Rev. Rul. 54-267

Advice is requested relative to the taxability for Federal income tax purposes of amounts paid by an organization exempt under section 101(6) of the Internal Revenue Code to purchase annuity contracts for employees who have requested that their salary payments be decreased by certain amounts and that such amounts be applied toward the purchase of annuity contracts.

In the instant case certain employees of an educational organization have requested their employer to purchase annuity contracts for them and to charge the cost of such contracts to their salary payments. Employees who have requested that this be done include (1) some of the full time employees now participating in the organization's present retirement plan, (2) some full time employees not now so participating, (3) some part time employees not now participating, and (4) some gratis employees (employees who perform certain services but receive no monetary compensation) who desire to make annual contributions to the organization and have it pay the annual premiums on annuity contracts.

Section 22(b)(2) of the Code provides in part as follows:

(b) EXCLUSIONS FROM GROSS INCOME.-The following items shall not be included in gross income and shall be exempt from taxation under this chapter chapter 1 of the Code :

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(2) ANNUITIES, ETC.-

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(B) * * * if an annuity contract is purchased for an employee by an employer exempt under section 101(6), the employee shall include in his income the amounts received under such contract for the year received except that if the employee paid any of the consideration for the annuity, the annuity shall be included in his income as provided in subparagraph (A) of this paragraph, the consideration for such annuity being considered the amount contributed by the employee. * * *.

It is held that where annuities are purchased by an organization exempt from Federal income tax under section 101(6) of the Code for employees who, under the above circumstances, have requested that their salary payments be decreased by certain amounts and that such amounts be applied toward the purchase of annuity contracts, the inclusion in gross income of an employee of the amounts thus paid by the employer for the annuity contracts is not deferred until the year of receipt as provided in section 22(b)(2)(B) of the Code. Revenue Ruling 181, C.B. 1953-2, 111, relating to amounts contributed by the employer is not applicable to the circumstances expressed herein.