317 Mass. 612 | Mass. | 1945
This is an appeal by a taxpayer from a decision by the Appellate Tax Board denying his petition for abatement óf a portion of a tax assessed on account of income received by him in 1938. The question presented is' whether a sum the taxpayer received was a retirement allowance taxable under G. L. (Ter. Ed.) c. 62, § 5 (b), and so entitling the taxpayer to an exemption of $2,000, or whether the amount received was an annuity taxable under G. L. (Ter. Ed.) c. 62, § 5 (a), of which the said sum of $2,000 was not exempt.
The taxpayer was an employee of a New York bank on July 1, 1933, when the bank put into effect a retirement plan for the-benefit of its employees. The amount of the retirement allowance was computed upon the employee’s salary and was composed of two sums, an amount calculated on the basis of one and one half per cent of the employee’s salary on July 1, 1933, multiplied by the number of years he had then been in the employ of the bank, and an amount equal to two per cent of his annual salary earned after July 1, 1933, until his retirement at sixty-five years of age. The only contribution the employee made was to the last mentioned sum for which deductions were made from his compensation while he was employed and retained his membership in the plan. The retirement benefits under the plan were administered and underwritten by an insurance company to which the bank “intends to make annual payments” for the purchase of annuities for those employees eligible to immediate retirement. Retirement allowances were payable monthly in a fixed amount upon retirement of the employee and were to continue during
The taxation of retirement allowances was first brought within our present income taxing system by St. 1920, c. 102, which provided that a retirement allowance other than pensions or allowances which are exempt by law, “however otherwise such an allowance may be described,” shall be deemed to be income from profession, employment, trade or business within St. 1916, c. 269, § 5 (b), and shall be entitled to the exemptions and deductions permitted under said chapter. That provision without any change material to our present inquiry has since remained in our taxing statute. See now G. L. (Ter. Ed.) c. 62, § 5 (b), as most recently amended by St. 1939, c. 486, § 1. At the time St. 1920, c, 102, became effective on January 1, 1921, the taxing statute, St. 1916, c. 269, § 5 (a), provided for a tax on an annuity, and also provided that the income from property held in trust should not be taxed as an annuity even if the payments made to the beneficiaries were in the form of annuity, but was taxable at a higher rate under § 2 of said chapter. See now G. L. (Ter. Ed.) c. 62, § 5 (a).
The monthly payments of fixed amounts to the taxpayer during his life by one obligated to make them have the appearance at least of income received from an annuity. An annuity has been defined as “a yearly payment of a specified sum of money bestowed upon another and resting upon and secured by the personal obligation of the one paying it.” Bacon v. Commissioner of Corporations & Taxation, 266 Mass. 547, 549. See Bates v. Barry, 125 Mass. 83; Curtis v. New York Life Ins. Co. 217 Mass. 47; Welch v. Hill, 218 Mass. 327; Mutual Benefit Life Ins. Co. v. Commonwealth, 227 Mass. 63; Gregg v. Commissioner of Corporations & Taxation, 315 Mass. 704. The form in which payments are made is not decisive of their taxability as income. From the beginning of our present income taxing statutes, income from property in trust was not to be taxed as an annuity even though the payments received by the beneficiaries were in the form of
The payments which the taxpayer received were not entirely gratuitous for he had made contributions in order to enable him to join the plan and to receive these payments upon his retirement from the service, and his paid membership gave him the right to the benefits which thereby accrued to him. One feature of the plan which was published and distributed to the employees of the bank was the monthly payment of retirement allowances which were to be made by a designated insurance com
Abatement is granted in the amount of $39.96 together with costs.
So ordered.