APPEAL FROM THE COURT OF CLAIMS.
MR. CHIEF JUSTICE TAFT delivered the opinion of the Court.
The Supplee-Biddle Hardware Company sued the United States in the Court of Claims to recover $55,153.89, with interest, as taxes illegally assessed on the proceeds of two life insurance policies paid to it as the beneficiary on the death in 1918 of the insured, Robert Biddle, 2nd. Biddle was elected President of the Company in February, 1917. He was then thirty-seven years of age, in good health, and had for nearly twenty years held various offices in the Biddle Hardware Company, which had merged with the appellee company in January, 1914. He was a man of ability, energy and initiative and was so regarded in the hardware trade. The returns from the Company's business under Biddle's management had been much increased. At the instance of the Board of Directors and the expense of the Company, he took out the two policies for $50,000 each. They were term policies for five years. The Company intended thus to make secure its financial position, and to indemnify itself against losses to its earning power in the event of Biddle's death.
The Revenue Act of 1918, which was passed February 24, 1919 (40 Stat. 1057, c. 18), in prescribing the income to be taxed, deals first with individuals, from § 212 to
§ 228, inclusive. Then follows provision for the rate of income tax on corporations, beginning with § 230. Section 233(a) says "That in the case of a corporation subject to the tax imposed by section 230 the term 'gross income' means the gross income as defined in section 213," with certain exceptions not here material. Section 213 defines the gross income for individuals as follows:
"That for the purposes of this title (except as otherwise provided in section 233) the term 'gross income' --
"(a) Includes gains, profits, and income derived from salaries, wages, or compensation for personal service . . . of whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from interest, rent, dividends, securities, or the transaction of any business carried on for gain or profit, or gains or profits and income derived from any source whatever . . .; but
"(b) Does not include the following items, which shall be exempt from taxation under this title:
"(1) The proceeds of life insurance policies paid upon the death of the insured to individual beneficiaries or to the estate of the insured."
The Treasury Department, construing these sections, held that the proceeds of insurance policies paid to a beneficiary which was a corporation, were not exempted and were included as "gains . . . from any source whatever." Under this ruling the appellee was forced to pay a tax of $84,737.95 on the proceeds of the two policies of $97,947.28. The Commissioner of Internal Revenue reduced this amount by $29,584.06 in accordance with the powers conferred upon him by §§ 327 and 328 of the Revenue Act of 1918 to reduce the rate of taxation in cases of unusual hardship. There remained, however, the sum of $55,153.89, which tax the appellee paid under
protest, and for this with interest, the Court of Claims gave ...