Newmark v. CIR, No. 116

CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)
Writing for the CourtCLARK, MOORE and KAUFMAN, Circuit
Citation311 F.2d 913
PartiesMorris NEWMARK and Julia Newmark, Petitioners-Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
Docket NumberNo. 116,Docket 27578.
Decision Date27 December 1962

311 F.2d 913 (1962)

Morris NEWMARK and Julia Newmark, Petitioners-Appellants,
v.
COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.

No. 116, Docket 27578.

United States Court of Appeals Second Circuit.

Argued November 26, 1962.

Decided December 27, 1962.


311 F.2d 914

Morris Newmark (Harry L. Jessop, New York City, of counsel), pro se, for petitioners-appellants.

Louis F. Oberdorfer, Asst. Atty. Gen., and Lee A. Jackson, David O. Walter, and Alan D. Pekelner, Attys., Dept. of Justice, Washington, D. C., for respondent-appellee.

Before CLARK, MOORE and KAUFMAN, Circuit Judges.

KAUFMAN, Circuit Judge.

After a determination of a deficiency in his federal income tax for the years 1946 and 1947, Morris Newmark petitioned the Tax Court for a redetermination. The Tax Court held that demand notes of $13,000 and $13,400, issued by the Eastern Cutter Corporation in 1946 and 1947 respectively, represented additional income to Newmark and was taxable as such, either on a theory of constructive receipt or on the theory that the notes were applied against a loan previously extended to Newmark by the corporation. Newmark appeals from the adverse decision and from the denial of his motions for a new trial and for a reconsideration, vacation, and revision of the Tax Court's disposition. We affirm the decision below.

The case was tried upon stipulated facts. The stipulation incorporated by reference various affidavits, letters and portions of transcripts from earlier judicial proceedings. These documents, when read together, provide ample support for the conclusions of the Tax Court. Stripped to essentials, the facts are these. On September 21, 1945 the taxpayer and a Mr. Barber entered into an agreement with Ansel R. Abeel, Sr., in which the taxpayer and Barber were to purchase, for $50,000, all the shares of the Eastern Cutter Corporation on or before October 1, 1945. In order to finance the purchase, Newmark and Barber applied for a $50,000 loan to Intermediate Factors Company, which, on October 1, granted the loan and exacted a charge of $4,000 for the use of its money. A rapid series of further occurrences on October 1, 1945, resulted in a consummation of the loan and a purchase of the shares in Eastern Cutter. Newmark and Barber, in return for the loan from Intermediate Factors, executed a demand note for $54,000. With the proceeds of their loan, the two men purchased the shares in the corporation, and immediately installed themselves as officers of the corporation (Newmark as president, and Barber as secretary and treasurer) and, along with their wives, as the board of directors. In order that the loan from Intermediate Factors be satisfied, the newly formed Eastern Cutter board of directors authorized a loan by the corporation to Newmark and Barber of $27,625 each, and during the following week, the two men borrowed and withdrew a total of $54,000 from Eastern Cutter's bank account. By October 9, 1945, Newmark and Barber had completed payment of the $54,000 demand note held by Intermediate Factors.

On October 1, 1945, an employment contract was executed in which Newmark was hired for a term of five years as president and director at a salary of $300 per week. Barber executed an identical contract as secretary, treasurer, and director. Newmark's (and Barber's) yearly salary was thus $15,600. On his 1946 federal income tax return, however, Newmark reported as salary only $2,600 and in 1947, only $2,200. He did not report the balances of $13,000 and $13,400 which were alleged in the notice of deficiency to have been constructively received. The Government contends, and the Tax Court found, that salary credits to the full extent of the taxpayer's salary were issued in the form of monthly demand notes throughout 1946 and 1947,

311 F.2d 915
and that, although the taxpayer may have received only $2,600 and $2,200 in cash from Eastern Cutter, the balance of the salary credits was applied in satisfaction of Newmark's debt of $27,625 to the corporation, or could have been converted into cash at the will of the taxpayer. On either theory — discharge of indebtedness or constructive receipt — it is contended that there was income to Newmark of $15,600 in each of the two years in question

We need devote little time to reciting the applicable rules of law, for they are basic and uncontested. The doctrine of constructive receipt has been explained as follows:

"A taxpayer should not have the right to select the year in which to reduce income to possession. It is now well setted that income which is subject to a taxpayer\'s unfettered command and which he is free to enjoy at his own option is taxed to him as his income whether he sees fit to enjoy it or not. The doctrine of constructive receipt is to be applied where a cash basis taxpayer as is Newmark in the case before us is presently entitled to money, which money is made immediately available to him, and his failure to receive it in cash is due entirely to his own volition." 2 Mertens, Federal Income Taxation § 10.01 (1961).

See Weil v. Commissioner, 173 F.2d 805 (2d Cir., 1949); Hedrick v. Commissioner, 154 F.2d 90 (2d Cir.), cert. denied, 329 U.S. 719, 67 S.Ct. 53, 91 L.Ed. 623 (1946). Of course, since the payments in question must be available on demand, a showing that Eastern Cutter was insolvent or that funds to meet the salary credits were otherwise...

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23 practice notes
  • Likins-Foster Honolulu Corp. v. CIR, No. 10060-10061.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (10th Circuit)
    • October 16, 1969
    ...with the release of the mortgagors by the mortgagees. See Riss v. C. I. R., 10 Cir., 368 F.2d 965, 968; Newmark v. C. I. R., 2 Cir., 311 F.2d 913; Clarke v. United States, 94 F.Supp. 543, 548 (E.D.Pa.); and 2 Mertens, Federal Income Taxation, § 11.19. Although the right of the mortgagors to......
  • OKC Corp. v. Comm'r of Internal Revenue, Docket Nos. 15099-80
    • United States
    • U.S. Tax Court
    • April 25, 1984
    ...upon the nature of the payment. For example, a discharge of indebtedness may constitute a payment for services (Newmark v. Commissioner, 311 F.2d 913, 915 (2d Cir. 1962), affg. a Memorandum Opinion of this Court; Tucker v. Commissioner, 69 T.C. 675 (1978); Denny v. Commissioner, 33 B.T.A. 7......
  • Riss v. CIR, No. 8530.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (10th Circuit)
    • November 10, 1966
    ...Taylor v. Commissioner of Internal Revenue, 298 F.2d 198 (4th Cir.); United States v. Hall, 307 F.2d 238 (10th Cir.); Newmark v. C. I. R., 311 F.2d 913 (2d Cir.). Similarly, assumption by a purchaser of the seller's obligation to third parties has been held equivalent to receipt by the sell......
  • BIG" D" DEVELOPMENT CORPORATION v. Commissioner, Docket No. 4758-68.
    • United States
    • United States Tax Court
    • June 21, 1971
    ...the command of the seller, and that any cross indebtedness was lacking in reality. See also Newmark v. Commissioner 63-1 USTC ¶ 9163, 311 F. 2d 913 (C. A. 2, 1962), affirming a Memorandum Opinion of this Court Dec. 25,077(M). There it was held that a taxpayer had received salary from his co......
  • Request a trial to view additional results
23 cases
  • Likins-Foster Honolulu Corp. v. CIR, No. 10060-10061.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (10th Circuit)
    • October 16, 1969
    ...with the release of the mortgagors by the mortgagees. See Riss v. C. I. R., 10 Cir., 368 F.2d 965, 968; Newmark v. C. I. R., 2 Cir., 311 F.2d 913; Clarke v. United States, 94 F.Supp. 543, 548 (E.D.Pa.); and 2 Mertens, Federal Income Taxation, § 11.19. Although the right of the mortgagors to......
  • OKC Corp. v. Comm'r of Internal Revenue, Docket Nos. 15099-80
    • United States
    • U.S. Tax Court
    • April 25, 1984
    ...upon the nature of the payment. For example, a discharge of indebtedness may constitute a payment for services (Newmark v. Commissioner, 311 F.2d 913, 915 (2d Cir. 1962), affg. a Memorandum Opinion of this Court; Tucker v. Commissioner, 69 T.C. 675 (1978); Denny v. Commissioner, 33 B.T.A. 7......
  • Riss v. CIR, No. 8530.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (10th Circuit)
    • November 10, 1966
    ...Taylor v. Commissioner of Internal Revenue, 298 F.2d 198 (4th Cir.); United States v. Hall, 307 F.2d 238 (10th Cir.); Newmark v. C. I. R., 311 F.2d 913 (2d Cir.). Similarly, assumption by a purchaser of the seller's obligation to third parties has been held equivalent to receipt by the sell......
  • BIG" D" DEVELOPMENT CORPORATION v. Commissioner, Docket No. 4758-68.
    • United States
    • United States Tax Court
    • June 21, 1971
    ...the command of the seller, and that any cross indebtedness was lacking in reality. See also Newmark v. Commissioner 63-1 USTC ¶ 9163, 311 F. 2d 913 (C. A. 2, 1962), affirming a Memorandum Opinion of this Court Dec. 25,077(M). There it was held that a taxpayer had received salary from his co......
  • Request a trial to view additional results

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