Bishop v. Shaughnessy

• Citation: 95 F. Supp. 759
• Decision Date: 31 January 1951
• Docket Number: 3330.,Civ. No. 3329
• Parties: BISHOP v. SHAUGHNESSY, Collector of Internal Revenue. BISHOP v. SHAUGHNESSY, Collector of Internal Revenue.
• Court: U.S. District Court — Northern District of New York

95 F. Supp. 759

BISHOP v. SHAUGHNESSY, Collector of Internal Revenue.

BISHOP v. SHAUGHNESSY, Collector of Internal Revenue.

Civ. Nos. 3329, 3330.

United States District Court N. D. New York.

January 31, 1951.

Smith & Sovik, Syracuse, N. Y. (Laurence Sovik and William J. Mackay, Syracuse, N. Y., of counsel), for plaintiffs.

Theron Lamar Caudie, Asst. Atty. Gen., Irving J. Higbee U. S. Atty. Syracuse, N. Y., Frederic Rita, Special Asst. to Atty. Gen. (Edmund Port, Asst. U. S. Atty., Syracuse, N. Y., of counsel), for defendants.

FOLEY, District Judge.

These actions, because of their similarity in law and facts and by stipulation of the attorneys, were tried together by this court and a jury. In accordance with Rule 49(a) of the Federal Rules of Civil Procedure, 28 U.S.C.A. and with the assistance and agreement of the attorneys, a simple, single question was formulated in each action upon the substantial factual issue of bona fide gift requiring a categorical answer from the jury. Comprehensive instructions were given in the charge to the jury and the jury unanimously answered "yes" in writing to the question submitted in each action, finding on this issue of fact that a valid and genuine gift of the stock in question had been effected by the plaintiffs, Edward R. Bishop and E. Lawton Bishop, in each instance at issue. The court in submitting the issue of fact to the jury expressly reserved decision upon questions of law, and also reserved decision upon a motion by the plaintiff in reference to the serious question of the inclusion of dividends paid in 1942 and not specifically set forth in the claim for refund, and upon the motion for a directed verdict made in each action in behalf of the defendant Collector of Internal Revenue.

The defendant does not challenge the special verdict of the jury and it is apparent that such verdict is supported by sufficient evidence to warrant the special findings. It is also apparent that the main reliance of the defendant Commissioner in making his determination as to the increased assessment against the taxpayers and in filing the answer in the actions was placed upon the contention that the dividends paid after the transfer of the stock constituted an assignment of income, and the gifts of the stock for income tax purposes were not bona fide. This position is evidenced further by the submission of an affidavit submitted by a special assistant to the attorney general, dated August 2, 1950, in opposition to a motion for summary judgment in this court, stating that the alleged gifts "were not bona fide gifts but were simply an artifice to avoid payment of income taxes upon dividends accumulated upon the stock alleged to have been given." The contention of the defendant in this respect was completely washed away by the special verdict of the jury that the transfers were valid, genuine gifts made in good faith, and these findings, also, in my judgment, answer much of the problem presented here.

The defendant in seeking to support its motion for a directed verdict urges that the resolution passed on January 24, 1942, authorizing Edward R. Bishop, as treasurer, "to pay off all back dividends on the preferred stock during the year of 1942, at his discretion, as the condition of the company warrants it" constituted a declaration of dividend and vested such dividend as income in the holders of the stock at that time, although the payment of the dividends was not actually made until after the transfer of the stock by the plaintiff Edward R. Bishop, on April 17, 1942, and by plaintiff E. Lawton Bishop, on April 15, 1943. The dividends were actually paid to the donees November 30, 1942, December 29, 1942, and June 26, 1943. To sustain this position, the...