Simpkinson v. Commissioner of Internal Revenue, 8298.
| Decision Date | 12 April 1937 |
| Docket Number | No. 8298.,8298. |
| Parties | SIMPKINSON v. COMMISSIONER OF INTERNAL REVENUE. |
| Court | U.S. Court of Appeals — Fifth Circuit |
George G. Tyler, of New York City, and Richard H. Wilmer, of Washington, D. C., for petitioner.
S. Dee Hanson, John J. Pringle, Jr., J. Louis Monarch, and Sewall Key, Sp. Assts. to the Atty. Gen., and Robert H. Jackson and James W. Morris, Asst. Attys. Gen., Morrison Shafroth, Chief Counsel, Bureau of Internal Revenue, and William E. Davis, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., for respondent.
Before FOSTER, SIBLEY, and HUTCHESON, Circuit Judges.
The single question is whether $40,000 paid to Robert M. Kerr, by Unopco Corporation in January, 1931, was a nontaxable gift or taxable as income. The Revenue Act of 1928, § 22, 45 Stat. 797 (26 U.S.C.A. § 22 and note), declares: "`Gross income' includes * * * income derived from * * * compensation for personal service, of whatever kind and in whatever form paid." To be excluded is "the value of property acquired by gift," etc. The Commissioner held the payment to be taxable as "a bonus in recognition of valuable and loyal services rendered," and the Board of Tax Appeals sustained him.
The facts are simple. Universal Oil Products Company owned a process patent for making gasolene. Its stockholders on January 16, 1931, consummated a sale of the entire capital stock for $25,000.000, about $4,100,000 of liquid assets having first been transferred to another corporation created to receive them called Unopco Corporation, whose stock was issued proportionally to the old stockholders of Universal Oil Products Company. The stockholders thus through this new company preserved unaltered their interests in the reserved assets. On January 9, 1931, the directors of Unopco in formal meeting took this action: "Resolved that the Directors of this Corporation recommend to the stockholders of this Corporation that the sum of $607,500 be appropriated, paid and distributed as a bonus to sixty-four former employes, attorneys and experts of Universal Oil Products Company * * * in recognition of their valuable and loyal services, etc.," and a stockholders' meeting was called to pass upon the recommendation. The following day the stockholders met and unanimously adopted a resolution which quoted that of the directors and approved it, and then "Resolved further that this Corporation do appropriate, pay and distribute the said sum of $607,500 as a bonus to sixty-four former and present employes, attorneys and experts of said Universal Oil Products Company in recognition of the valuable and loyal services of said employes, attorneys and experts to said Universal Oil Products Company." About January 20, 1931, the president accordingly delivered a check to each beneficiary personally or by mail, saying or writing in effect that it was a gift and need not be included in income tax returns. Unopco did not in its own tax return deduct these payments as a business expense, nor did its stockholders, nor did Universal Oil Products Company. The payments had not been discussed before the stock sale was consummated January 6, 1931. There was no legal obligation to make them, nor had they been requested. None of the recipients ever worked for Unopco or its stockholders personally, but were working for Universal Oil Products Company. A witness testified that the discussion preceding the resolution was of a gift or honorarium.
In a broad sense a benefit done another without legal obligation is a gift; but construing together the provisions of the income tax statutes, when money is paid to a present or former employee in consideration of his services he receives it as a compensation for services, although not demandable,...
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