Eubank v. Commissioner of Internal Revenue
| Decision Date | 14 March 1939 |
| Docket Number | Docket No. 86200. |
| Citation | 39 BTA 583 |
| Parties | GERALD A. EUBANK, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Board of Tax Appeals |
Harry J. Rudick, Esq., for the petitioner.
Albert E. Arent, Esq., for the respondent.
The respondent determined a deficiency in the petitioner's income tax for the calendar year 1933 in the amount of $943.34. The petitioner alleges the respondent erred in including in his taxable income certain renewal insurance commissions which were paid in the taxable year to petitioner's assignee.
FINDINGS OF FACT.
Petitioner has an office at 40 Wall St., New York, New York, and notice of deficiency was mailed to that address.
From January 1 to September 1, 1924, petitioner was branch manager for the State of Michigan of the Canada Life Assurance Co., under a contract with that company. After termination of this contract, on September 1, 1924, petitioner became entitled to renewal commissions thereunder with respect to life insurance premiums collected thereafter on policies written prior to the termination of the contract.
On November 24, 1924, petitioner executed and delivered the following assignment to the Union Trust Co., Detroit, Michigan (subsequently the Union Guardian Trust Co.):
FOR A VALUABLE CONSIDERATION, the undersigned, GERALD A. EUBANK, hereby sells, assigns and transfers to the Union Trust Company, of Detroit, Michigan, all his right, title and interest in and to a certain agreement bearing date the 22nd day of January, 1924, between Canada Life Assurance Company, of the first part, and said Gerald A. Eubank, party of the second part, made in connection with the employment by the said Assurance Company of the said Eubank as a branch manager for said Company, together with all moneys payable or to become payable to the said Eubank under and by virtue of the terms of the said contract.
IN WITNESS WHEREOF, said Gerald A. Eubank has hereunto set his hand and seal this 24th day of November, 1924.
The Canada Life Assurance Co. acknowledged receipt of the instrument of assignment.
From September 1, 1924, to June 30, 1927, the petitioner and one Hart, a partner, were general agents in New York City for the Aetna Life Insurance Co., under a contract with that company dated August 20, 1924. This contract was terminated on June 30, 1927, whereupon petitioner individually became general agent in New York City for the Aetna Life Insurance Co., under a contract effective July 1, 1927. Petitioner became entitled to receive one-half of whatever renewal commissions became payable subsequent to June 30, 1927, without obligation to perform any further services.
Petitioner on July 19, 1927, resigned the general agency granted by the last mentioned contract, such resignation to take effect September 30, 1927. However, in consideration of $12,000 received from his successor appointed by the insurance company, petitioner agreed to make his resignation effective August 31, 1927, i. e., one month earlier, without, however, affecting his right to renewal commissions. After August 31, 1927, petitioner was not required to render any further services in order to become entitled to the renewal commissions provided for by the agency contract.
In each agency contract between petitioner and the Aetna Life Insurance Co. the insurance company reserves the right to change the rates of commissions payable to the agent. In these contracts it is agreed that in the event of termination of the contracts the company will pay at the end of each three months after termination "commissions" on the premiums actually collected on business secured under the contracts prior to such termination on which the agent would have been entitled to renewal commissions in event of continuance of the contract, in stated percentages for a certain number of years, less any commissions payable to subagents and less any indebtedness of the agent to the insurance company. Then the following appears:
Said party of the second part petitioner hereby agrees that the above described settlement shall be accepted in full compensation for his interest in the agency hereby conveyed.
The contract with the Canada Life Assurance Co. describes compensation of the branch manager under the contract as first year commissions and renewal commissions, payable at certain rates.
Each of the two contracts with Aetna provides that no assignment, transfer, or disposal of the agency or business, or any interest whatever therein, can be made without the consent and approval of the insurance company in writing. The contract with Canada Life provides that "any rights of the Branch Manager under this agreement shall not be sold or assigned by him without the consent of the Company in writing."
Under all of the contracts, petitioner was an agent of the insurance companies.
On March 28, 1928, petitioner executed and delivered the following assignment to the Union Trust Co., Detroit, Michigan (subsequently, Union Guardian Trust Co.):
KNOW ALL MEN BY THESE PRESENTS, That I, Gerald A. Eubank, of South Orange, County of Essex, State of New Jersey, am the same person who with Hugh D. Hart under the firm name of HART & EUBANK was appointed by the Aetna Life Insurance Company of Hartford, Connecticut, as General Agent for said Company in New York City under written appointment which was executed at Hartford, State of Connecticut, the 20th day of August, A. D. 1924, and which took effect on the 1st day of September, A. D. 1924; and I am the same person who was appointed General Agent by said Company as successor to said HART & EUBANK to represent said Company as General Agent in New York City, under written appointment which was executed at Hartford, State of Connecticut, the 28th day of June, A. D. 1927, and which took effect on the 1st day of July, A. D. 1927.
NOW, IN CONSIDERATION of the sum of One Dollar ($1.00) and other good and valuable considerations, the receipt whereof is hereby acknowledged, I do hereby sell, transfer and set over unto the UNION TRUST COMPANY, Detroit, Michigan, Trustee, all commissions now due me or to become due me under or on account of and subject to the terms and conditions of said appointments or amendments thereto and all right, title and interest therein which I now have or may have at any future time, hereby waiving all right or title to and interest in said appointments or amendments thereto and authorizing and requesting said company to pay all said commissions to the said UNION TRUST COMPANY, Trustee, which is hereby authorized to receipt and discharge the same in full.
I do also hereby sell, assign, transfer and set over unto the said UNION TRUST COMPANY, Trustee, all my interest in commissions on Group and Wholesale business as covered by individual agreements under each policy placed through the General Agencies of HART & EUBANK and/or G. A. EUBANK, that may be now due or to become due me from said AETNA LIFE INSURANCE COMPANY and all right, title and interest therein which I now have or may have at any future time, hereby waiving all right or title to and interest in said commissions and authorizing and requesting said Company to pay all said commissions to the said UNION TRUST COMPANY, Trustee, which is hereby authorized to receipt and discharge the same in full.
IN WITNESS WHEREOF, I have hereunto executed this assignment, release and waiver in triplicate, under seal, at New York, State of New York, this 28th day of March, A. D. 1928.
The Aetna Life Insurance Co. acknowledged receipt of the instrument of assignment as follows:
Union Trust Company
Detroit, Michigan.
Gentlemen:
We have received from Mr. Gerald A. Eubank and placed on file copy of an assignment executed by him in favor of the Union Trust Company, trustee, covering all of Mr. Eubank's commission interests under said contracts and amendments thereto with this Company as named in the assignment.
The Aetna Life Insurance Company does not guarantee the sufficiency or validity of any assignment and in placing this assignment on file it must be understood that the Company does not waive any of its rights under the contracts or amendments thereto.
Checks will be forwarded from the Home Office to the Union Trust Company covering commissions as they accrue according to the terms of the contracts. There will also be checks from time to time sent the Union Trust Company from the Company's cashier in New York City covering various items which are being collected by him.
During the year 1933 petitioner's assignee, the Union Guardian Trust Co., received renewal commissions payable under the provisions of the agency contracts referred to above, as follows:
From Aetna Life Insurance Co., Hart & Eubank contract ______ $12,354.16
From Aetna Life Insurance Co., Eubank contract _____________ 591.47
From Canada Life Assurance Co ______________________________ 2,667.16
___________
15,612.79
In computing the deficiency here in question the respondent added to petitioner's taxable income the renewal commissions received by petitioner's assignee in 1933 in the amount of $17,207.94. This amount was incorrect. It is agreed that the amount of such commissions was $15,612.79. Respondent stated, in the explanation of the adjustments made in determining the deficiency, as follows:
Relative to the inclusion in taxable income of $17,207.94 sic, representing life insurance renewal commissions received by a trust established by you, the Bureau holds that the income is taxable to you. Information on file in the Bureau indicates that on March 28, 1928, you made a conveyance in trust of certain insurance renewal commissions then due or to become due in the near future, arising out of a contract with the Aetna Life Insurance Co. for the uses and benefits set forth in another instrument dated June 18, 1928....
To continue reading
Request your trial