or a building, which was partially completed before the death of the decedent; nor are we dealing with a situation in which none of the product was to be delivered before the death of the decedent. I express no opinion concerning the applicability of sec. 691 in such situations.