(dissenting).
In the taxable year in question, 1938, the taxpayer, Moses Parshelsky, received $14,-980 as the life annuitant named in policies applied for and issued to his brother, Isaac, and $14,390.50 under policies applied for and issued to himself, which named Isaac as the life annuitant and entitled Moses or his estate to payments becoming due after Isaac’s death. If each brother had taken out his policies without previous consultation with the other, the amount which should be included in the gross income of Moses pursuant to § 22 (b) (2) of the Revenue Act of 1938 would be $12,000, that is, 3% of the aggregate premiums paid for the annuity contracts. See Title G. & T. Co. v. Commissioner, 40 B.T.A. 475’. It is conceded, however, that the annuity contracts were taken out pursuant to agreement between the brothers. The precise terms of their agreement were not found by the Tax Court, nor are they stated in the majority opinion of this court. I assume the agreement to have been as follows: Moses agreed to invest $200,000 in single premium annuity contracts entitling Isaac to $14,390.50 annually during his life and Isaac agreed to invest a like sum in like annuity contracts entitling Moses to $14,-980 annually so long as he should live.1 That agreement was performed, and each brother became a life annuitant under policies issued to the other and also had a remainder interest in the policies issued to himself if he survived the annuitant. I can see no basis for inferring any agreement between the brothers as to what disposition should be made of the remainder interest in the policies issued to the other. After his own death, why should either brother be interested in whether subsequent payments under policies issued to the other were to go to the latter or to his wife or to some favored charitable institution? Under any agreement reasonably to be inferred to have been made between the brothers each was interested only in securing a life annuity under policies taken out by the other.
The Tax Court held that each brother bought the contracts issued to the other. It then split up the premium paid by Isaac on the policies issued to him into (a) consideration for life annuity payable to Moses, (b) consideration for payments to Isaac or his estate if he should survive Moses, and (c) consideration for payments to> Moses’ estate if Isaac should not survive. The Tax Court held that (a) and (c) totaling $173,826.72 were applied to purchase *599the annuities and that (b), the sum of $26,-173.28, “must be considered the consideration paid for a transfer, by petitioner’s brother [Isaac] of the right to receive payment upon survival of the brother.” This seems to me completely fictional. First, there was no transfer to Moses of Isaac’s right to receive $14,390.50, if Isaac survived Moses. Secondly, since Isaac did not survive, Moses has received nothing as Isaac’s assignee, if a transfer of Isaac’s right be assumed. What Moses receives as survivor of Isaac he gets by virtue of the policies issued to himself.
My brothers, as I read their opinion, have not adopted the Tax Court’s theory of a transfer of Isaac’s “(b)” right to Moses. They say that Moses transferred to Isaac the “(a)” and “(c)” annuities provided in the policies issued to him and “retained” in himself the rights which the policies gave him in case he survived Isaac; and, since he has received more than the theoretical premium ascribed by the insurance companies as the cost of the rights retained, he is taxable upon the full payment instead of upon 3% of the premium paid for the contract. This seems equally fictional; nor do I find in the statute any justification for so splitting the premium. If A buys a single premium annuity contract naming B as life annuitant and C as surviving beneficiary, I do not understand that the premium is to be divided between the cost for the life annuity and the cost for payment to the surviving beneficiary and the latter taxed upon the full annual payments as soon as he has received a sum equal to the relatively small part of the premium ascribed to the cost of his part of the annuity contract. In such a case I think that B must include in his gross income 3% of the total premium so long as he receives the annuity, and when, on B’s prior death, the annuity becomes payable to C, then C must likewise include 3% of the total premium so long as he receives the annuity. Or let it be supposed that X takes out an annuity policy naming Y as life annuitant and himself as surviving beneficiary because Y has promised to give him 1,000 shares of stock in Z corporation. So long as Y receives the annuity I think he is taxable on a sum equal to 3% of the whole premium paid by X. I do not believe that such a case involves “a transfer * * * by assignment or otherwise” of an annuity contract within the meaning of the Revenue Act. Similarly, in the case at bar, I see no reason for indulging in fictions and unrealities merely to augment taxes. The reality is that Moses received $14,980 as life annuitant under Isaac’s policies and $14,390.50 as surviving beneficiary under his own policies. He is taxable on $12,000, three per cent, of the aggregate premiums. I would remand the case for recomputation of the tax on this basis.
The difference in the annual payments was doubtless due to a difference in the ages of the life annuitants.