Edwards v. Keith
| Decision Date | 31 January 1916 |
| Docket Number | 129. |
| Parties | EDWARDS v. KEITH. |
| Court | U.S. Court of Appeals — Second Circuit |
Jones McKinny & Steinbrink, of Brooklyn, N.Y. (George W Wickersham, of New York City, Chas. A. Woods, of Long Island City, N.Y., and Meier Steinbrink, of Brooklyn, N.Y., of counsel), for plaintiff in error.
Melville J. France, U.S. Atty., of Brooklyn, N.Y., for defendant in error.
Before LACOMBE, COXE, and ROGERS, Circuit Judges.
The action is brought to recover part of the income tax for 1913 paid by plaintiff. The statute (Act Oct. 3, 1913, 38 Stat 114, 116) provides for the levying an individual tax on those liable to pay 'upon the entire net income arising or accruing from all sources in the preceding calendar year ' For the year 1913 the period is 10 months only, the statute taking effect March 1, 1913. The act thus defines net income:
'That, subject only to such exemptions and deductions as are hereinafter allowed, the net income of a taxable person shall include gains, profits, and income derived from salaries, wages, or compensation for personal service of whatever kind and in whatever form paid, or from professions, vocations, businesses, trade, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in real or personal property, also from interest, rent, dividends, securities, or the transaction of any lawful business carried on for gain or profit, or gains or profits and income derived from any source whatever, including the income from but not the value of property acquired by gift, bequest, devise, or descent.' Division B of section II.
Plaintiff is a life insurance agent, employed by an insurance company under written contracts to procure applications for assurance on the lives of individuals. As compensation for his services the insurance company is obligated to pay him a certain commission on the first premium paid by the assured when the policy is issued. It is further obligated, as the assured pays subsequent renewal premiums for a certain number of years, to pay to plaintiff a stated commission on each of such renewal premiums. It is with these renewal premiums, or rather with the commissions paid thereon that this cause is concerned. Plaintiff's brief thus states the controversy.
'A single question is presented by the appeal, namely: whether or not the commissions payable to complainant under the contracts with the Assurance Society annexed to the complaint, upon renewal premiums paid on policies obtained through the instrumentality of appellant prior to March 1, 1913, but which commissions were not actually paid to and received by complainant until after March 1, 1913, and between that date and December 31, 1913, constitute a part of 'the entire net income' of complainant 'arising or accruing from all sources' between those dates.'
An elaborate argument is presented on behalf of the plaintiff in error, based in part upon provisions in the contracts whereby the company agrees to loan money to the agent to the amount of certain expected commissions on renewals, and the agent agrees to render assistance in the collection of renewal premiums; but the question seems to us a very simple one and one absolutely determined by the provision in all the contracts that 'commissions shall accrue only as the premiums are paid in cash. ' That the work for which the compensation is paid was done in some prior year seems to us unimportant.
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... ... s 202(b)(1), 42 Stat. 229. Cf. Merchants' L. & T. Co. v. Smietanka, 255 U.S. 509, 41 S.Ct. 386, 65 L.Ed. 751, 15 A.L.R. 1305; Goodrich v. Edwards, 255 U.S. 527, 41 S.Ct. 390, 65 L.Ed. 758. We are not unmindful of cases in which a like formula was applied without the aid of statute. Lynch v ... It was not turned into capital because it had been acquired earlier. Edwards v. Keith (D.C.) 224 F. 585; Id. (D.C.A.) 231 F. 110; Workman v. Commissioner (C.C.A.) 41 F.(2d) 139. Before March 1, 1913, and afterwards, it was continuously ... ...
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