Fry's Estate v. Commissioner of Internal Revenue

This is a petition to review a decision of the Tax Court. The question presented is whether a lump sum payment to the decedent in 1947 from an employees’ pension trust established by his employer was taxable to him as a capital gain or as if it were an annuity. The payment was made to the decedent upon his certification that he had reached the retirement age of 70 years but it appeared that he thereafter continued to render some services to his employer and continued to receive from his employer the same compensation which he had previously received. The Tax Court held that the payment was not made “on account of the employee’s separation from the service” within the meaning of the exception clause of Section 165(b) of the Internal Revenue Code, 26 U.S.C. § 165(b), and hence was taxable to him under that section “as if it were an annuity” rather than as capital gain. The Court accordingly upheld the deficiency in tax determined by the Commissioner on that basis. We find ourselves in complete accord with the conclusions of the Tax Court for the reasons slated in the opinion filed for the court in banc by Judge Hill. 19 T.C. 461.

The decision of the Tax Court will be affirmed.