Starrels v. CIR
| Decision Date | 25 May 1962 |
| Docket Number | No. 17358.,17358. |
| Parties | Maurie STARRELS and Doris W. Starrels, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Kenny, Morris, & Ibanez, Robert S. Morris, and Robert W. Kenny, Los Angeles, Cal., for petitioner.
Louis F. Oberdorfer, Asst. Atty. Gen., Lee A. Jackson, Harold M. Seidel, and William Friedlanders, Attys., Dept. of Justice, Washington, D. C., for respondent.
Before BARNES, JERTBERG and BROWNING, Circuit Judges.
The Tax Court decision before us for review was founded upon a stipulation disclosing the following facts: Doris W. Starrels is the daughter of the late Commander Frank W. Wead. Loew's, Inc. wished to produce a motion picture about naval aviation. Loew's agreed to pay Mrs. Starrels certain sums of money in return for her consent to the portrayal of her father, herself, and other members of the family in the proposed movie. Loew's subsequently produced a movie "in which was depicted events taken from the life of Commander Wead," and in due course made the disputed payment.
The question presented to the Tax Court, and to us, is whether the payments which Mrs. Starrels received from Loew's fell within the terms of 26 U.S. C.A. § 104(a) (2), which excludes from a taxpayer's gross income "the amount of any damages received (whether by suit or agreement) on account of personal injuries * * *." The Tax Court held that they did not, and we agree.
Mrs. Starrels contended before the Tax Court that damages for invasion of a taxpayer's right of privacy are exempt from taxation under Section 104(a) (2), and that payments made pursuant to a prior consent to a future invasion of such rights should also be exempt. But the Tax Court pointed out that there was no evidence that Mrs. Starrels' right of privacy had in fact been invaded. The Tax Court concluded that if payments
The Tax Court expressly reserved the question of whether Section 104(a) (2) would exempt from taxation money paid pursuant to a prior agreement to an invasion of privacy where an invasion of privacy in fact subsequently occurred.
As Mrs. Starrels concedes, the right of privacy is personal, and the payments involved could constitute "damages received * * * on account of personal injuries" of Mrs. Starrels only if they compensated Mrs. Starrels for an invasion of her own privacy, rather than the privacy of her father. James v. Screen Gems, Inc., 174 Cal.App.2d 650, 344 P.2d 799 (1959); Metter v. Los Angeles Examiner, 35 Cal.App.2d 304, 310, 95 P.2d 491, 495 (1939). See also Runyon v. United States, 281 F.2d 590, 592 (5th Cir. 1960).
Mrs. Starrels argues, however, that the "public exhibition for commercial purposes of one's family life is ipso facto an invasion of the personal right of privacy * * *." If this is a suggestion that Mrs. Starrels' family relationships with her father were depicted in the movie, there is nothing in the record to support it. If it is a suggestion that as a matter of law each member of a family has a legally protected right in the privacy of each of the other members of the family, the authority relied upon by Mrs. Starrels Gill v. Curtis Publishing Co., 38 Cal.2d 273, 239 P.2d 630 (1952) does not sustain it. See Kelly v. Johnson Publishing Co., 160 Cal.App.2d 718, 722, 325 P.2d 659, 662 (1958).
As the Tax Court said, it might be plausibly argued that advance consent precludes a subsequent invasion of personal rights from being tortious, and therefore that payment for such consent could never constitute "damages received * * * on account of personal injury * * *." But in any event it seems reasonably sure that the exemption in Section 104(a) (2) was not intended to reach advance payments for consent where no actual invasion of personal rights subsequently occurred. The language of Section 104(a) (2) reads most naturally in terms of payment for injuries sustained prior to a suit or settlement agreement. The "exemption is allowed for damages which have already occurred, and there is no suggestion of an exemption for amounts paid for possible future damages." Meyer v. United States, 173 F.Supp. 920, 924-925 (E.D. Tenn.1959). See also Ehrlich v. Higgins, 52 F.Supp. 805, 808-809 (S.D.N.Y.1943).
This reading is also consistent with the underlying purpose of the statute. Damages paid for personal injuries are excluded from gross income because they make the taxpayer whole from a previous loss of personal rights — because, in effect, they restore a loss to capital. See Commissioner of Internal Revenue v. Glenshaw Glass Co....
To continue reading
Request your trial
-
Miller v. Comm'r of Internal Revenue
...as compensation which makes her personal injuries whole. Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955); Starrels v. Commissioner, 304 F.2d 574, 576 (9th Cir. 1962); Villaume v. United States, 616 F. Supp. 185 (D. Minn. 1985). In this case, petitioner filed law suits in the state o......
-
U.S. v. Garber
...to payments resulting from the settlement or prosecution of a tort claim. Knuckles v. CIR, 349 F.2d 610 (10th Cir. 1965); Starrels v. CIR, 304 F.2d 574 (9th Cir. 1962); Agar v. CIR, 290 F.2d 283 (2d Cir. 1961). The only evidence in the record which could possibly support a claim that the pa......
-
Cordell v. Detective Publications, Inc., 18918.
...U.S. 883, 86 S.Ct. 176, 15 L.Ed.2d 124 (1965); Gruschus v. Curtis Pub. Co., 342 F.2d 775 (10th Cir. 1965); Starrels v. Commissioner of Internal Revenue, 304 F.2d 574 (9th Cir. 1962); Bowman Gum, Inc. v. Topps Chewing Gum, Inc., 103 F. Supp. 944, 951-954 (E.D.N.Y.1952); Von Thodorovich v. Fr......
-
Huddell v. Levin
...U.S. 426, 430, 75 S.Ct. 473, 99 L.Ed. 483 (1955); H. Liebes & Co. v. Commissioner, 90 F.2d 932 (9th Cir. 1937); see Starrels v. Commissioner, 304 F.2d 574 (9th Cir. 1962); Agar v. Commissioner, 290 F.2d 283 (2d Cir. 1961). Nevertheless, Congress re-enacted the exemption in 1939 and 1954, as......
-
Federal Income Tax Consequences of Settlements and Judgments-part I: Plaintiffs
...the injury is to the business, and the damages recovered are taxable. 15. Church, supra, note 13. 16. See, e.g., Starrels v. Commissioner, 304 F.2d 574 (9th Cir. 1962). 17. Id. 18. Rev. Rul. 85-98, 1985-29, I.R.B. 5; Rev. Rul. 84-108, 1984-2, C.B. 32, revoking Rev. Rul. 75-45, 1975-1 C.B. 4......
-
Congress's Amendment to Section 104 of the Tax Code Will Not Clarify the Tax Treatment of Damages and Will Lead to Arbitrary Distinctions
...404, 412-14 (1931) (holding that the taxpayer's recovery of basis in the item is not a taxable event). 24. See Starrels v. Commissioner, 304 F.2d 574, 576 (9th Cir. 1962) (holding that "[d]amages paid for personal injuries are excluded from gross income because they make the taxpayer whole ......