Knapp v. Commissioner

Keen,

dissenting: I respectfully note my dissent herein because I am unable to view the question presented by this proceeding as one to be disposed of by the application of the doctrines of constructive receipt. In my opinion it is solely a question of the construction to be given to the language used by Congress in enacting section 165 of the Revenue Act of 1934, set out in the margin.1 The question presented is whether, under the facts set out in the findings, the earnings and the principal of the Sears, Roebuck & Co.’s Employees’ Savings *29and Profit-Sharing Pension Fund, in which petitioner was a depositor, or any part thereof, were “made available” to petitioner as a dis-tributee in a year or years prior to the taxable year as petitioner contends, or were “made available” to him in the taxable year when they were physically received by him as respondent contends.

In order to find the solution to this question it is first necessary to ascertain the meaning of the words “made available” as used in the phrase “but the amount actually distributed or made available io any distributee shall be taxable to him in the year in which so distributed or made available * *

The legislative history of this section of the revenue act throws very little light on this specific question. This section made its first appearance as a part of the taxing statutes in the Revenue Act of 1921 and contained at that time the phrase which we have quoted above. There have been changes in this section which have been made in the Acts of 1926, 1928, 1932, 1934, 1936, and 1938, but the quoted phrase is used without change or comment in all of the acts with the exception of the Act of 1928, and in that act the change was minor and immaterial. However, the changes which were made .in this section in the various Revenue Acts from 1924 to 1938, inclusive, indicated the desire of Congress to encourage and foster employees’ trusts and to minimize the incidence of any tax on the participating employees. See Seidman’s Legislative History of Federal Income Tax Laws, pp. 87, 257, 545, 604, 851.

There is no other section of the revenue acts in which the phrase “made available to” is used. In article 332 of Regulations 74 and 77, and article 44-2 of Regulations 86, the phrase is used in discussing income not reduced to possession in the following sentence: “To constitute receipt in such a case the income must be credited or set apart to the taxpayer without any substantial limitation or restriction as to the time or manner of payment or condition upon which payment is to be made, and mast be made available to Mm so that it may be drawn at any time, and its receipt brought within his own control and disposition.”

Nor are there any cases in which the meaning of this phrase as used in this section of the revenue act has been judicially interpreted.

We should therefore look to the ordinary meaning of the words used, Reinecke v. Smith, 289 U. S. 172, getting what help we can from the context of the section in which they appear. Webster defines “available” as: “Such as one may avail one’s self of; capable of being used to accomplish a purpose; usable; convertible into a resource; as, an available measure; an available candidate.” It would seem that the phrase “made available to”, as used in the regulations which we have set out above, has the same connotation, since it is followed by the explanatory phrase “so that it may be drawn at any time.” Look*30ing to the context of the particular section of the act, we find the phrase “made available” used disjunctively with the phrase “actually distributed.” As the court said in Monroe Cider Vinegar & Fruit Co. v. Riordan, 280 Fed., 624, 626, “the legislative body is not presumed to use meanlingless language, or putting the rule another way, * * * in ascertaining the legislative intent due consideration and weight shall be given to the words and phrases of a statute.” In Gilbert v. Commissioner, 56 Fed. (2d) 361, 362, the court said: “It is a well-settled rule of construction that a statute should, if possible, be so construed as to give meaning to all parts of it.” We may, therefore, conclude that Congress, in using the phrase “made available” meant to provide for a situation different from that covered by the phrase “actually distributed”, and that the former is antonymous to rather than synonymous with the latter. In other words, the statute provides that even though the earnings and principal of the fund accumulated by the trust have not been actually distributed to the employees, nevertheless, the amount shall be taxable to him if it is made available to him and in the year in which so made available. We must conclude that Congress used the phrase “made available” in its ordinary sense of “made usable or convertible into a resource”, as distinguished from the connotation of actual receipt present in the other phrase used in this section of the statute, “actually distributed.”

Since we are here concerned with a definite and express statutory provision, it is not necessary to concern ourselves, as the majority opinion has done, with any fictional doctrine of constructive receipt. The problem as I have seen it is purely one of statutory construction.

Having construed the phrase in question in this way, the remaining question is whether the phrase so construed is applicable to the facts in this case. In my opinion it is.

After petitioner had completed ten years of service with the company he was entitled to withdraw all money and securities credited to his account. The only limitation on that general right was the provision that if he once withdrew he could not reenter the fund. If this proceeding is treated as one involving the application of the doctrine of constructive receipt, it is conceivable that this limitation might be material, but it is not material in considering the question of whether the money and securities credited to petitioner by the trustees of the fund were made usable or convertible into a resource as to petitioner in a year or years prior to the taxable year. Since petitioner had the absolute right of withdrawing the money and securities so credited to him at any time after he had completed ten years of service, they then became available to him within the meaning of this section of the statute and the money and securities credited to his account in subsequent years were made available to him in the years so credited.

*31The case of Asher v. Welsh, decided by the Federal District Court for the District of California, Southern Division, on May 24, 1938, is not helpful in a consideration of the instant proceeding. In that case the doctrine of estoppel was found to be controlling. There the taxpayer was employed by the same company as that which employed petitioner here. He did not report in his returns as income the money and securities credited to his account by the fund in the years so credited. The respondent relied upon these returns and did not, therefore, collect the taxes which would have been collected had the facts been disclosed. Having paid a tax upon the final distribution of these accumulated moneys and securities in the year in which they were actually received, the taxpayer sought to recover the amount paid in an action against respondent. The court held that he was estopped from doing this. In the instant proceeding no issue of estoppel 'has been raised by respondent and there is no evidence that any tax would have been due from petitioner in any prior year even if the amounts made available to him by the fund had been reported in the year in which they were so made available. Therefore, the respondent can not be said to have relied to his detriment on petitioner’s returns for prior years, and consequently, there can be no estoppel. The only information we have as to the taxes which might have been due from petitioner if his income had been properly reported is in a memorandum attached to his return for the taxable year which indicates that no taxes would have been properly payable by him.

Leech and Hill agree with this dissent.

SBC. 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 his employees, to which 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 161, 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. Such distributees shall for the purpose of the normal tax be allowed as credits against net income such part of the amount so distributed or made available as represents the items of dividends and interest specified in section 25 (a).