Time Oil Company v. Commissioner of Internal Revenue

The first question on this review is whether management and management’s trustees have so clumsily handled pension trust funds supplied by the Time Oil Company as to cause it to lose the tax advantages to which it presumptively was entitled, the trust having been previously approved by the Commissioner of Internal Revenue under Section 165 (a) of the 1939 Internal Revenue Code, as amended; 56 Stat. 862 , 26 U.S.C.A. §' 165(a). The tax court has said: “Yes.”

Of course, under Sec. 165, for the tax advantages to accrue, no part of the corpus or income of the trust may be used for or diverted to purposes other than for the exclusive benefit of the set-tlor’s employees or their beneficiaries. (Emphasis supplied.)

If this statute were literally construed a trust just could not invest in any se: curities or obligations of the employer-settlor. Apparently the commissioner has realized that if contributions require the employer to permanently take the amount thereof in cash out of a going business, impairing the company’s ability to survive or to grow, there then would be many companies, particularly small ones, which just couldn’t have pension plans. Accordingly, the commissioner, as he…