United States v. Drescher
| United States v. Drescher | |
|---|---|
 | |
| Court | United States Court of Appeals for the Second Circuit |
| Full case name | United States v. Drescher |
| Argued | January 5, 1950 |
| Decided | February 16, 1950 |
| Citations | 179 F.2d 863; 50-1 USTC (CCH) ¶ 9186 |
| Case history | |
| Prior history | 84 F. Supp. 228 (W.D.N.Y. 1949) |
| Court membership | |
| Judges sitting | Learned Hand, Thomas Walter Swan, Charles Edward Clark |
| Case opinions | |
| Majority | Swan, joined by Hand |
| Concur/dissent | Clark |
| Laws applied | |
| Internal Revenue Code | |
United States v. Drescher, 179 F.2d 863 (2nd Cir. 1950)[1] was a United States income tax case before the Second Circuit. The Court held as follows:
- The value of the employer-purchased annuities in question was taxable as part of taxpayer's gross income in the year in which the annuities were purchased.
- The annuities in question were nonassignable, and possession was retained by the employer until taxpayer reached age of retirement; and the employee's compensation was not reduced during these years, nor did he have election to receive in cash the amount paid.
Facts
[edit]A corporation, anticipating its executive's retirement, purchases an "endowment policy," entitling him (the policy-holder) to a lump-sum-certain when he retires in 15 years.
Held
[edit]The executive must include the premium immediately, as his "basis" for his new policy.
Academic commentary
[edit]The stakes for the government are as follows:[2]
- Due to the declining present value of future money, a taxpayer pays less in taxes if he can defer his tax payment.
- In the case of this endowment policy:
- If the Premium = $B, the [lump sum] will be $[B*(1+i)^Y].
- If deferral is permitted, the executive's tax savings = (marginal rate R)*[lump sum]
- Reasons in favor of deferral: it was issued to the company in the interim; and, unlike the stock bonus above, his rights are nonforfeitable: he can't sell/borrow against it, nor can he be denied it by being fired.
- Reasons against deferral: it names him as the beneficiary; he should feel better off at issuance—and he certainly consented to the policy purchase in lieu of salary (e.g. as consideration).
References
[edit]- ^ United States v. Drescher, 179 F.2d 863 (2d. Cir. 1950).
- ^ Chirelstein, Marvin (2005). Federal Income Taxation: A Law Student's Guide to the Leading Cases and Concepts (Tenth ed.). New York, NY: Foundation Press. pp. 16–17. ISBN 1-58778-894-2.
External links
[edit]Text of United States v. Drescher, 179 F.2d 863 (2nd Cir. 1950) is available from: Justia OpenJurist Google Scholar
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