Curtis v. Commissioner , 8 T.C. 266 ( 1947 )

Anna E. Curtis, Formerly Anna E. McGlynn, Petitioner, v. Commissioner of Internal Revenue, Respondent

Curtis v. Commissioner

Docket No. 8868

United States Tax Court

8 T.C. 266; 1947 U.S. Tax Ct. LEXIS 291;

February 5, 1947, Promulgated

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Decision will be entered for the respondent.

Petitioner is the widow of a retired fireman of the District of Columbia. Pursuant to the provisions of the Code of the District of Columbia and an order of the Board of Commissioners of the District, effective on and after April 9, 1938, she received a monthly relief allowance of $ 60 from the Policemen and Firemen's Relief Fund, District of Columbia. Decedent paid $ 558.69 into the fund for the benefit of himself and his widow through monthly deductions of 3 1/2 per cent from his salary, as required by section 4-503 of the said code. During each of the taxable years 1942 and 1943 petitioner received $ 720 from the fund. Held, the amount received constituted taxable income to the petitioner.

Wilton H. Wallace, Esq., for the petitioner.

E. L. Woolf, Esq., for the respondent.

Arnold, Judge.

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ARNOLD

The respondent determined an aggregate income tax deficiency for 1942 and 1943 of $ 173.38 by increasing petitioner's taxable income for each year by $ 720 which she received as a widow's pension from the Policemen and Firemen's Relief Fund, District of Columbia. Petitioner omitted the $ 720 from each year's return and denies that it is taxable income.

In determining the deficiency the respondent added the unforgiven portion of petitioner's 1942 tax liability, determined to be $ 66.71, to her 1943 tax liability under and pursuant to the provisions of the Current Tax Payment Act of 1943.

FINDINGS OF FACT.

The petitioner is an individual presently residing at 1502 Trinidad Avenue, Washington, D. C. Her 1942 and 1943 tax returns were filed with the collector of internal revenue for the district of Maryland.

In 1942 and 1943 petitioner was the widow of Joseph T. McGlynn, a former employee of the District of Columbia, who died in 1938. Prior to 1942 petitioner applied to the Commissioners of the District of Columbia for relief under title 4, chapter 5 of the District of Columbia Code (1940 ed.). The commissioners upon the recommendation of the Police and Firemen's Retiring and Relief Board, awarded to petitioner as the widow of the aforesaid decedent, as relief, from the Policemen and Firemen's Relief Fund, District of Columbia, the sum of $ 60 per month. In this manner petitioner received in cash $ 720 from the source stated for 1942 and an identical amount for 1943. The sums so received were not included by petitioner in her gross income.

Title 4, chapter 5, of the District of Columbia Code (1940 ed.), entitled "Police and Firemen's Relief Fund," provides in part as follows:

§ 4-503.

The said fund shall consist of all fines imposed by the commissioners of the District of Columbia upon members of the police and fire departments of said District by way of discipline; all rewards, proceeds of gifts, and emoluments that may be received by any member of said departments (for extraordinary services), except such part thereof as the said commissioners may allow to be retained by members of said departments; a deduction of three and one-half per centum of the monthly salary of each member of said departments; donations; and the net proceeds of sales of unclaimed property in the custody of the property clerk of the police department; all of which shall be paid into the treasury of the United States to the credit of the "Policemen and firemen's relief fund, District of Columbia," herein provided for; and should the said fund at any time be insufficient to defray the expenditures hereafter provided for, the commissioners of the District of Columbia, in that event, are authorized and it shall be their duty, to direct the collector of taxes of said District, and it shall be the duty of the said collector, pursuant to such direction, to pay into the treasury of the United States, out of the general revenue of the District of Columbia collected by him, to the credit of the said "Policemen and firemen's relief fund, District of Columbia," such sums as may be necessary from time to time to meet deficiencies in said fund. The moneys to the credit of the said fund shall be available for appropriation by Congress annually only for expenditure on requisitions of the said commissioners for the purposes set forth in sections 4-501, 4-503, 4-506 to 4-510, 4-512 to 4-514 inclusive, of this title, and all expenditures from said fund shall be made and accounted for in the same manner as other expenditures of the government of the District of Columbia are made and accounted for.

§ 4-504. * * *

There shall be deducted for the benefit of the policemen and firemen's relief fund 3 1/2 per centum of the monthly pay of each member of the Metropolitan Police force, the fire department, the United States Park police, and the White House police force. Upon the separation from the service of any such member, except for retirement as authorized by law, he shall be refunded the deductions made from his salary for said fund, and should any such member subsequently be reappointed to any of such police forces or the fire department he shall be required to redeposit to the credit of the policemen and firemen's fund the amount of deductions refunded to him. In the case of the death of any such member while in the service the amount of his deductions shall be paid to the legal representative of his estate, provided he leaves no widow or child or children entitled to and granted relief payable from said fund.

§ 4-505. * * *

The commissioners of the District of Columbia are hereby empowered to determine and fix the amount of the pension relief allowance heretofore and hereafter granted to any person under and in accordance with the provisions of sections 4-501, 4-503, 4-506 to 4-510, 4-512 to 4-514.

* * * *

§ 4-507.

Whenever any member of the police department or the fire department of the District of Columbia shall become so permanently disabled through injury received or disease contracted in the line of duty as to incapacitate him for the performance of duty, or, having served not less than twenty-five years and having reached the age of fifty-five years shall, for any cause, become so permanently disabled, as to incapacitate him for the performance of duty and shall make written application therefor and said application shall be approved by the commissioners of said District, or, having reached the age of sixty years, in the discretion of the said commissioners, he shall in either event be retired from the service thereof and be entitled to receive relief from the said policemen and firemen's relief fund, District of Columbia, in an amount not to exceed 50 per centum per year of the salary received by him at the date of retirement. In case of the death of any member of the police department or the fire department of the District of Columbia, before or after retirement from the service thereof, leaving a widow, or a child or children under sixteen years of age, the widow shall be entitled to receive relief from the said policemen and firemen's relief fund, District of Columbia, in an amount not exceeding $ 60 per month, and each child under the age of sixteen years in an amount not exceeding $ 10.00 per month: Provided, That upon the remarriage of any widow granted relief under the provisions of sections 4-501, 4-503, 4-506 to 4-510, 4-512 to 4-514, such relief shall cease, and the relief granted to or for any child or children under the age of sixteen years shall cease upon their reaching that age: Provided further, That no widow, child, or children of any deceased member of the said police department or fire department resulting from any marriage contracted subsequent to the date of retirement of such member shall be entitled to any relief under the provisions of sections 4-501, 4-503, 4-506 to 4-510, 4-512 to 4-514.

The omitted sections of title 4, chapter 5, of the District of Columbia Code pertinent hereto may be summarized as follows: Section 4-501 creates the "Policemen and Firemen's Relief Fund, District of Columbia"; section 4-502 provides that all moneys deposited to the credit of the fund "shall be paid to the collector of taxes of the District of Columbia and deposited in the treasury to the credit of the revenues of said District." Section 4-506 provides for payment from the fund of medical or surgical services, other than such rendered by the Board of Police and Fire Surgeons, and hospital treatment whenever any member of police or fire department becomes temporarily disabled by injury received or disease contracted in the actual discharge of his duties, but necessity of such expense must be certified by the Board of Police and Fire Surgeons, or two members thereof, approved by the superintendent of police or chief engineer of the fire department, as the case may be, and approved by the Commissioners of the District of Columbia. Section 4-508 provides for voluntary retirement at certain ages and with specified years of service, prescribes the benefits as "an amount equal to 50 per centum per annum of the salary received by him at the date of retirement," provided that in any fiscal year any such retirement shall be in accordance with such rules and regulations as may be adopted by the commissioners and not aggregating in excess of $ 30,000 for any one fiscal year. Section 4-509 authorizes the commissioners to pay not in excess of $ 75 from the fund to defray funeral expenses of policemen or firemen dying while in the service of the District of Columbia. Section 4-510 creates the Police and Firemen's Retiring and Relief Board, provides for the appointment of members by the commissioners, prescribes the duties of the board, hearings, compulsory attendance of witnesses, and a report of the board's findings to the commissioners, who can approve, disapprove, or modify the report. Section 4-512 authorizes the commissioners, in their discretion and at any time, to require a medical examination of "any person receiving any relief allowance under the provisions of sections 4-501, 4-503, 4-506 to 4-510, 4-512 to 4-514, who has served less than twenty-five years," as a result of which they shall determine whether the relief shall be continued, increased, decreased, or discontinued. Failure to appear for medical examination authorizes the commissioners in their discretion to reduce or entirely discontinue such relief. Section 4-513 provides for reduction or discontinuance of the payments by the commissioners, in their discretion, for conviction of crimes involving moral turpitude, habitual drunkenness, or lewd or lascivious conduct. Section 4-514 authorizes the commissioners to call any retired member into service in cases of emergency.

Joseph T. McGlynn was employed by the District Fire Department on or about November 17, 1930, retired on or about April 1, 1938, and died on or about April 8, 1938. Under date of April 29, 1938, the Board of Commissioners of the District of Columbia issued the following order:

Ordered: That Anna E. McGlynn, widow of the late J. T. McGlynn, a pensioner of the Fire Department of the District of Columbia, is hereby granted relief in the amount of $ 60.00 per month, during widowhood, payable from the Policemen and Firemen's Relief Fund for the District of Columbia, effective on and after April 9, 1938.

The sum of $ 558.69 was deducted from the salary of Joseph T. McGlynn during his service with the Fire Department and credited to the Policemen and Firemen's Relief Fund, District of Columbia. From April 9, 1938, until February 17, 1945, the date of petitioner's remarriage, the fund paid $ 4,936 to her pursuant to the above order.

The following tabulation reflects the direct appropriations made by Congress to the Policemen and Firemen's Relief Fund, District of Columbia, the aggregate amount received by the fund through the withholding of 3 1/2 per cent of the monthly pay of each member of the Metropolitan Police Force and Fire Department, and the other sums contributed to the fund under and in accordance with title 4, section 503, of the District of Columbia Code (1940 ed.) for the fiscal years stated:

Fiscal year	Appropriation	Receipts of	Fines, etc.
		3 1/2%
1941	$ 1,165,000	$ 219,181.06	$ 6,673.37
1942	1,250,000	212,258.45	4,394.48
1943	1,355,000	226,280.39	9,475.80
1944	1,450,000	223,828.14	8,499.50

During the taxable years petitioner was employed as a secretary by the National Hospital Service Society, Inc. Her tax returns for 1942 and 1943 reported income from her salary as $ 1,532.50 and $ 1,687.50, respectively. At no time during the taxable years, or at any other time, did petitioner herself render any service to the District of Columbia.

OPINION.

The petitioner contends that the sum paid her each month is relief, that it constitutes a gift or gratuity, and that it is not taxable. She asserts that she had no vested right to the relief granted by the Board of Commissioners of the District of Columbia, that the commissioners possessed discretionary authority to grant or withhold the requested relief, and that the relief involved nothing in the nature of an annuity.

The respondent contends that the amounts paid to petitioner from the Policemen and Firemen's Relief Fund, District of Columbia, are to be treated as amounts received pursuant to an annuity contract and subject to tax in the manner provided in section 22 (b) (2). Respondent relies upon Dismuke v. United States, 297 U.S. 167">297 U.S. 167; Retirement Board of Allegheny County v. McGovern, 316 Pa. 161">316 Pa. 161; 174 Atl. 400; Crawford v. Teachers' Retirement Fund Association (Oregon, 1940) 99 Pac. (2d) 729; andI. T. 3653, C. B. 1944, p. 75.

We agree with respondent that the sums in question constitute taxable income to the petitioner. Our analysis of the applicable provisions of the District of Columbia Code convinces us that Congress did not intend to provide for the making of gifts or gratuities. The statutory plan required the decedent to contribute a fixed percentage of his salary toward the fund from which the payments were made. In return the employee was entitled to retirement under certain conditions and, upon reaching a specified age, "shall * * * be entitled to receive relief from the said policemen and firemen's relief fund, District of Columbia, in an amount not to exceed 50 per centum per year of the salary received by him at the date of retirement." Sec. 4-507, supra. In addition to the retirement benefits a policeman or fireman acquired additional benefits under the statutory plan by virtue of the provisions therein for his widow and his children under sixteen years of age. With respect to them, Congress provided that whether death occurred before or after retirement from service the "widow shall be entitled to receive relief from the said policemen and firemen's relief fund, District of Columbia, in an amount not exceeding $ 60 per month and each child under the age of sixteen years in an amount not exceeding $ 10.00 per month * * *." Sec. 4-507, supra.

In our opinion, Congress vested no discretion in the Board of Commissioners to deny relief to the widow of a retired fireman. Their discretion in the matter of relief was limited to the amount of the relief allowance. Sec. 4-505, supra. And, even so, Congress set the maximum amount of relief that the commissioners could grant. Here the commissioners fixed the amount of the relief allowance at the maximum set by Congress, as they were clearly authorized to do by law.

The facts show that petitioner received payments from a fund to which her deceased husband contributed as an employee of the District of Columbia. By virtue of his services to the District and by virtue of his contributions to the fund he became entitled, upon fulfilling certain conditions and qualifications, to retirement benefits from the fund, or if he died his widow and children under sixteen became entitled to certain benefits from the fund. There is no doubt in our minds that retirement pay, disability benefits, funeral expenses, and benefits to widows and children under sixteen were inducements held out to decedent and others to become employees of the District of Columbia. Having accepted employment, rendered personal services to the District of Columbia, and contributed to the fund until his retirement, the decedent became entitled to receive from the fund an amount not to exceed 50 per cent of his salary at the date of his retirement. But for his death a week after his retirement, the payments from the fund in recognition of his services and his contributions would probably have been larger. Upon his death his widow became entitled to benefit by monthly payments from the fund. Her right to receive was fixed by statute, section 4-507. She did in fact receive monthly payments from the fund, and the situation is sufficiently akin to an annuity contract and the treatment of retired employees under the Civil Service Retirement Act to justify a similar treatment. See Dismuke case, supra. Cf. I. T. 2984, C. B. XV-1, p. 87. The fact that the District statute includes within its scope the widow and/or children under sixteen years of age of policemen and firemen presents no insurmountable obstacle to the application of section 22 (b) (2) of the Internal Revenue Code. When the provisions of the latter section are applied to the facts of this case, it is obvious that the monthly payments in question constitute taxable income, since the cost of the annuity was, according to the scheme of section 22 (b) (2), fully recovered from payments made prior to the taxable years.

Decision will be entered for the respondent.