Robinson v. Comm'r of Internal Revenue

• Decision Date: 06 April 1965
• Docket Number: Docket No. 89128.
• Citation: 44 T.C. 20
• Parties: RAY S. ROBINSON AND EDNA MAE ROBINSON, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
• Court: U.S. Tax Court

44 T.C. 20

RAY S. ROBINSON AND EDNA MAE ROBINSON, PETITIONERS,

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

Docket No. 89128.

Tax Court of the United States.

Filed April 6, 1965.

Arnold Broser, George V. Delson, and Joseph B. Franklin, for the petitioners.

Robert D. Whoriskey and Marie L. Garibaldi, for the respondent.

1. Held, T, a professional boxer who filed 1957 income tax return on cash basis, was not chargeable with any greater amount of income in 1957 from a certain championship match than was actually received by him or paid out for his benefit from his contractual share of the receipts. He was not a member of a joint venture in respect of that match; nor was the contract providing for deferred payments a sham. There was no constructive receipt of any amount in excess of that reported.

2. Held, a cash payment of $10,000 to or in behalf of T to open his training camp represented unreported income.

3. As to various deductions, (a) expenditure by T for fight tickets distributed to various persons held to represent in part a nondeductible personal outlay and in part a deductible business expense; allocation made; (b) a certain payment made to one of T's managers held not shown to have been connected with T's trade or business and therefore not deductible as business expense; (c) claimed expense for use of training facilities held deductible; (d) amount of theft loss held not proved in excess of amount allowed.

4. Addition to tax under section 6654, I.R.C. 1954, approved.

Respondent determined a deficiency in petitioners' income tax for the year 1957, and additions to tax, as follows:

+--+
                ¦¦¦¦
                +--+
                

            Additions to tax
                Deficiency
                            Sec.6654    Sec. 5541(a)
                            I.R.C. 1954 I.R.C. 1954
                $313,449.82 $1,043.56   $17,543.33
                

In amendments to his answer, respondent claims an increased deficiency in the amount of $38,690.23, based upon two amounts which he failed to include as unreported income of petitioners in his determination of the deficiency of $313,449.82, and concedes that petitioners are not liable for the addition to tax of $17,543.33 determined by him under section 6651(a).

The principal question for decision involves the determination of the amount includable in petitioner Ray S. Robinson's 1957 gross income pursuant to contractual arrangements in connection with his participation in the Robinson-Basilio world middleweight championship fight. This question turns upon whether Robinson was a member of a joint venture or partnership in respect of this fight so as to be chargeable with his share of the earnings even though not distributed to him in 1957 and whether he in any event was chargeable by reason of constructive receipt with a greater amount of earnings therefrom than actually reported by him for 1957.

Other questions presented are (1) whether petitioner Robinson received $10,000 in cash in 1957 in connection with opening his training camp for the Basilio fight; (2) whether a $7,600 expenditure for fight tickets was an ordinary and necessary business expense; (3) whether $7,331.91 paid to Ernie Bracca was an ordinary and necessary business expense; (4) whether petitioner paid $2,000 in 1957 for training camp facilities; (5) whether the Commissioner erred in reducing a claimed $4,300 embezzlement loss to the extent of $2,000; and (6) whether petitioners are liable for an addition to tax in the amount of $1,043.56 for underpayment of estimated tax in 1957.

FINDINGS OF FACT

Some of the facts have been stipulated, and, as stipulated, are incorporated herein by reference.

Petitioners Ray S. Robinson and Edna Mae Robinson were, during 1957, husband and wife. Their address was 2076 Seventh Avenue, New York, N.Y. Petitioners filed their joint Federal income tax return for 1957 with the director of internal revenue, New York, N.Y., on the basis of a calendar year, using the cash receipts and disbursements method of accounting.

Ray S. Robinson (hereinafter sometimes referred to as petitioner) was and is a well-known prizefighter, professionally and publicly known as Sugar Ray Robinson. During the year 1957, he was the world middleweight boxing champion. He has been a professional prizefighter for more than 20 years; has engaged in approximately 170 professional fights of which 10 or 12 were championship contests; and was the world middleweight champion five times. He has always been a substantial ‘gate attraction’ and has established records for attendance at contests throughout the country.

Professional boxing is a legalized sport which has become a business and which is conducted as a form of public entertainment. All who engage in it, either as boxer participants, managers, or promoters, are, generally speaking, motivated by the desire of profit or monetary gain. Contestants are matched according to weight classes. In each weight class there is at any one time, ordinarily, one recognized world champion. Recognition as a world champion places the individual so recognized in a position to obtain more for his services. Contests in which champions participate have great box office appeal, arouse great public interest, have large audience participation, and bring in more revenues from sales of admission tickets, or ‘gate’, and sales of radio and television rights, motion-picture rights, and closed-circuit telecast admissions, than do nonchampionship contests.

Promoting professional boxing contests includes the negotiation and execution of contracts with the boxers; the arranging of details necessary to the exhibition of the contest; the selling of tickets of admission; the staging of the contest; the sale of rights to broadcast and to telecast for home television consumption and/or closed-circuit theater television consumption; and the sale or distribution of motion pictures. The promotion of a championship bout involves the outlay and/or commitment of substantial sums of money on the part of the promoting corporation.

Professional boxing is conducted in most States under rules and regulations administered by a State governmental authority. In many instances professional boxing is administered under a licensing system by which control and supervision is exercised over the boxers, their managers, promoting corporations, referees, judges, matchmakers, timekeepers, and those in charge of the sale and distribution of admission tickets. In New York, the governing authority is the State Athletic Commission (hereinafter referred to as the commission) which is a division of the Department of State.

Petitioner during the year 1957 was a professional boxer licensed by, among others, the commission.

International Boxing Club of New York, Inc. (hereinafter referred to as IBC), was, during 1957, a promoting corporation licensed by the commission. It promoted most of petitioner's professional fights.

At no time was petitioner an officer, director, or stockholder of IBC, nor did he ever have a financial interest therein other than claims for moneys due him as a boxer. Petitioner was in no way related to any officer, director, or stockholder of IBC.

IBC was during the years 1957 and 1958 a wholly owned subsidiary of Madison Square Garden Corp. (hereinafter referred to as The Garden), a corporation organized and existing under the laws of the State of New York, whose stock was traded on the over-the-counter securities market.

Petitioner was never an officer, director, or stockholder of The Garden and never had a financial interest therein.

James D. Norris during the year 1957 was president of both IBC and The Garden. He and an associate ‘owned control’ of The Garden.

Sometime prior to July 31, 1957, petitioner and IBC conducted negotiations with respect to a proposed title bout to be held at the Yankee Stadium in New York City in September 1957 between petitioner and one Carmen Basilio. Petitioner at the time was the world middleweight champion and Carmen Basilio was the world welterweight champion. The contest was to be for the middleweight ‘crown,‘ with petitioner as the defending champion and Basilio the contender.

As a result of such negotiations, IBC and petitioner agreed to the terms of a contest to be staged on September 23, 1957, between petitioner and Carmen Basilio, or on September 24, 1957, in the event of rain. The terms were evidenced by two instruments executed by the parties and each dated July 31, 1957. One of the instruments was on a standard printed form; the other instrument was in typewritten form.

The rules of the commission require, among other things, that contracts with boxers be executed on a printed form approved by the commission and that such contracts be filed with the commission within 48 hours after execution. Rule B, subdivs. 1 and 13.

The standard printed form of contract, with blank spaces filled in by typewriter, covered many of the regulatory details with respect to the conduct of the contest and contained provisions to the following effect:

a. The contest was to be for the middleweight crown between Ray Robinson and Carmen Basilio;

b. The contest was to be held on September 23, 1957, at the Yankee Stadium in Bronx, N.Y.;

c. The match was to be for 15 rounds to a decision; and at a weight not to exceed 160 pounds;

d. IBC agreed to pay after said contest and Ray Robinson agreed to accept ‘as in full payment for all his claims and demands for and on account of the performance by him of this contract * * * 45 percent of the gross receipts derived from the sale of tickets of admission less the Federal and/or State Admission Taxes and compensation for ring officials plus 45 percent of radio, theatre television, and motion picture receipts, as per agreement presented to the Com[mission] this day’;

e. Details with respect to rules of the contest were contained in the printed body of the contract form including the right of IBC to rescind the contract if Robinson meanwhile entered into another contest and was defeated or did anything calculated...