Court Opinion

ID: 4610638
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:47:19.079715+00
Date Added: 2024-06-11T07:54:06.365150
License: Public Domain

ARNOLD J. MOUNT, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Mount v. CommissionerDocket No. 9429.United States Board of Tax Appeals10 B.T.A. 1156; 1928 BTA LEXIS 3943; March 5, 1928, Promulgated 1928 BTA LEXIS 3943">*3943  BONUS. - After several years' employment as cashier of a bank, petitioner resigned, and on the same day received from the directors a bonus of $2,500.  Held, that on the record such amount was additional compensation.  Homer H. Tooley, C.P.A., for the petitioner.  M. E. McDowell, Esq., for the respondent.  TRUSSELL 10 B.T.A. 1156">*1156  This proceeding results from the determination by respondent of a deficiency in income tax for 1921, amounting to $350.13.  Petitioner alleges error in that an amount of $2,500 has been added to petitioner's income, claiming it was a gift and not taxable.  FINDINGS OF FACT.  Petitioner is a resident of California.  Prior to August 1, 1921, petitioner had been for some years vice president and cashier of the Central National Bank of Oakland, at a fixed compensation and without any contractual relation entitling him to extra compensation.  Under date of August 3, 1921, petitioner tendered to the Central National Bank his resignation.  On August 3, 1921, at a regular meeting of the board of directors of the Central National Bank, according to the minutes, the following resolution was unanimously adopted.  RESOLVED, That1928 BTA LEXIS 3943">*3944  this Board accept with regret the resignation of Mr. Mount as Vice-President and Cashier and take this occasion to acknowledge its appreciation of the service which he has rendered to the bank in the past and to wish him success in his new field of labor.  RESOLVED, further that a bonus of $2,500 be paid to Mr. Mount in addition to the salary heretofore fixed by resolution of the Board.  On the same day, and after the directors' meeting, petitioner was handed a deposit slip of the Central National Bank evidencing a deposit to the credit of petitioner amounting to $2,500 and petitioner was told by the vice president of the bank, who was also the secretary 10 B.T.A. 1156">*1157  to the board of directors, that the bank was making a present of $2,500 to petitioner in such a form that it would not be taxable.  This bonus was wholly unexpected by petitioner.  The deposit slip was marked in the handwriting of the said secretary "Gift authorized by Board of Directors." For income-tax purposes, the Central National Bank reported and it deducted from its income "salaries, wages, etc. or other determinable gains, profits and income" paid to petitioner amounting to $11,500, consisting of salary $9,0001928 BTA LEXIS 3943">*3945  and bonus $2,500.  OPINION.  TRUSSELL: The sole issue here is a question of fact.  Quite unexpectedly to him, petitioner received from a corporation, his employer, a bonus, under circumstances well calculated to impress upon him strongly the opinion that he received a gift which is not taxable income.  The impression did not rest upon inference, for the deposit ticket evidencing to him the deposit of the bonus to his credit at the bank bore on it the legend "Gift authorized by Board of Directors," and he was assured by an officer of the corporation it was a gift.  The formal action of the directors, however, does not evidence such an intention.  In the resolution which the directors spread upon their minutes they used the expression "That a bonus of $2,500 be paid to Mr. Mount in addition to the salary heretofore fixed by resolution of the Board." To our minds this language plainly indicates the purpose to pay to the petitioner an amount as additional compensation.  Some months later, when making the returns and reports required of it for income-tax purposes, the corporation reported compensation paid petitioner for services in an amount which included the amount of the bonus, 1928 BTA LEXIS 3943">*3946  and furthermore, the corporation claimed a deduction thereof from gross income under the classification "salaries paid." There is small wonder that the opinion of petitioner persists.  It is apparent that at the moment of parting with their associate the bank officers, or some of them, assumed an air of generous appreciation of the retiring cashier's long association with them in the banking business and that they undertook to leave upon his mind the impression that they were making him a present, but the contemporaneous record which was made a part of the minutes of the directors' meeting does not warrant any such sense of generosity but rather the acknowledgment that the petitioner's long service warranted additional compensation.  We are of the opinion that the $2,500 here in controversy was compensation and was so intended by the paying bank.  The deficiency is $350.13.  Judgment will be entered accordingly.