Castner Garage, Limited v. Commissioner Universal Motor Company v. Commissioner Island Securities, Limited, A Dissolved Corporation v. Commissioner 43 B.T.A. 1, acq Cumm. Bull. 2 Kala Walton TX :45 – 7:30 pm Wednesday, June 13, 2007

Facts Charles C. Pittam owned majority of the outstanding capital stock of Island Island owned a majority of the stock in Castner and Universal Remaining stock owned by Pittam’s brother-in-law, officers, or employees Four Insurance policies (life, accident, and health) procured for President Charles C. Pittam (prior to 1930) –Policies acquired to strengthen credit and for collateral purposes –Premiums were paid by businesses (beneficiaries) and Pittam

Facts Pittam was paid salaries from each business prior to disability Insured Pittam became disabled; income paid to beneficiaries –Income was reported on amounts in excess of premiums paid (based on §22 (b)(5)) All policies were assigned to the insured on May 23, 1936 Tax Commissioner brought action against taxpayers for payment of tax deficiencies.

Issue Whether and to What extent the petitioners are taxable upon amounts received by them in 1935 and 1936 from the Prudential Insurance Company of America as disability payments under policies of combined life, health, and accident insurance upon their president, Charles C. Pittam

Ruling Section 22(b)(5) does not limit the gross income exemption of compensation to only individuals; corporations are included; therefore the amounts received by petitioners can be excluded from gross income Rule Section 22(b)(5), Revenue Acts of 1934 and 1935 Compensation for injuries or sickness. Amounts received, through accident or health insurance or under workmen’s compensation acts, as compensation for personal injuries or sickness, plus the amount of any damages received whether by suit or agreement on account of such injuries or sickness.

Conclusion/Reasoning Section 22(b)(5) is general in its application and is not limited so as to exclude corporations, such as these, which have insurable interests