Bacon v. Comm'r of Corps.

• Decision Date: 27 March 1929
• Citation: 266 Mass. 547,165 N.E. 664
• Parties: BACON v. COMMISSIONER OF CORPORATIONS AND TAXATION.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

266 Mass. 547

165 N.E. 664

BACON

v.COMMISSIONER OF CORPORATIONS AND TAXATION.

Supreme Judicial Court of Massachusetts, Worcester.

March 27, 1929.

Report from Superior Court, Worcester County; D. F. Dillon, Judge.

Complaint by George A. Bacon against the Commissioner of Corporations and Taxation. On report. Complaint dismissed.

D. H. Greenberg, of Boston, for petitioner.

R. A. Cutter, Asst. Atty. Gen., for respondent.

RUGG, C. J.

In December, 1923, the complainant, being one of three constituting a partnership, made a contract in writing with his partners whereby the firm was dissolved, the complainant transferred to the continuing partners all his interest of every nature in the firm property, and the business was to be continued by the other two partners, who assumed and agreed to pay all firm debts and wholly to indemnify the complainant therefrom, and who agreed to pay the retiring partner the sum of $52,000 per year in equal weekly installments for the duration of his life. Facts are agreed for the purposes of this case that the complainant's share in the partnership assets was fifty-two per cent., that the sale by him to the two partners remaining was a genuine transaction made in good faith, and that the fair value of his share in the partnership on January 1, 1916, including its good will, was $355,499.82. Annual payments pursuant to the contract were made during the calendar years 1925 and 1926. On these payments the respondent levied a tax for each year under G. L. c. 62, § 5 (a), whereby it is provided: ‘Income of the following classes received by any inhabitant of the commonwealth during the preceding calendar year shall be taxed as follows: (a) Income from an annuity shall be taxed at the rate of one and one-half per cent. per annum.’ The complainant was denied the abatement he requested, paid the taxes, and has brought this complaint to recover the sums thus paid. G. L. c. 62, § 47, as amended by St. 1926, c. 287, § 3.

The question to be decided is whether the annual payments to the complainant by his former partners in accordance with the terms of their written contract of December, 1923, are an ‘annuity’ within the meaning of that word in the statute already quoted. There is in that contract no mention of the value of the partnership assets or of the value of the share of the complainant therein, and no mention of the price agreed upon as the value of the complainant's share as basis for the agreement. The contract contains no reference to any of these matters. The complainant simply received from the remaining partners an agreement for the annual payment of the specified sum during his life and for relief from all partnership obligations, and he transferred to those partners all his interest of every kind in the firm and its assets. The only thing of value now possessed by him, in place of his former interest in the firm property, is his contract with the two remaining partners.

The conception of an annuity commonly accepted is that it is a yearly payment of a specified sum of money bestowed upon another and resting upon and secured by the personal obligation of the one paying it. It may arise out of a contract, or out of a gift, or under a will. This is to be gathered from our own decisions. In Curtis v. New York Life Ins. Co., 217 Mass. 47, 49, 104 N. E. 553, 554 (Ann. Cas. 1915C, 945), it was said: ‘One of the well known forms of contract is that...