Case Name: Willis B. Ferebee and Lucille B. Ferebee, Petitioners, v. Commissioner of Internal Revenue, Respondent
Court: United States Tax Court
Jurisdiction: United States
Decision Date: 1963-02-14
Citations: 39 T.C. 801
Docket Number: Docket No. 89813
Parties: Willis B. Ferebee and Lucille B. Ferebee, Petitioners, v. Commissioner of Internal Revenue, Respondent.
Judges: Bkijce, concurs in the result.
Reporter: Reports of the Tax Court of the United States
Volume: 39
Pages: 801–809

Head Matter:
Willis B. Ferebee and Lucille B. Ferebee, Petitioners, v. Commissioner of Internal Revenue, Respondent.
Docket No. 89813.
Filed February 14, 1963.
Willis B. Ferebee, pro se.
Ralph A. Andershow, Esq., for the respondent.

Opinion:
OPINION.
Dawson, Judge:
The respondent determined a deficiency of $867.60 in the petitioners' income tax for the calendar year 1958.
The two issues for decision are:
(1) Whether the payment of $1,461.19 made by the new employer for moving petitioners' household goods to the location of the new employment was taxable income to them.
(2) Whether the payment of $1,450 made by the new employer for real estate commission on the sale of petitioners' former residence was taxable income to them.
All of the facts are stipulated and are so found. The stipulation of facts and exhibits attached thereto are incorporated herein by reference.
The petitioners, Willis B. Ferebee and Lucille B. Ferebee, are husband and wife residing at 1247 Kensington Boad, Grosse Pointe Park, Mich. They filed their joint Federal income tax return for the calendar year 1958 with the district director of internal revenue at Detroit, Mich.
Willis B. Ferebee (hereinafter referred to as the petitioner) was, prior to March 15, 1958, manager of labor relations for the Pennsalt Chemicals Corporation (hereinafter referred to as the old employer) in its corporate home office in Philadelphia, Pa.
On March 15,1958, petitioner changed his employment to the Bower Boiler Bearing Division of Federal-Mogul-Bower Bearings, Inc. (hereinafter referred to as the new employer), in Detroit, Mich., where he was employed as director of industrial relations. This position was orally offered by the new employer to petitioner sometime before March 15, 1958.
The old employer and the new employer are in no way connected and the petitioner was never employed in Pennsylvania by the new employer. FT or did petitioner ever perform any duties in Pennsylvania for the new employer.
Petitioners' change of employment necessitated the sale of their residence in Merion Park, Pa., and the moving of their household goods from Merion Park to Grosse Pointe Park, Mich. The cost of moving their household goods was $1,461.19 which amount was paid directly by the new. employer to United Van Lines, Inc., on July 15, 1958. This amount was not included by petitioners as taxable income in their 1958 income tax return.
On June 21, 1955, petitioners purchased a home in Merion Park, Pa., known as 517 Howe Boad, for the amount of $29,000.
Petitioners executed an agreement of sale on March 4, 1958, in which they agreed to sell their Merion Park residence on or before June 20, 1958, for $29,000. They further agreed to pay to the real estate brokers a sales commission of 5 percent of the gross sales price. This agreement of sale was consummated and closed on June 13,1958, and the residence was conveyed by deed to the purchasers for $29,000. The real estate commission on the sale of the Merion Park residence was paid on June 10, 1958, to the real estate brokers by the new employer. The amount of the commission was $1,450. The amount was not included by petitioners as taxable income in their 1958 income tax return.
Respondent determined that the payments made by the new employer for the moving expenses and the real estate commission were includable in petitioners' income for 1958.
Petitioners do not raise the issue that the cost of moving their household goods and the amount of real estate commission are deductible as ordinary and necessary expenses incurred in carrying on a trade or business under section 162 or any other section of the Internal Revenue Code of 1954.
There is no provision in the Internal Revenue Code of 1954 specifically requiring the inclusion in gross income of such payments as those here involved nor is there any provision specifically providing for the exclusion or deduction thereof. However, the respondent has drawn a distinction between an "old" employee and a "new" employee with respect to tax treatment for paid or reimbursed moving expenses. In Rev. Rui. 54r-429,1954^-2 C.B. 53, he ruled that where an individual is transferred by his employer from one "official station" to another official station of the same employer, any amounts paid by the employer to or on behalf of the employee for expenses of moving the employee and his immediate family, and his personal and household effects, to the new station are not compensatory in nature; and that, therefore, such amounts are not includable in the employee's income. But in Rev. Rui. 55-140,1955-1 C.B. 317, it was held that where an individual enters into a new employment and, as part of this new arrangement, the employer agrees to pay either to or on behalf of the employee the expenses of moving him and his family, and his personal and household effects, to the place where he is to perform such new employment, any amounts paid to or on behalf of the employee by the new employer under such arrangements are includable in the employee's income.
Petitioners contend that there is no legal validity for the distinction made by respondent in the two revenue rulings between "present employer" and "new employer" situations. To support their contention they cite two examples in their brief which are appealing from an equitable standpoint. Nevertheless, in some comparatively recent decisions, the courts have sustained respondent's rulings and upheld the distinction. See United States v. Woodall, 255 F. 2d 370 (C.A. 10, 1958), certiorari denied 358 U.S. 824 (1958) ; Greenlee v. United States, 190 F. Snpp. 874 (N.D. Ga. 1960) ; Hedberg v. United States, 7 A.F.T.R. 2d 1416 (W.D. Wash. 1961); John E. Cavanagh, 36 T.C. 300 (1961); Alan J. Vandermade, 36 T.C. 607 (1961). We agree with these prior decisions.
Since this is clearly a case where the new employer has paid the expenses of moving the household goods, we hold that the amounts so paid were taxable income to petitioners within the meaning of section 61(a) and 63(a), I.R.C. 1954.
As to the second issue concerning the new employer's payment of the real estate commission, respondent contends that it was in the nature of a cash bonus or additional compensation arising out of the discharge of petitioners' personal obligation to pay the 5 percent commission on the sale of their Merion Park residence. Petitioners counter with the assertion that payment of the commission should be considered as a part of the "amount realized" from the sale of the property as that term is used in section 1001(b), I.E.C. 1954. They say that the amount paid by their new employer was not intended as "additional compensation" but rather as a restoration of a capital loss since the "amount realized" by them from the sale of their home was $29,000, exactly the amount they paid for it in 1955. They rely on our decision in Otto Sorg Schairer, 9 T.C. 549 (1947), where it was held that the amount received by the taxpayer as a reimbursement from his present employer should be treated for tax purposes as a part of the "amount realized" from the sale of the taxpayer's home under section 111(b), I.E.C. 1939, and not as additional compensation.
The facts in the Schairer case would appear to be distinguishable on several grounds from those present here. But we need not enumerate the distinctions because the majority of this Court has recently declined to follow the Schairer decision. See Harris W. Bradley, 39 T.C. 652 (1963).
Accordingly, we hold that the payment of the real estate commission on the former residence was tantamount to the receipt by the petitioners of compensation from the new employer. As such, it was taxable income to them.
Reviewed by the Court.
Decision will be entered for the respondent.
Bkijce, concurs in the result.