Case Name: Cora B. Beatty, Executrix, Estate of John W. Beatty, Petitioner, v. Commissioner of Internal Revenue, Respondent
Court: United States Board of Tax Appeals
Jurisdiction: United States
Decision Date: 1927-07-26
Citations: 7 B.T.A. 726
Docket Number: Docket No. 7360
Parties: Cora B. Beatty, Executrix, Estate of John W. Beatty, Petitioner, v. Commissioner of Internal Revenue, Respondent.
Judges: 
Reporter: Reports of the United States Board of Tax Appeals
Volume: 7
Pages: 726–729

Head Matter:
Cora B. Beatty, Executrix, Estate of John W. Beatty, Petitioner, v. Commissioner of Internal Revenue, Respondent.
Docket No. 7360.
Promulgated July 26, 1927.
W. D. Stewart, Esq.¡ for the petitioner.
Albert S. Lisenby, Esq., for the respondent.

Opinion:
OPINION.
Murdock:
The question to be decided in this case is whether the $2,999.98 paid to Beatty during the latter half of 1922, was taxable income, or whether it was a gift and therefore not taxable.
A gift has been defined as a valid transfer of property from one to another without consideration or compensation therefor. Noel v. Parrott, 15 Fed. (2d) 669; Gray v. Barton, 55 N. Y. 68; Curriden v. Chandler, 79 N. J. 269; Appeal of Estate of David R. Daly, 3 B. T. A. 1042. To establish a gift there must be an intention to make the gift, a change in possession in accordance therewith, and an acceptance by the donee. Farmers' Loan & Trust Co. v. Winthrop, 207 App. Div. 356; 202 N. Y. S. 456; Appeal of Estate of David R. Daly, supra.
"Although it has been held that the motive accompanying a gift is not material, gifts usually proceed from the generosity of the giver; and, where there is any doubt as to the nature of the transaction, the absence of such motive is a pertinent circumstance for consideration." Noel v. Parrott, supra.
In this latter case it was held that past services may be a consideration for a transfer of property from one to another and that the transfer may be by way of compensation for services previously rendered and for loss sustained-in the termination of the employment. It was also held that directors have no authority to give away corporate assets and that for them to do so would be an illegal misapplication of corporate funds and that it must be assumed that directors have not intended such a flagrant violation of their trust. See cases there cited.
It is now settled that within the meaning of the Revenue Acts, " income may be defined as gain derived from capital, from labor, or from both combined, including profit gained from the sale or conversion of capital." See Bowers v. Kerbaugh Empire Co., 271 U. S. 170, wherein other authorities are cited. " In determining what constitutes income, substance rather than form is to be given controlling weight." Bowers v. Kerbaugh Empire Co., supra; Eisner v. Macomber, 252 U. S. 189.
The facts in this case do not convince us that the Commissioner has improperly construed the law, or that he has committed error in his determination of the tax liability of this petitioner.
It is apparent that the trustees approached the problem of Beatty's retirement with great reluctance. They appreciated his past services and they also appreciated the fact that it was necessary for them to select another man for his place who was physically able to carry on the good work of the Department. They had not yet put into effect any system of pensions. In this dilemma they passed the resolutions quoted in our findings of fact. By these resolutions they gave him an honorary title and as a recognition of his valued and honored labor they paid him $500 a month. He accepted these things. The resolutions retired him from actual service, but his name was still connected with the Department of Fine Arts of the Institute and he was still on the pay roll. We are unable to say that the payments were without consideration, or that they did not represent gain derived from labor, or that they were not properly included in income.
Reviewed by the Board.
Judgment will be entered for the respondent.