Estate Tax-The Failure of I.R.C. Section 2039 To Reach Death Benefits Arising Out of the Employment Relationship-Estate of Fusz

Decedent’s employment contract provided for a salary payable to him and monthly payments to his widow for life if he died during the term of the contract. No post-retirement benefits were payable to decedent under the contract or pursuant to any other agreement with the employer. After decedent’s death during the term of the contract the payments to his widow commenced; their commuted value, however, was not included in the gross estate of decedent. The Commissioner of Internal Revenue, ruling that the payments to the widow constituted an annuity, the commuted value of which was includable in decendent’s gross estate under section 2039 of the Internal Revenue Code of 1954, assessed a deficiency in decedent’s estate tax return. In a case of first impression, the Tax Court rejected the Commissioner’s contention. The payments to decedent’s widow are not includable in decedent’s gross estate because before his death decedent had no right to receive an annuity or other payment under the employment contract.