the general manager. The fact that the decedent was to be available for consulting purposes merely recognizes that one who owns 98% of the common stock of a company would be rather reluctant to part with some "say-so" in the management of its affairs.
The fact that full compensation was to be paid while the decedent had not relinquished management of the business would be anticipated. But when he relinquished the management of the business either by attaining the age of 70, or his prior incapacity, it was anticipated that he be paid in effect a retirement or disability payment as the case might be. Thus, the plaintiffs' characterization of the agreement as one anticipating continuous active employ is illfounded. Rather we deal here with a situation anticipating employ through the age of 70 or prior incapacity. Subsequent to that time, Silberman was to receive such payment as was contemplated by § 2039 as a retirement benefit upon the happening of either event set out in the agreement.
We of course do not disregard the obligation that he be available for general advice and consultation, if and when so requested or required by the Company. But it is at once obvious that the obligations on the part of the retiring or incapacitated President, Treasurer and General Manager is at the very most an ephemeral obligation in consideration of the 50% payment which would be made to him for the rest of his life. And equally, with this specified obligation of advice and consultation is the unspecified obligation under all the variations which the term "incapacitated" may present. Thus, if Mr. Silberman had become completely incapacitated to the point where there could be no response to requests for advice or consultation, obviously he would still have received the payment under the agreement.
The question then is whether the anticipated termination of "full-time employment" represents a withdrawal from active service, and the assumption of the status of an annuitant. Such a status seems to be contemplated by the terms of the agreement which expressly provides that "* * * the Company is desirous of retaining the full-time services of Mr. Silberman until his retirement and of making his experience and advice available to the Company after his retirement * * *" (Emphasis added)
An annuity "* * * designates a fixed sum, granted or bequeathed, payable periodically. * * *" 3 C.J.S. Annuities § 1, pages 1373-1374. While difficult to define, it may generally be said to be a periodic fixed payment made to an individual by some third party, for life or some fixed period of time. Bodine v. Commissioner of Internal Revenue, 103 F.2d 982, C.A. 3, 1939, cert. den. 308 U.S. 576, 60 S. Ct. 92, 84 L. Ed. 483 (1939). It "* * * is a fixed amount directed to be paid absolutely and without contingency." Dwight Estate, 389 Pa. 520, 525, 134 A. 2d 45, 48 (1957).
Retirement "* * * is variously defined as meaning to separate or withdraw; to withdraw from office, a public station, business or the like; to withdraw from active service. * * *" 77 C.J.S. pages 329-330. It does not of necessity mean the absolute withdrawal of an employee or official from his previous position in order to be entitled to retirement payments and this quite obviously is what the parties had in mind when they created the wording and terminology of the agreement. Thus the call for advice and consultation played no really significant part in the separation of Silberman from active service. For the parties knew quite well that as the owner of 98% of the outstanding shares of common stock and of one entitled to participate in the dividends and profits of the Company, he had such a basic interest as would require him to advise and hold himself subject to consultation, if and when his advice was sought, for the preservation of his own financial interests.
The right to receive such payments satisfies the requirement that the decedent possessed the right to receive annuity payments at the time of his death. Gray v. United States, supra ; Bahen's Estate v. United States, supra.
It must next be determined whether or not the requirements of § 2039(b) are met by the employment agreement. That section provides that the general provisions of § 2039 apply,
"* * * to only such part of the value of the annuity or other payment receivable under such contract or agreement as is proportionate to that part of the purchase price therefor contributed by the decedent. For purposes of this section, any contribution by the decedent's employer or former employer to the purchase price of such contract or agreement (whether or not to an employee's trust or fund forming part of a pension, annuity, retirement, bonus or profit sharing plan) shall be considered to be contributed by the decedent if made by reason of his employment."
Part of the consideration for the employment agreement before me includes the retirement or disability plan and therefore the requirements of § 2039(b) are met.
The rights which the decedent possessed immediately prior to his death, were rights which were solely dependent upon him, and in no way dependent upon his employer. The employer's obligations were fixed by the terms of the contract, and nothing the employer could do would alter its obligation. Effectuation of the provisions of the agreement was solely dependent upon conditions which would befall the employee, i.e., he would reach the age of 70 or suffer some prior incapacity which would then have created immediately enforceable obligations on the employer. The Court in In re Wadewitz' Estate, 339 F.2d 980, 983, C.A. 7, 1964, relied on Bahen, supra, and determined that "* * * the statute, supported by the applicable Treasury regulations, includes a right to possess in the future even if such right is contingent upon the happening of an event as long as the contingency is not within the control or discretion of another." This is precisely the situation which occurred in Gray and occurs here. However, it is different from the situation in Kramer in that in the latter case a predetermined periodic payment was to be made by the employer irrespective of any act or election of the employee, and was totally independent of any contingent events. In Kramer the salary was in many respects analogous to a mandatory periodic payout of interest to an individual without any contingencies being attached, and which was a continuing obligation of the employer, until Kramer's death, irrespective of Kramer's age, health, or employment status.
Since at the time of his death Mr. Silberman possessed the right to receive retirement payments, any benefits which would inure to his wife as a consequence of this employment agreement considered as a whole, are includable in Mr. Silberman's gross estate. Gray v. United States, supra ; Bahen's Estate v. United States, supra.
Judge Aldisert dissenting in Gray believed that certain essential requisites for taxation were lacking. Specifically, he believed that it was a fiction to say that Gray had some enforceable future right to receive benefits, when at the time of his death he could not under any circumstances have received the retirement benefits. Such is not the situation in the present case because at any time, without completion of any specified number of years of service, Silberman could have received the retirement benefit upon becoming disabled. Thus, Silberman had continuous present protection, whereas in Gray if the decedent had any protection at all, it was only in futuro. Therefore, in the instant case, what Judge Aldisert found lacking in Gray cannot be said to be lacking here, since all of the elements of § 2039 are met, and support the mandate of Congress which requires inclusion of such amounts in a decedent's gross estate. Accordingly, the commuted value of Mrs. Silberman's life estate was properly included in the evaluation of Mr. Silberman's gross estate, and judgment will be entered in favor of the defendant and against the plaintiff.
This Opinion incorporates Findings of Fact and Conclusions of Law required by Rule 52 of the Federal Rules of Civil Procedure.