The opinion of the court was delivered by: PINE
These are actions for the recovery of internal revenue taxes alleged to have been erroneously or illegally collected. The cases were consolidated for trial. Plaintiffs in each case are husband and wife.
Webster R. Frye became a member of the District of Columbia Fire Department in 1919. In 1929 he was retired from active duty pursuant to an Act of Congress approved September 1, 1916, as amended, creating a 'policemen and firemen's relief fund' and for other purposes.
He was found to be 'so permanently disabled through injury received * * * in the line of duty as to incapacitate him for the performance of duty.' Since then he has received from this fund the maximum permitted under the Act, namely, 50% of his salary. Prior to retirement there was deducted from his salary and paid into this fund the amount required by the Act, namely, 3 1/2% of the salary. In the year 1944 he received $ 1,200 from this fund. He and his wife filed a joint income tax return for the year 1944, and included in the taxable income reported this sum of $ 1,200
Herman L. Lay became a member of the Metropolitan Police Force of the District of Columbia in 1929. In 1935 he was retired from active duty pursuant to this Act of Congress. The facts in his case are otherwise identical with those in the case of Frye, except that he received $ 1,225 from the 'fund' in question and the tax year involved is 1945.
The question presented is whether monies received from this 'fund' are exempt from income tax under Section 22(b) (5) of the Internal Revenue Code, 26 U.S.C.A.Int.Rev.Code, § 22(b)(5). This section, so far as material, reads as follows:
'(a) General definition. 'Gross income' includes gains, profits, and income derived from salaries, wages, or compensation for personal service * * * of whatever kind and in whatever form paid * * * or gains or profits and income derived from any source whatever. * * *
'(b) Exclusions from gross income. The following items shall not be included in gross income and shall be exempt from taxation under this chapter:
'(5) 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 * * *.'
Specifically, the question is whether the monies received by plaintiffs from this 'fund' come within the tax-exempt item of 'amounts received through accident or health insurance or under workmen's compensation acts, as compensation for personal injuries.' This involves a consideration of the Act creating the fund, supra.
That Act, as amended, provides among other things as follows:
The nucleus of the fund is the Police Relief Fund and the Firemen's Relief Fund under prior statutes. Sec. 4-501, D.C. Code 1940. It is to be augmented by fines imposed upon policemen and firemen by way of discipline, rewards, gifts, and emoluments received by them for extraordinary services, except such part as the Commissioners of the District of Columbia allow to be retained, a deduction of 3 1/2% of the monthly salary of each policeman and fireman, donations, net proceeds of sales of unclaimed property in the custody of the Police Department, and by direction of the Commissioners, monies out of the general revenue of the District necessary to meet deficiencies in the fund. Sec. 4-503. The deductions above mentioned are to be refunded to policemen and firemen upon separation from the services except by retirement. Sec. 4-504.
The Commissioners are empowered to determine and fix the amount of the 'pension relief allowance.' Sec. 4-505.
Medical and hospital expenses for temporary disability of a policeman or fireman through injury received or disease contracted in the actual discharge of duty are to be paid from this fund in cases where services other than those which can be rendered by ...