# Brief for the Respondent in Opposition — Angelus Funeral Home v. Commissioner > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385604_0793%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Brief for the Respondent in Opposition - **Published:** January 1, 1969 - **Citation:** 396 U.S. 824 ## Text i FE SUN OH wR th Oe ou the Sap Court of the Gnited Sits OCTOBER TERM, 1968 g a No. 1434 ANGELUS FUNERAL H9ME, PETITIONER | Re oa | ~ CoMMISSIONER OF INTERNAL REVENUE ON PETITION FOR A W RIT OF CERTIORARI TO THE UNITED | STATES COURT OF APPEALS FOR THE aaeialoes CIRCUIT » BRIEF FOR THE RESPONDENT IN OPPOSITION ¢ e OPINIONS BELOW v The opinion of the Tax Court (Pet. A1-A15) is re- ported at 47 T.C. 391. The opinion of the court of ap-, " peals (Pet. B1-B10) is ‘reported at ce F. = 210. + JURISDICTION The judgment of the court of appeals was entered on February 10, 1969. Petitioner’s petition for rehear- ) ing was denied on February 27, 1969. The petition for a writ of certiorari was filed on May 24, 1969. The _ jurisdiction of this Court is inv oked under 28 U.S. C. |: 1254(1). : ’ QUESTION PRESENTED ors I, - Whether prepayments received by the. petitioner . corporation from customers under a ‘‘Pre-Need Fu- 353-874—96 ; (1) ;* ¥ (* . neral Plan Agreement’’, which authorized petitiqner at its option to use the prepayments for its own bene-- fit, were inéludible in its gross income for the taxable years in which received. > : ae STATUTE INVOLVED . The pertinent provisions of Govtions 61, 441, "446 and 451 of the Internal ! Revenue Code of 1954 are set forth 1 in the Appendix, Inf ‘a, pp. 8-9. STATEMENT Petitioner, Angelus Funeral Home, is a California corporation engaged in the business of providing fu- neral. and burial services. It files its income tax re- turns on a calendar year, accrual basis. As a part of its business during the years 1954 and coritinuing through 1961,-petitioner entered into written contracts.’ with individuals. Each agreement, called a ‘*Pre-Need | Funeral Plan Agreement”, prov ided for Schlude v. Commissioner, 372 US. 128; Hagen Advertising Displays; Tne. v: Commissiqner, decided March 3, 1969 ° (69-1 U.S.T.C., par. 9254). Cf. Fiaiklin Life Insurance ee > ” _ Co. vy. United States, 399 F. 2d 757 (CA, 7). certiorari denied, 393 U.S. 1118. . After analyzing the two types of funeral service contracts (*‘Pre-Need Funeral Plan Agreement’’) be- tween petitioner and its customers—those entered into before September 1961 and those entered into after- ward—the Tax Court concluded that prepayments un- der the earlier type (not involved on this appeal) were received and held in trust by petitioner for the benefit of the customer until his death and hence were not repertable in the year of receipt, but that prepayments under the later type of agreement (here - involved) were not so received and héld and therefore were re- portable in the year of receipt. Petitioner’s contention that the courts below erred ing ‘eating the later prepay- ments as includible in petitioner’ s gross income for the year of receipt disregards hoth tlie terms of the later agreement and the controlling decisions, The later ~ agreement, as distinguished from the earlier one, im- posed no restraint upon petitioner’s right*to use fhe prepaid funds for designated purposes beneficial to it (acquisition or improvement.of land and other facili- ties) ; on the contrary, it expressly granted petitioner the 4 option” to use the funds for such purposes. (Parag ‘aphs 5-6; Pet. A3-A4, B3.) The mere recita- tion elsewhere in the agreement that the funds were to be held “‘in trust’? (paragraph 4) must be read in conjunction with the broad option granted to use the funds for petitioner’s own benefit; and when so read ® becomes clear, as both courts below pointed out, that petitioner had the right to use the funds at any time for its own benefit under the later ‘agreement. If any % Mier 44 r a. 6 >: doubt otherwise existed regarding petitioner’s right _to use the prepayments for its own benefit, it is dis- ‘pelled by petitioner’s obligation under the agreement to pay its customers ten percent of the prepayments: ‘‘in consideration for its right to use”? the prepay- ments. (Pet. A4, B3.) 2. The decision below is not in conflict, with any other decision. Cases involving option payments appli- cable against the purchase price if the option is exer- cised, upon which petitioner chiefly relies (P ith, 15), -present the question whether the option payment is to be treated by the optionor as ordinary income or as part of the capital - gain ‘on the sale—the de- termination of » 9 ° , * the Secretary or his delegate, does clearly re- flect income. , ¢ — (¢) Permissible’ Methods.—Subject to the provisions of subsections (a) and (b), a tax- payer may compute taxable income under any of the following methods of accounting— (1) the cash receipts and ‘ disbursements method ; | | (2) an accrual method; Me (3) any other method permitted by this chap- ter; or... ee a (4) any combination of the foregoing meth- ods permitted@tmder regulations prescribed by the Secretary or his delegate. ; ol % x * * [26 U.S.C. 446.] SEC. 451. Generat RuLE For TAxaBLE YEAR OF INCLUSION, (a) General Rule.—The amount of any item of gross income shall be included in the gross income for the taxable year in which received ~ ge by the taxpayer, unless, under the method of accounting used in computing taxable income, such amount is to be properly accounted for as of a different period. : * * 2°" # . * : [26 U.S.C. 451.] ').S. GOVERNMENT PRINTING OFFICE: 1969 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385604_0793%3A2. Public record. Not legal advice.