Court Opinion

ID: 9446826
Source: CourtListenerOpinion
Date Created: 2023-08-03 22:19:21.62639+00
Date Added: 2024-06-11T17:30:47.818059
License: Public Domain

On Petition for Rehearing.
PER CURIAM.
Petition for rehearing denied.
The petition for rehearing stresses § 29.22(a)-l of Treasury Regulation 111, as amended April 12, 1946 and Commissioner v. LoBue, 1956, 351 U.S. 243, 76 S.Ct. 800, 100 L.Ed. 1142, as calling for a decision in favor of petitioner. The Regulation and LoBue deal with a fact situation in which property (i. e., stock) “is transferred by an employer to an employee for an amount less than fair market value.” An illustrative example is the employee option to purchase stock at less than its market value. This difference was held in LoBue to be taxable gain to the employee and, because the option was granted as compensation for personal service, deductible by the employer. LoBue is distinguishable, as here there was no proof that the repurchase price, including the “special death benefits,” exceeded the fair market value of the shares reacquired by the taxpayer from the estates of its deceased employees. Thus there is no basis for showing that sums advanced to repurchase stock were business expenses rather than purchases of capital assets.
The fallacy in petitioner’s argument results from the difference in the facts covered by the Regulation and LoBue and those here involved. Although comment was made by the Tax Court and by this court concerning stock ownership by less than 100% of the employees this fact is not determinative. Nor is the fact that the Stock Purchase Plan may have been adopted as a reward or incentive to the employees sufficient to characterize the Special Death Benefit payment as compensation for services. The payment here made was related solely to the value of the stock. As the Tax Court said: “Nothing in the record before us forms the basis for a conclusion that the employees who were also stock*405holders rendered any special services justifying financial recognition that discriminated against other employees. * * * The conclusion is irresistible that the payments in controversy were made in respect of the stock and not inspect of services rendered.”