Duberstein v. CIR, 13646.

• Decision Date: 08 April 1959
• Docket Number: No. 13646.,13646.
• Citation: 265 F.2d 28
• Parties: Mose DUBERSTEIN and Sylvia Duberstein, husband and wife, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Court: U.S. Court of Appeals — Sixth Circuit

265 F.2d 28 (1959)

Mose DUBERSTEIN and Sylvia Duberstein, husband and wife, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 13646.

United States Court of Appeals Sixth Circuit.

April 8, 1959.

Sidney G. Kusworm, Dayton, Ohio, for petitioners.

Charles B. E. Freeman, Dept. of Justice, Washington, D. C., Andrew F. Oehmann, Acting Asst. Atty. Gen., Lee A. Jackson, Melva M. Graney, Arthur I. Gould, Attys., Dept. of Justice, Washington, D. C., on the brief, for respondent.

Before MARTIN, Chief Judge, MILLER, Circuit Judge, and O'SULLIVAN, District Judge.

O'SULLIVAN, District Judge.

The sole question in this case is whether a Cadillac automobile received by the taxpayer Duberstein in the year 1951 from Mohawk Metal Corporation, was a gift or taxable income. The Tax Court found that it was not a gift, and affirmed the action of the Commissioner of Internal Revenue in assessing a deficiency against Duberstein by including in his 1951 income the sum of $4,250.00, the fair market value of the Cadillac.

Duberstein was President of Duberstein Iron and Metal Company of Dayton, Ohio, and Morris Berman was President of Mohawk Metal Corporation of New York. These two corporations had done business with each other in the buying and selling of various metals over a period of years. Duberstein and Berman were personally acquainted. On some occasions when these two corporate officers were talking to each other, Berman would ask questions about names of consumers who used various chemicals. Duberstein gave Berman the names of such consumers known to Duberstein. At some time in the year 1951, Berman called Duberstein and told him that some of the information given to Berman was so helpful that he felt he wanted to give Duberstein a present. He stated that he had a Cadillac car for Duberstein and requested him to come to New York to receive it as a gift. At that time, Duberstein advised Berman that he did not feel Berman or the company owed him anything, that he had not expected anything for the information given to Berman, and had not intended to be compensated. He testified that Berman insisted he accept the Cadillac car. Duberstein did so. No further conversations were had between Duberstein and Berman, after receipt of the car, concerning the question of whether it was a gift or was taxable compensation. It was undisputed that Duberstein was not an employee of the Mohawk Metal Corporation and that there was no understanding or agreement between him and Mohawk Metal Corporation that he was to be compensated in any way for information given Berman.

In 1954, an agent of the Internal Revenue Department got in touch with Duberstein and stated his intention to charge Duberstein with receipt of income in 1951 in the amount of the fair market value of the Cadillac. Duberstein referred the matter to his accountant, one Flagel, who then learned that Mohawk Metal Corporation had deducted as expense the value of the Cadillac car on its tax return for 1951, classifying the item as a "finder's fee" paid to Duberstein. Mr. Flagel wrote several letters to Berman concerning the matter, but got no response. He then contacted one Gorin, the accountant who prepared the income tax return for Mohawk Metal Corporation. Evidence was received by the Tax Court that when Gorin, Mohawk's accountant, prepared the 1951 tax return for the corporation, he discussed the matter of this Cadillac automobile with Berman. He gave Flagel the following account of his talk with Berman:

"Well, he had talked with Mr. Berman and explained to Mr. Berman that if the Cadillac was recorded as a gift, it would not be deductible as such. Mr. Berman wanted to know how it would be deductible."

The Tax Court concluded as follows:

"Upon this record, we conclude that petitioners have failed to carry the burden of proving that the automobile was a gift. The only justifiable inference is that the automobile was intended by the payor to be remuneration for services rendered to it by Duberstein."

It bottomed its decision primarily upon its finding that, "the record is significantly barren of evidence revealing any intention on the part of the payor to make a gift."

We believe that the taxpayer met his burden of proof and that any presumption in favor of the correctness of the Commissioner's assessment disappeared when met by uncontradicted evidence that the Cadillac automobile was a gift. The Tax Court was of the opinion that there was no evidence introduced by taxpayer as to the donor's donative intent. In this, we think the Tax Court disregarded the effect of the uncontradicted testimony. It was not necessary to bring in the donor,...