Court Opinion

ID: 9671971
Source: CourtListenerOpinion
Date Created: 2023-08-24 03:46:29.729622+00
Date Added: 2024-06-11T18:16:13.498240
License: Public Domain

Martin, J.
(dissenting in part). I must dissent to that part of the majority opinion holding that the bonus is not a taxable transfer under sec. 72.01, Stats.
If the estate is entitled to the bonus payment at all, its right thereto must have come from the testator, either by the passing of his interest in it or as income produced after his death by property transferred to the estate. In my opinion it is necessary to define the bonus as one or the other.
An employee bonus is recognized in Wisconsin for tax purposes as compensation for services rendered. Had decedent lived to receive this payment he would have been re*337quired to report it for tax purposes as income received for services to his employer. Further, his employer was entitled to deduct such expénditure from its corporate income for tax purposes under sec. 71.04 (1), Stats.
But it is not income to the estate, since it was not earned by property of the deceased nor by services performed after his death. Neither is it a gift.
Bonuses are a comparatively new method of compensation for services rendered. A bonus is exactly what the word means, — something given in addition to what is ordinarily or strictly due. An employee bonus is something given to an employee in addition to his wages. The right to it arises directly and solely out of the employment relationship and is peculiar to the employee. His employment alone gives rise to it, and although it is not an interest upon which he can sue until a specific bonus payment is declared, it cannot be ignored that such an interest, rooted in the fact of his employment, is capable of fruition until the time has passed when the employer’s business earnings establish that a bonus payment is or is not warranted. Until the happening of the contingency upon which fruition depends, that interest is as real as the fact of employment.
The significant fact, in my opinion, is that the bonus could be paid to the estate only because decedent had earned it, even though there was no legal liability on the part of the company to pay it until it was declared. Decedent’s right to it was a contingent right, inchoate in character, which he possessed by reason of his employee relationship to the corporation during 1951. If he did not possess it or if it was not such as could pass to his estate at his death, appellant would have no authority to accept the bonus payment and distribute it under the will. It came to the estate through decedent’s efforts.
It is true that at the moment of death the value of this contingent interest was not determinable. At that time it *338may or may not have been worth anything. But that is immaterial since the tax is imposed upon the transfer of such interest, not upon the value thereof. Estate of Week (1919), 169 Wis. 316, 172 N. W. 732. And where the determination of value depends upon the happening of a contingency it has been held that the tax is due and payable when the interest vests in possession and its value is ascertainable. As stated in State v. Pabst (1909), 139 Wis. 561, 585, 121 N. W. 351:
“This portion of the law does not operate to postpone the imposition of the tax on the transfer beyond the time of the death of the transferor, for, as we have seen, the tax comes into existence at the time of the death of the decedent and remains a lien on the property involved until paid; but, since the fair market value thereof is not then ascertainable, it operates to postpone payment to the time when it is ascertainable, namely, when the contingency happens which gives the beneficiary the actual possession or enjoyment of the property transferred.”
The only case cited, where the facts are similar to those in this case, is Estate of Messing (CCH 1948), 7 TCM 568, 570, in which the United States tax court held that a bonus payment made to the estate was not includable in the estate for federal tax purposes. In that case, however, the tax court did not characterize the bonus, but based its opinion on a finding that there was no legal claim to the bonus payment at the time of the decedent's death “as to which he had an interest subject to valuation.” In any event, we are concerned with the effect of sec. 72.01, Stats., and, as pointed out in Estate of Ogden (1932), 209 Wis. 162, 169, 244 N. W. 571:
“In a matter of construction the state court’s determination as to the meaning of a state statute prevails.”
It will be noted that our statute provides a tax is imposed upon any transfer of property or any interest therein “except *339as hereinafter provided.” The burden of proof is upon the appellant to show that the bonus payment comes within the exceptions provided by the statute. This she has not done.
I am authorized to state that Mr. Chief Justice Fairchild concurs in this dissent.