Heyward v. Comm'r of Internal Revenue, Docket Nos. 83861
| Decision Date | 28 July 1961 |
| Docket Number | Docket Nos. 83861,83862. |
| Parties | MARY B. HEYWARD, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.JOHN T. HEYWARD AND HAIDEE M. HEYWARD, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Robert W. Hemphill, Esq., and Paul Hemphill, Jr., Esq., for the petitioners.
James E. Johnson, Jr., Esq., for the respondent.
John T. Heyward was president and principal stockholder of Winnsboro Granite Corporation, and Mary B. Heyward, John's sister, was a minority stockholder but not an employee thereof. Held: Homes owned by Winnsboro Granite and fuel oil used therein furnished John and Mary by Winnsboro Granite in 1955 without charge were not lodgings furnished for the convenience of the employer within the meaning of section 119, I.R.C. 1954, and the respective values thereof are includible in the gross incomes of John and Mary. Value of lodgings determined.
In these consolidated proceedings, respondent determined deficiencies in income tax against petitioners for the calendar year 1955 in the following amounts:
+-------------------------------------------------------+
¦Docket¦Petitioner ¦Deficiency¦
+------+-------------------------------------+----------¦
¦No. ¦ ¦ ¦
+------+-------------------------------------+----------¦
¦83861 ¦Mary B. Heyward ¦$216.56 ¦
+------+-------------------------------------+----------¦
¦83862 ¦John T. Heyward and Haidee M. Heyward¦673.24 ¦
+-------------------------------------------------------+
The only issue is whether petitioner Mary B. Heyward and petitioner John T. Heyward realized income by reason of occupying rent free two houses owned by Winnsboro Granite Corporation (hereafter called Winnsboro Granite) and by reason of Winnsboro Granite's furnishing fuel oil for the houses occupied by them.
Some of the facts have been stipulated and are found as stipulated.
Mary B. Heyward was unmarried and resided in Rion, South Carolina, during the taxable year 1955. She filed an individual Federal income tax return, Form 1040, for the taxable year 1955 with the director of internal revenue for the district of South Carolina, reporting compensation from Rion Crush Stone Corporation in the amount of $4,800 and dividends from Winnsboro Granite in the amount of $412.
John T. Heyward and Haidee M. Heyward were husband and wife during the taxable year 1955 and they resided in Rion, South Carolina. They filed a joint Federal income tax return, Form 1040, for the taxable year 1955 with the director of internal revenue for the district of South Carolina.
John and Mary are brother and sister.
Winnsboro Granite is a South Carolina corporation, organized many years ago for the purpose of operating granite quarries. In 1955 there were 1,050 shares of stock of the company issued and outstanding, owned as follows:
+------------------------------------+
¦ ¦Number of ¦
+---------------------+--------------¦
¦Name of stockholder ¦shares owned ¦
+---------------------+--------------¦
¦John T. Heyward ¦595 3/4 ¦
+---------------------+--------------¦
¦Mary B. Heyward ¦41 1/4 ¦
+---------------------+--------------¦
¦Julia W. Johnston ¦137 ¦
+---------------------+--------------¦
¦Reita W. Witherspoon ¦137 ¦
+---------------------+--------------¦
¦Henlen W. Hemphill ¦137 ¦
+---------------------+--------------¦
¦Robert W. Hemphill ¦1 ¦
+---------------------+--------------¦
¦Paul Hemphill ¦1 ¦
+------------------------------------+
The company has been run by the Heyward family since 1903. John has been president of the company since 1941 but Mary was not an employee of Winnsboro Granite. During the year 1955 the quarrying operations of the company were conducted at its Anderson quarry located about 10 miles northwest of Rion, South Carolina, and about 15 miles due west of Winnsboro, South Carolina. Rion is about 25 miles north of Columbia, South Carolina. The offices of Winnsboro Granite are located at the Anderson quarry. The quarry is not usually operated at night and the office is not open at night.
Rion Crush Stone Corporation is a wholly owned subsidiary of Winnsboro Granite and operates a stone-crushing plant at Rion, at an old quarry originally operated by Winnsboro Granite. John is in charge of the operations of both Winnsboro Granite and Rion Crush Stone Corporation. He is also president of Heyward Granite Company, located at Graniteville, Missouri. John makes several trips daily between the Anderson quarry and the crushing plant at Rion. He also makes trips to Heyward Granite Company occasionally.
Winnsboro Granite owns about 3,000 acres of land stretching over an area of about 10 miles encompassing the Anderson quarry, the Rion stone-crushing plant, and the unincorporated village of Rion. The company owns about 50 or 60 houses on this property, some of which are located at Anderson quarry and some of which are located at Rion. Most of these houses are occupied by key employees of the company rent free, in accordance with a long-established policy of the company to have employees live on the company property for its protection and for convenience to the jobsite. The remainder of the company houses are unoccupied.
Rion is an unincorporated village of about 30 houses, 22 or 23 of which are owned by Winnsboro Granite, and 3 or 4 of which are vacant. There were no paved streets, street lights, public buildings (except a post office), stores, local police or fire protection, or any of the other public facilities generally found in an incorporated community. There were no telephones in Rion in 1955 although there were 10 or 11 at the time of trial. There is considerable noise and dust in Rion from the stone-crushing plant located nearby. Rion is not a desirable place to live for anyone not connected with either Winnsboro Granite or Rion Crush Stone Corporation.
In 1955 John lived in a house owned by Winnsboro Granite in Rion, about one-fourth of a mile from the stone-crushing plant. He had lived in this house since 1941, when he became president of Winnsboro Granite on the death of his brother. The main part of the house was frame and was built in the late eighties or the early nineties. The house had 10 rooms (a living room, a dining room, a kitchen, 6 bedrooms, and a gallery) and 3 baths. The gallery was constructed as an addition to the house by Winnsboro Granite after John moved into the house and was built of Winnsboro blue granite, a product of the Anderson quarry. It was built at a cost of about $50,000 as an advertisement for Winnsboro Granite's product and is used primarily for display. Many photographs have been made of the gallery for advertising the Winnsboro blue granite, which is called ‘the silk of the trade.’ The gallery includes a chimney, a mantelpiece, steps, a terrace, and three arches, all made of granite, and is known throughout the monumental stone business. John at times held conferences at the house with persons dealing with Winnsboro Granite and received customers there for purposes of entertaining and advertising. John paid no rent for the house, and all improvements, repairs, utilities, and maintenance expenses were paid for by Winnsboro Granite, which also paid $403.20 in 1955 for fuel oil used in the house.
Mary has lived on the Winnsboro Granite property since 1903. In 1955 she lived in a house in Rion owned by Winnsboro Granite. This house was formerly a 3-car garage until 1933 when a floor was put in it and it was made into a 5-room dwelling. It had a dining room, a living room, a kitchen, one room built on the back and used as a bedroom, and a bedroom in the attic. Part of the house is still used as a garage. Mary paid no rent for this house, and all repairs, utilities, and maintenance expenses were paid for by Winnsboro Granite, which also paid $263.92 in 1955 for fuel oil used in the house.
One of the houses owned by Winnsboro Granite is Heyward Hall, an 8-room house with considerable historical value located about 4 miles from Rion. About 3 years ago this house became vacant. Winnsboro Granite wanted the house occupied, and John contacted a realtor in Columbia, South Carolina, to find a tenant for it. No rental price was put on it because John first wanted to get someone interested in it and then some rental arrangement would be worked out. Rent was not the primary consideration. However, the house has remained vacant and in the 3 years that it has been available nobody has shown any interest in it. In the same general area is a 6-room house which the owner has been trying to rent through a realtor, but no interest has been shown in it and it is vacant. Very few, if any, houses in Rion are rented.
Winnsboro Granite has never charged rent to any of the employees who occupy the houses owned by it. Neither John nor Mary was expressly required by Winnsboro Granite or Rion Crush Stone Corporation to live in the houses they occupied in 1955 and neither of them had any specific agreement with Winnsboro Granite with reference to occupancy of the houses rent free.
The fair rental value of the house occupied by John and his family in 1955 was $100 per month and of the house occupied by Mary in 1955 was $50 per month. Neither John nor Mary was required to live in these houses in 1955 as a condition of his or her employment or for the convenience of his or her employer. Neither the fair rental value of the houses nor the fuel oil furnished was a gift by Winnsboro Granite to John or Mary.
OPINION.Respondent determined that the fair rental value of the houses owned by Winnsboro Granite and occupied by John and Mary in 1955, determined to be $1,200 and $600, respectively, and the cost of the fuel oil furnished by Winnsboro Granite in 1955 for...
To continue reading
Request your trial
-
Huff v. Comm'r of Internal Revenue
...1971 through August 1973. 10. T.C. Memo 1978-434. 11. Often, we are not required to characterize the income. E.g., Heyward v. Commissioner, 36 T.C. 739, 746 (1961), affd. 301 F.2d 307 (4th Cir. 1962). In the instant case, the parties' agreement as to sec. 1348 (see note 3 supra ) leads us t......
-
Bob Jones University v. United States, 553-78.
...employee occupy the premises, we do not think the value of the lodging is excludable from gross income under section 119." Heyward v. Commissioner, 36 T.C. 739, 744, aff'd. per curiam, 301 F.2d 307 (4th Cir. The determination of whether an employee is required to accept lodging as a conditi......
-
Matula v. Comm'r of Internal Revenue, Docket No. 92559.
...of an officer-stockholder and an officer-employee. Nor do we feel it necessary to characterize the nature of the payments. Cf. Mary B. Heyward, 36 T.C. 739 (1961), affd. 301 F.2d 307 (C.A. 4, 1962). Whether the payments are regarded as dividends, compensation, or other income to the officer......
-
Patel v. Commissioner
...failed to prove that they are entitled to exclude the fair rental value of the apartment under section 119. Heyward v. Commissioner Dec. 24,955, 36 T.C. 739, 746 (1961), affd. per curiam 62-1 USTC ¶ 9424 301 F.2d 307 (4th Cir. 1962). We conclude that the petitioners received constructive di......