Hibbard, Spencer, Bartlett & Co. v. Commissioner of Internal Revenue
| Decision Date | 12 November 1926 |
| Docket Number | Docket No. 7431. |
| Citation | 5 BTA 464 |
| Parties | HIBBARD, SPENCER, BARTLETT & CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Board of Tax Appeals |
David Bluford, Esq. and Raymond H. Schultz, Esq., for the petitioner.
John W. Fisher, Esq., for the respondent.
The Commissioner has determined deficiencies in income and profits taxes and an overassessment for the following years in the following amounts:
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Year. | Deficiency. | Overassessment
---------------------------------------|-------------|-----------------
1918 _________________________________ | $28,425.00 | _________
1919 _________________________________ | 12,563.32 | _________
1920 _________________________________ | __________ | $7,047.76
1921 _________________________________ | 3,136.74 | _________
1922 _________________________________ | 3,852.38 | _________
| |
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The controversy arises over the alleged error of the Commissioner in refusing to allow, as deductions from gross income in the respective years, the amounts paid by the petitioner in each year to the Hibbard, Spencer, Bartlett & Co. pension fund; in holding that the total of the annual contributions made to the fund by the employees, and of the accrued interest on the entire fund, was income to the petitioner in each year; and, if no trust existed, in disregarding for invested capital purposes the contributions of the employees for years prior to 1918. The facts were stipulated.
FINDINGS OF FACT.
the employees and the taxpayer, and, pursuant thereto the Hibbard, Spencer, Bartlett & Co. Pension Fund, hereinafter called the Pension Fund, was established and has since continued in operation.
RULES AND REGULATIONS GOVERNING HIBBARD, SPENCER, BARTLETT & CO.
State Street Bridge, Chicago
1. The word Employer, wherever it shall appear herein, shall be taken to mean Hibbard, Spencer, Bartlett & Co. The personal pronouns he, his and him, wherever appearing herein, unless a contrary intention is clearly expressed, shall be taken to refer to employes of either sex. The word salary, as used herein, means the agreed periodical compensation of the employe and does not include commissions, bonuses, overtime earnings, profit sharing distributions or service dividends.
2. This fund shall be known as "The HIBBARD, SPENCER, BARTLETT & CO. PENSION FUND."
4. Said fund shall be controlled by a Pension Committee of seven, consisting of the President and First Vice-President of Hibbard, Spencer, Bartlett & Co., three Directors to be chosen at the annual meeting of the Board of Directors of said company and two employes, not directors, to be elected annually by the employes. Each member shall serve until his successor is elected. Said committee shall have full power and authority to do all acts necessary to carry out the objects of this pension fund as provided herein. One member of said Committee shall be chosen and act as its secretary. Meetings of said Committee may be called on notice by any member. Vacancies occurring in the Pension Committee may be filled by the Board of Directors of Hibbard, Spencer, Bartlett & Co. Three members of the Committee, including the Chairman of the Board of Directors, or President or First Vice-President, shall constitute a quorum for the transaction of business.
5. With the exception mentioned in Paragraph 7, all employes (including officers) of the Employer, who are eighteen years of age or over (other than persons more than forty years old when last entering the service of the Employer, and country traveling salesmen) shall contribute to this fund and be eligible to receive benefits therefrom as herein provided. By country traveling salesmen is meant all salesmen whose routes are mainly outside of the limits of the city of Chicago.
6. Each employe specified in the preceding section shall contribute to this fund a sum equal to two per cent of his annual salary, not exceeding sixty dollars per annum, to be deducted quarterly from the payment of such salary.
7. Subject to the approval of the Employer, employes of advanced age electing so to do may participate in this fund. By employes of advanced age is meant those who, when last entering the service of the Employer, are more than forty, but not more than fifty-five years old. Notice of such election must be given in writing to the treasurer of the Employer within ten days after the employe of advanced age enters the service of the Employer. Such notice must state the date of the employe's birth, — day, month and year. If the employe's application is approved by the Employer, its treasurer will give him written notice thereof.
8. The percentage of his annual salary to be contributed to this fund by each male employe of advanced age participating therein shall be determined by subtracting his age at his nearest birthday when last entering the service of the Employer from sixty-five and dividing one hundred by the remainder. In the case of female employes of advanced age participating in the fund, the percentage to be contributed shall be determined by subtracting the age at the nearest birthday when entering the service from sixty and dividing one hundred by the remainder. In each of these calculations fractions under one-half of one per cent shall be disregarded in the result. Fractions of one-half of one per cent or more shall be treated as a whole number. The percentage thus determined shall be the fixed contribution of the employe throughout the period of his service. The contributions of employes of advanced age will be deducted by the Employer from their salaries.
ILLUSTRATION
Age at Nearest Birthday
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| Contribution
Age | -------------------
| Males. | Females
------------------|----------|---------
| Per cent | Per cent
| |
41 ______________ | 4 | 5
42 ______________ | 4 | 6
43 ______________ | 5 | 6
44 ______________ | 5 | 6
45 ______________ | 5 | 7
46 ______________ | 5 | 7
47 ______________ | 6 | 8
48 ______________ | 6 | 8
49 ______________ | 6 | 9
50 ______________ | 7 | 10
51 ______________ | 7 | 11
52 ______________ | 8 | 13
53 ______________ | 8 | 14
54 ______________ | 9 | 17
55 ______________ | 10 | 20
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9. The Employer will contribute each quarter a sum equal to the aggregate payments by the employes during the same period.
10. The pension fund shall remain in the custody of the Employer and all payments provided for in these Rules and Regulations are to be made out of said fund.
11. In case of the voluntary resignation of an employe or his dismissal by the Employer, or such employe becoming a country traveling salesman, or in case suit shall be filed by any such employe against the Employer, or in case the Employer shall become liable to pay compensation to such employe for disability, as provided in any Workmen's Compensation Law, all payments made by him to this fund shall be returned to him, with simple interest at the rate of three per cent per annum, less any amount he may have received from the fund, and his interest in the fund shall thereupon terminate. Interest shall be computed from the first of the year on the contributions for the year next preceding.
Provided that the question of cause for dismissal of any employe by the Employer is to rest wholly in the discretion of said Employer by its proper officer or officers.
12. If any employe contributing to said fund shall die while in the service of the Employer, or while on the pension roll hereby created, all payments made by such employe to said fund shall be paid to his estate with interest as provided in the preceding section. Provided, if any employe shall die intestate his deposit with interest as aforesaid may, in the discretion of the Pension Committee, be paid to his widow, or if he shall be unmarried at the time of his death, to his next of kin, unless said employe shall have filed a notice in writing with the secretary of the Pension Committee directing payment to be made otherwise.
13. Except in cases where there are special reasons to the contrary, it is the policy of the Employer to retire from its service all employes who have reached the age of sixty-five years in case of males, and sixty years in case of females.
14. Male employes who have been continuously in the service of the Employer at its Chicago office for fifteen years or more will be permitted to retire from such service on attaining the age of sixty-five years. After attaining the age of sixty years such employes may be retired by the Pension Committee, at its discretion.
Female employes who have been continuously in the service of the Employer for fifteen or more years, at its Chicago office, will, on attaining the age of sixty years, be permitted to retire from such service.
15. Each...
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