Court Opinion

ID: 9644266
Source: CourtListenerOpinion
Date Created: 2023-08-22 20:51:38.106472+00
Date Added: 2024-06-11T18:11:10.673183
License: Public Domain

MORTON, Circuit Judge
(dissenting).
I do not think there was any evidence before thq Board of Tax Appeals warranting a finding that the payment in question was compensation. If the situation had been reversed, the Commissioner would have scouted any claim that this payment was deductible business expense of the Unopco Corporation, — his counsel conceded at the argument that he probably would not have allowed it. He would have pointed out that there is nothing whatever on which to' found such a claim. The deceased taxpayer had never been employed by Unopco in any capacity. He had never been regularly employed by the Universal Company. He was a professional man in independent practice who had been consulted by the Universal Company on matters within his field and had testified in patent suits, and had been paid for so doing. Unopco had never had any relations at all with him. The distribution was not treated by Unopco Company as compensation. It was treated as a gift and was so approved by stockholders, as well as by the directors.
What an employer out of generosity adds to the pay of an' employee is sometimes held to be compensation. Here there was no pay to add to. The persons who had made a great fortune in Universal when they sold it out organized Unopco as a sort of investment corporation to handle their funds, and having done so, made gifts from those funds to various persons whose services had assisted in the success of Universal. I cannot see the slightest evidence of compensation, and 1 think the decisions support this view. Lunsford v. Commissioner, 62 F.(2d) 740 (C.C.A.6); Cunningham v. Commissioner, 67 F.(2d) 205 (C.C.A.3); Jones v. Commissioner, 31 F.(2d) 755 (C.C.A.3); Blair v. Rosseter, 33 F.(2d) 286 (C.C.A.9). Cases should be distinguished in which the donor deducted the payment as a business expense (Fisher v. Commissioner, supra, relied on in the majority opinion, Lougee v. Commissioner, 63 F.(2d) 112 (C.C.A.1)), *64those in which the payment was not approved as a gift by the stockholders, and those in which there was consideration for the payment or an obligation to make it.