Robinson v. Comm'r of Internal Revenue, Docket No. 89819.

• Citation: 42 T.C. 403
• Decision Date: 18 May 1964
• Docket Number: Docket No. 89819.
• Parties: LOTTIE ROBINSON, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
• Court: United States Tax Court

42 T.C. 403

LOTTIE ROBINSON, PETITIONER,

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

Docket No. 89819.

Tax Court of the United States.

Filed May 18, 1964.

Leon E. Mendel, for the petitioner.

Conley G. Wilkerson, for the respondent.

Petitioner's husband, after serving over 10 years on the Police Force of Columbus, Ohio, died on August 30, 1939, from a cause which was not service connected. Upon his death, petitioner became entitled to a pension from the Police Relief Fund of Columbus. This fund was noncontributory by employees prior to August 1939. Petitioner began receiving a pension from the Police Relief Fund as of August 30, 1939. She continued to receive a pension throughout the year 1958. Prior to January 1, 1951, petitioner had received pension payments totaling over $5,000 and for the years 1951 through 1955 received pension payments totaling $3,600. Petitioner never included the pension payments she received in her taxable income. Held, the pension payments received by petitioner during the years 1956, 1957, and 1958 are amounts received under a contract of an employer providing for such payments by reason of an employee's death within the meaning of section 22(b)(1)(B), I.R.C. 1939, which section is made applicable to the years 1956, 1957, and 1958 by section 101(f), I.R.C. 1954, because the employee died prior to the date of enactment of the I.R.C. 1954. Held, further, pension payments received by petitioner prior to January 1, 1951, were not excludable from her income and therefore as of January 1, 1956, petitioner had $1,400 of her $5,000 exclusion remaining to be used.

OPINION

SCOTT, Judge:

Respondent determined deficiencies in petitioner's income tax for the calendar years 1956, 1957, and 1958 in the amounts of $170, $172, and $178, respectively.

The issue for decision is whether payments received during the calendar years 1956, 1957, and 1958 by petitioner, the widow of a Columbus, Ohio, policeman, from the Columbus Police Relief Fund are includable in her taxable income.

All of the facts have been stipulated and are found accordingly.

Petitioner, a resident of Columbus, Ohio, filed individual income tax returns with the district director of internal revenue at Columbus, Ohio, for each of the calendar years 1956, 1957, and 1958.

Petitioner is the widow of Emmett E. Robinson, who was employed from October 6, 1920, to the date of his death on August 30, 1939, by the police department of the city of Columbus, Ohio.

Emmett E. Robinson died from chronic myocarditis following an appendicitis operation. At the time of his death there was in existence in Columbus, Ohio, a police relief fund which had been established by the city of Columbus, Ohio, under authority of section 4616 of the Ohio General Code (now Ohio Rev. Code sec. 741.32). Section 4621 of the Ohio General Code (Ohio Rev. Code sec. 741.40) provided for a special tax to be levied by the municipality to provide funds for the Police Relief Fund and Police Relief Sub-Fund and section 4623 of the Ohio General Code (now Ohio Rev. Code sec. 741.40) provided for the crediting to the fund of members' fines, rewards, and fees. Sections 1, 2, and 3 of rule 15 of the Police Relief Fund and Police Relief Sub-Fund of Columbus, Ohio, provided for pensions to be paid upon voluntary retirement or disability after a stated number of years of service to a member of the division of police of Columbus, Ohio. Section 4 of rule 15 provided in part as follows:

If any member of the Division of Police, while in the proper performance of his or her duty, be killed, or die from the effects of an injury thus received, or shall die from any cause after having served for not less than ten (10) years in said Division of Police, or any member who shall die, having been retired and pensioned under the provisions of the three previous sections of this rule, and at time of death leaves a widow, or minor child, or children under the age of sixteen years; or at the time of death if unmarried, leaves a dependent Mother or Father, either of whom depended wholly or in part upon him for support, the Board of Trustees, of the Police Relief Fund shall authorize, and direct the payment from the Police Relief Fund, the following sums, payable monthly:

To such widow, while she remains unmarried, the sum of $50.00.

Section 4 further provided that in the event any widow of a deceased member of the division of police is eligible to and does receive death benefits from the workmen's compensation fund of the State of Ohio, such widow shall not be eligible to receive any pension until termination of such payments under the Workmen's Compensation Act of Ohio. This rule further provided that should the widow become disreputable or knowingly engage in any unlawful or immoral business, then she shall be subject to forfeiture of her pension, upon a majority vote of the board.

By an application bearing a stamped date of August 30, 1939, petitioner applied to the board of trustees of the police relief fund of the city of Columbus, Ohio, for a pension as the widow of Patrolman Emmett E. Robinson. Petitioner's application was approved by the board of trustees at a meeting on September 11, 1939, and she was granted a pension in the amount of $50 a month commencing on August 30, 1939.

The payments to petitioner from the police relief fund were increased to $60 per month as of April 1, 1950, and to $75 per month as of September 1, 1957. During the years 1956, 1957, and 1958 petitioner received $720, $780, and $900, respectively, from the police relief fund of the State of Ohio.

Petitioner did not report the amounts received from the police relief fund on her income tax return for these years as taxable income and did not report and pay tax on any of the amounts received in years prior to the year 1956.

The police relief fund of the city of Columbus, Ohio, was noncontributory on the part of employees from the time of its establishment until sometime in 1939, but was changed sometime during August 1939, prior to the date of death of Emmett E. Robinson, to a contributory plan, and upon such change to the employees were required to contribute 2 percent of their salary to the fund.

Death benefits on account of the death of Emmett E. Robinson in the amount of $1,000 were paid to the designated beneficiary, Paul D. Robinson, from the police relief fund.

Respondent in his notice of deficiency increased petitioner's income tax as reported by the amount of $900 in each of the years 1956, 1957, and 1958, with the explanation that such amounts represented a pension received by her as the widow of a policeman and that the amount so received was includable in her taxable income.

Petitioner takes the position that the amount she received from the Columbus, Ohio, Police Relief Fund was an award excludable under section 102(a) of the Internal Revenue Code of 1954,¹ as an amount received by gift, bequest, devise, or inheritance. As an alternative to this contention petitioner contends that the payments which she received are not taxable income since they are amounts received in the nature of workmen's compensation for personal injury or sickness within the provisions of section 104(a)(1).²

Respondent contends that the payments made to petitioner were includable in her taxable income since they were paid because of the death of her husband and as consideration for services rendered by him. Respondent contends that section 101(b) which provides for the exclusion from income of a beneficiary of certain amounts received by reason of the death of an employee is not applicable to the amounts received by petitioner because of the provisions of section 101(f) which make section 101(b) applicable to amounts received by reason of the death of an employee occurring after the date of the enactment of the Internal Revenue Code of 1954 and section 22(b)(1)(B) of the Internal Revenue Code of 1939 applicable to amounts received by reason of the death of an employee prior to that date.

Respondent takes the position that the payments petitioner received do not fall within the provisions of section 22(b)(1)(B) of the Internal Revenue Code of 1939, since petitioner's husband's death occurred prior to January 1, 1951, the first year to which the provisions of that section are applicable. It is further respondent's position that if the provisions of section 22(b)(1)(B) of the Internal Revenue Code of 1939 are applicable to the payments received by petitioner, these payments are nevertheless taxable in full since petitioner has already received the benefit of the full $5,000 exclusion from income provided for by that section. Respondent takes the position that the payments petitioner received are not annuities within the provisions of section 72 since they were not received under an annuity, endowment, or life insurance contract. ³ Respondent states, however, that if it is assumed contrary to his contention, that the payments are annuities within the provisions of section 72, they are nevertheless fully taxable since any possible amount which petitioner's deceased husband paid into the retirement fund would have been recovered by petitioner in the first year during which payments to her were made.

The evidence is clear that the amounts here involved were amounts received by petitioner because her husband had been employed for more than 10 years by the police department of Columbus, Ohio, at the time of his death. These payments constitute taxable income unless exempt under some specific section of the internal revenue laws. See Anna E. Curtis, 8 T.C. 266 (1947). The amounts were not property acquired by bequest, devise, or inheritance since petitioner's husband had no property rights in the fund which were subject to being so acquired by petitioner. The possible exception would be any contribution which might have been made by withholding from petitioner's husband's salary and the evidence is insufficient to...