Court Opinion

ID: 4483881
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:16:21.589694+00
Date Added: 2024-06-11T14:53:45.108993
License: Public Domain

Goffe, J., dissenting: I disagree with the holding of the majority. I would conclude from the record made before me in this case that $300 of the stipend received by petitioner each month qualifies for exclusion from income under section 117(a)(1). We, and other courts, have uniformly held that the analysis of whether a stipend qualifies for exclusion is based upon all of the evidence presented; e.g., Phillips v. Commissioner, 57 T.C. 420, 427 (1971). As we stated in Bailey v. Commissioner, 60 T.C. 447, 452 (1973), “the purpose of the hospital in making the grant is, in large part, suggested by the nature of the activities carried on by petitioner.” The freedom with which Dr. Adams operated suggests to me that the hospital did not expect significant benefits or services from him. Vaccaro v. Commissioner, 58 T.C. 721, 728 (1972). I am unable to conclude from the record before us how the majority finds that the primary purpose for the payments was compensation for services rendered. Except for his work in the emergency room which accounted for approximately 25 percent of his hours at the hospital, petitioner was free to participate in the endeavors which he determined would be most educational. I agree with the majority’s conclusion that an analysis of each case must be based upon a “commonsense” approach, citing Parr v. United States, 469 F.2d 1156, 1158 (5th Cir. 1972). I differ, however, in the application of commonsense. I believe most employers are inclined to want to know what tasks an employee will be engaged in to insure that the needs of the business are covered. Instead of relying on the contract or “form” of the arrangement between petitioner and the hospital as the majority does, I would instead rely on how the parties in “substance” performed the terms of the contract. In the manner that Rocky Mountain Osteopathic Hospital operated, the hospital paid no attention at any given time as to whether petitioner was examining patients or attending lectures. His duties were not prescribed. The only activity of petitioner which was predictable by the hospital was his duty in the emergency room which I would find to be not substantial. It appears to me that the payments were more closely identified with enabling petitioner to educate himself than to render valuable services to the hospital. The test to be applied, according to the regulations, is the primary purpose for the payments. I recognize that substantial services resulted from petitioner’s activities but the benefits conferred upon the hospital would be consistent with both a “no strings attached” grant and employment. The majority, although finding as a fact that the hospital waived its rules and regulations governing petitioner’s activities, nevertheless casts doubt on petitioner’s testimony as to his freedom in choosing his activities. Petitioner testified unequivocally that the hospital never referred to the manual during his internship with respect to what the hospital expected of petitioner nor did the hospital establish a regimented program which the interns were to follow. When petitioner so testified, respondent did not claim surprise or ask to offer the testimony of a rebuttal witness. Respondent offered no evidence. Petitioner testified before me and only me and he impressed me as a candid, forthright witness and my observation of his demeanor convinced me that he was truthful. Where evidence is competent, relevant, credible, and uncontradicated, the Tax Court may not arbitrarily discredit or disregard it. Banks v. Commissioner, 322 F.2d 530, 537 (8th Cir. 1963). The majority finds as a fact that the manual was waived by the hospital during the period from January 1 to June 30,1973, but somehow concludes that when it was waived the interns had developed enough self-discipline to conduct themselves in a professional manner. This conclusion is not in any way supported by the record before us. There is no evidence of any monitoring of the professionalism of the interns or other means to ascertain the quality of their performance. The majority quotes from a letter by the director of medical education of the hospital stipulated into evidence in lieu of the director’s testimony in which he states that the manual states the regulations under which Dr. Adams’ internship was conducted. The majority, however, fails to comment upon the remaining portion of the letter which contains the following: Rocky Mountain Hospital has an intern and a resident training program. A trainee stipend is paid each physician. The primary purpose of the program is to further the education and training of the recipient in his individual capacity, and the amount provided by the grantor for such purpose does not represent compensation for services to patients nor does it serve the interest of the grantor. In other words, services are of only incidental benefit to the hospital. The intern program is conducted under the rules and regulations of the American Osteopathic Association as published in their requirements for postgraduate medical training. * * * The trainee stipend is defined as an amount paid or allowed to, or for the benefit of, an individual trainee to aid him in the pursuit of study and research in medicine. Nor does the majority refer to a letter from the administrator of the hospital which the parties stipulated in lieu of his testimony. The administrator describes petitioner’s internship as follows: A valid and duly executed contract existed between the hospital and Dr. Adams which succinctly stated the nature of the appointment, the obligations and responsibilities of each party. Dr. Adams was in a training program in harmony with the educational regulations and requirements of the American Osteopathic Association. Dr. Adams was granted a stipend for the purpose of defraying his living expenses and other expenses related to the pursuit of this study program. The Internship program at Rocky Mountain Hospital is not considered a source of employees for the hospital. They are here to further their medical education and experiences. They are considered as “employees” only in the context of enabling the hospital to obtain professional liability (malpractice) insurance against claims. The number of Interns may fluctuate from year to year, but this has no bearing on the number of employees needed for the hospital to function adequately. Any service provided by the Intern is merely incidental to his training and is not a source of income to the hospital. His program is established under rules and regulations of the American Osteopathic Association, clearly stating that emergency situations are the only exceptions considered more important than the advancement of his education. There is no evidence in the record to refute the statements of the only hospital employees who described the intern program. The record in this case is far from satisfactory but it contains the only evidence available from which to decide the case. Facts in other cases addressing the issue decided in this case, and facts not on the record in this case but which might have been on the record in this case had one or the other of the parties introduced the necessary evidence, are facts that, for purposes of deciding this case, must be considered nonexistent. This is so because, as the Court has stated on numerous occasions, findings with respect to questions of fact can properly be made only on the basis of the record before us; e.g., Purvis v. Commissioner, 65 T.C. 1165, 1169 (1976) (“Since it is a question of fact, our findings can properly be made only on the basis of the record before us”); Silverman v. Commissioner, 57 T.C. 727, 730 (1972), affd. without published opinion (8th Cir. 1973, 32 AFTR2d 73-5379, 73-2 USTC par. 9546) (“We must emphasize that in section 107 cases, as in all of our cases, the findings of fact and opinion are based on the evidence and proof presented in each case”). Accord, Spartanburg Terminal Co. v. Commissioner, 66 T.C. 916, 928 (1976) (“The decision we have reached here is based solely on the particular facts and circumstances of the record before us and is in no way intended to foreclose a different decision on the basis of a different record,” quoting Chesapeake & Ohio Ry. Co. v. Commissioner, 64 T.C. 352, 383 (1975)). See Schooler v. Commissioner, 68 T.C. 867, 869 (1977) (“the issue is a factual one, to be decided on the basis of all the evidence”); Colbert v. Commissioner, 61 T.C. 449, 455 (1974) (“However, we must judge from the record before us”); Estate of Roberts v. Commissioner, 59 T.C. 128, 132 (1972) (“Our determination of values * * * have been made on the basis of the record as a whole”). Based strictly on the facts before us, and without regard to facts that could or should have been — but were not — presented, I would hold that petitioner is entitled to exclude from income under section 117(a)(1) his stipend to the extent of $300 per month. Although the issue is primarily a question of fact, the United States Court of Appeals for the Tenth Circuit, to which an appeal in the instant case will lie, reversed the Tax Court in favor of the conclusions accorded the evidentiary facts by the trier of those facts in Edwards v. Commissioner, 415 F.2d 578 (10th Cir. 1969), revg. 50 T.C. 220 (1968), by stating at page 581: Although this determination is labeled as an “ultimate finding of fact,” it obviously is a result reached by legal reasoning springing from evidentiary facts and the inferences to be drawn therefrom. As in Commissioner v. Duberstein, 363 U.S. 278, 80 S.Ct. 1190, 4 L.Ed. 2d 1218 where the determinative issue involved gift or income, “primary weight in this area must be given to the conclusions of the trier of fact. * * * ” Wiles and Chabot, JJ., agree with this dissenting opinion.