¶1dissenting: I dissent from the view of the majority on the second issue. Subsection (B) of section 22 (b) (1), which was enacted by section 302 of the Revenue Act of 1951, applies only to amounts received under a contract of an employer paid by reason of the death of an employee. In the Senate Finance Committee Report on the Revenue Act of 1951 (S. Rept. No. 781, 82d Cong., 1st Sess. (1951), p. 50), it is stated:
6. Death benefits to employees
Section 22 (b) (1) of tbe code excludes from gross income amounts received under a life-insurance contract paid by reason of tbe death of the insured, whether in a single sum or otherwise. However, by its terms, this provision is limited to life-insurance payments, and the exclusion does not extend to death benefits paid by an employer by reason of the death of an employee. In order to correct this hardship, section 302 of your committee’s bill excludes from gross income death benefits not in excess of $5,000 paid by any one employer with respect to any single employee’s beneficiary or beneficiaries in accordance with a preexisting contract. …
¶2Thus, the statutory provision in question was intended to apply to true death benefits — that is, payments which the obligor would not be required to pay except for the event of death, hiere, under the pension plans, reserves were accumulated and were earmarked to the credit of the deceased employee, and during his life he had a vested interest in such reserves. The trust was obligated to pay out the amount of the reserve to him during his lifetime as he might elect. If at the time of his death he had not received the full benefit of the reserve earmarked for him, the remainder would go to his designated beneficiaries. Thus, the decedent’s death would not impose upon the obligor any obligation to pay any greater amount to his beneficiaries. It seems clear that any such payments made to the decedent’s beneficiaries should not be considered death benefits or amounts “paid by reason of the death of an employee.”
¶3The manner of taxing such payments as these is clearly set forth in section 165 (b), which provides that the amounts actually distributed or made available to any distributee is taxable to such distributee in the same manner as an annuity under section 22 (b) (2), or if received in 1 taxable year, as if received from sale or exchange of a capital asset held for more than 6 months. This is not to say that there may not be payments made by a qualified pension trust of a character which come within the provisions of section 22 (b) (1) (B). Indeed, section 29.22 (b) (l)-2 of Regulations 111, quoted in the majority Opinion, recognizes that this may be possible. But such regulations properly provide, in accord with the statute, that payments such as are here involved are not death benefits and do not come within the ambit of section 22 (b) (1) (B). It is my view that the petitioners are not entitled to any exclusions under that section.
¶4I also am of the opinion that, within the intendment of section 126 (a), the petitioners did acquire by reason of the death of the decedent, the right to receive items of gross income in respect of the decedent, and that they are entitled to the allowance for estate tax paid, pursuant to section 126 (c). The purpose of section 126 (c) is to give some relief, for income tax purposes, to one who is required to include in gross income an item which has been subjected to estate tax. I accordingly dissent from the holding of the majority on the third issue.