Renewal commissions paid in 1933 by insurance companies to the
assignee of an agent, pursuant to assignments made by the agent, in
1924 and 1928, of such commissions as should become payable to him
for services which had been rendered in writing policies of
insurance under agency contracts,
held, under § 22 of the
Revenue Act of 1932, income taxable in 1933 to the assignor.
Following
Helvering v. Horst, ante, p.
311 U. S. 112. P.
311 U. S.
124.
110 F.2d 737 reversed.
Certiorari,
post, p. 630, to review the reversal of an
order of the Board of Tax Appeals, 39 B.T.A. 583, sustaining a
determination of a deficiency in income tax.
Page 311 U. S. 124
MR. JUSTICE STONE delivered the opinion of the Court.
This is a companion case to
Helvering v. Horst, ante,
p.
311 U. S. 112, and
presents issues not distinguishable from those in that case.
Respondent, a general life insurance agent, after the
termination of his agency contracts and services as agent, made
assignments in 1924 and 1928, respectively, of renewal commissions
to become payable to him for services which had been rendered in
writing policies of insurance under two of his agency contracts.
The Commissioner assessed the renewal commissions paid by the
companies to the assignees in 1933 as income taxable to the
assignor in that year under the provisions of the 1932 Revenue Act,
47 Stat. 169, § 22 of which does not differ in any respect now
material from § 22 of the 1934 Revenue Act, involved in the
Horst case. The Court of Appeals for the Second Circuit
reversed the order of the Board of Tax Appeals sustaining the
assessment. 110 F.2d 737; 39 B.T.A. 583. We granted certiorari
October 14, 1940. 311 U.S. 630.
No purpose of the assignments appears other than to confer on
the assignees the power to collect the commissions,
Page 311 U. S. 125
which they did in the taxable year. The Government and
respondent have briefed and argued the case here on the assumption
that the assignments were voluntary transfers to the assignees of
the right to collect the commissions as and when they became
payable, and the record affords no basis for any other.
For the reasons stated at length in the opinion in the
Horst case, we hold that the commissions were taxable as
income of the assignor in the year when paid. The judgment below
is
Reversed.
The separate opinion of MR. JUSTICE McREYNOLDS.
The cause was decided upon stipulated facts. The following
statement taken from the court's opinion discloses the issues:
"The question presented is whether renewal commissions payable
to a general agent of a life insurance company after the
termination of his agency and by him assigned prior to the taxable
year must be included in his income despite the assignment."
"During part of the year 1924, the petitioner was employed by
The Canada Life Assurance Company as its branch manager for the
state of Michigan. His compensation consisted of a salary plus
certain commissions. His employment terminated on September 1,
1924. Under the terms of his contract, he was entitled to renewal
commissions on premiums thereafter collected by the company on
policies written prior to the termination of his agency, without
the obligation to perform any further services. In November, 1924,
he assigned his right, title and interest in the contract, as well
as the renewal commissions, to a corporate trustee. From September
1, 1924 to June 30, 1927, the petitioner and another, constituting
the firm of Hart & Eubank, were general agents in New York City
for the Aetna Life Assurance Company,
Page 311 U. S. 126
and from July 1, 1927, to August 31, 1927, the petitioner
individually was general agent for said Aetna Company. The Aetna
contracts likewise contained terms entitling the agent to
commissions on renewal premiums paid after termination of the
agency, without the performance of any further services. On March
28, 1928, the petitioner assigned to the corporate trustee all
commissions to become due him under the Aetna contracts. During the
year 1933, the trustee collected by virtue of the assignments
renewal commissions payable under the three agency contracts above
mentioned amounting to some $15,600. These commissions were taxed
to the petitioner by the commissioner, and the Board has sustained
the deficiency resulting therefrom."
110 F.2d 738.
The court below declared --
"In the case at bar, the petitioner owned a right to receive
money for past services; no further services were required. Such a
right is assignable. At the time of assignment, there was nothing
contingent in the petitioner's right, although the amount
collectible in future years was still uncertain and contingent. But
this may be equally true where the assignment transfers a right to
income from investments, as in
Blair v. Commissioner,
300 U. S.
5, and
Horst v. Commissioner, 107 F.2d 906, or
a right to patent royalties, as in
Nelson v. Ferguson, 56
F.2d 121,
cert. denied, "
286 U.S. 565. By an assignment of future earnings, a taxpayer
may not escape taxation upon his compensation in the year when he
earns it. But when a taxpayer who makes his income tax return on a
cash basis assigns a right to money payable in the future for work
already performed, we believe that he transfers a property right,
and the money, when received by the assignee, is not income taxable
to the assignor.
Accordingly, the Board of Tax Appeals was reversed, and this, I
think, is in accord with the statute and our opinions.
Page 311 U. S. 127
The assignment in question denuded the assignor of all right to
commissions thereafter to accrue under the contract with the
insurance company. He could do nothing further in respect of them;
they were entirely beyond his control. In no proper sense were they
something either earned or received by him during the taxable year.
The right to collect became the absolute property of the assignee,
without relation to future action by the assignor.
A mere right to collect future payments for services already
performed is not presently taxable as "income derived" from such
services. It is property which may be assigned. Whatever the
assignor receives as consideration may be his income, but the
statute does not undertake to impose liability upon him because of
payments to another under a contract which he had transferred in
good faith under circumstances like those here disclosed.
As in
Helvering v. Horst, just decided, the petitioner
relies upon opinions here, but obviously they arose upon facts
essentially different from those now presented. They do not support
his contention. The general principles approved in
Blair v.
Commissioner, 300 U. S. 5, and
applied in
Helvering v. Horst, are controlling, and call
for affirmation of the judgment under review.
THE CHIEF JUSTICE and MR. JUSTICE ROBERTS concur in this
opinion.