Court Opinion

ID: 9457672
Source: CourtListenerOpinion
Date Created: 2023-08-04 20:29:30.457435+00
Date Added: 2024-06-11T17:35:27.384750
License: Public Domain

DAVIS, Judge
(dissenting):
Chief Judge Friendly’s comprehensive opinion demonstrates at least these two things: first, that since Commissioner of Internal Revenue v. Duberstein, 363 U.S. 278, 80 S.Ct. 1190, 4 L.Ed.2d 1218 (1960), there has been a perhaps unfortunate variety of judicial answers to the question whether payments to survivors were compensation or gifts, and, second, that in this case the trier of facts could have come to the other conclusion as many other judges probably would. Nevertheless, I depart from the court because the standards set by the Supreme Court, in delineating the roles of trier and reviewing tribunal, seem to me to call for affirmance of the Tax Court’s result here, regardless of what we or some others would do as fact-finders.
Duberstein stressed that “appellate review of determinations in this field must be quite restricted”, confirmed “that primary weight in this area must be given to the conclusions of the trier of fact”, and pointed out that the “clearly erroneous” rule “applies also to factual inferences from undisputed basic facts”, 363 U.S. at 289-291, 80 S.Ct. at 1199. The opinion characterizes the trier’s own determination as factual, directs that it “be reached on consideration of all the factors” and by “application of the fact-finding tribunal’s experience with the mainsprings of human conduct [as well as the “data of practical human experience” and “informed experience with human affairs”] to the totality of the facts of each case”, and invokes the analogy of Mr. Justice Cardozo’s poetic description of “ordinary and necessary” as “a way of life” as well as a “riddle” to which “ [l]ife in all its fullness must supply the answer.” 363 U.S. at 288-290, 80 S.Ct. at 1198. See, also, pp. 287, 292, 80 S.Ct. pp. 1197, 1200. Conversely, the Court specifically refused to promul*71gate subsidiary rules of law, more detailed than these general criteria. 363 U.S. at 287-289, 80 S.Ct. at 1197-1199. These expressions, both in words and in spirit, add up to the directive that, on appeal, heavy reliance must be put on the factfinder’s sense of the gestalt of the particular transaction — the “over-all inference”, as the Court puts it, 363 U.S. at 287, 80 S.Ct. at 1198 — the total configuration from which is drawn the employer’s “dominant reason” for making the payment.
The Court’s discussion also envisaged, expressly, that these general and “nontechnical” standards, applied “on a case-by-ease basis” “in the variety of forums in which federal income tax cases can be tried”, could possibly lead to a lack of “tidiness, symmetry and precision” and some “diversity of result” — just as any “system based on the determinations of various fact-finders” can do. 363 U.S. at 289, 290, 80 S.Ct. at 1198-1199. But it thought that this risk was implicit in the existing statutory scheme, and could be remedied, “if there is fear of undue uncertainty or overmuch litigation”, by Congress should it choose to “make more precise its treatment of the matter.” Id. I can only conclude from these pages of Duberstein that the Supreme Court deliberately acknowledged the chance of the very contrariety-of-opinion which this court now deplores, and left the cure to the legislature.
The Tax Court below canvassed all the significant factors which have been mentioned as bearing on the issue1 but felt that the taxpayers had failed, on “conflicting evidence”, to sustain their burden of showing that the employer had made a gift.2 Given Duberstein’s accent on the trier’s role and special function, I do not have the necessary “definite and firm conviction that a mistake has been committed” on this record. The testimony of William Salomon, managing partner of the employer, is especially damaging to the taxpayer.3 He said, in *72particular, that “the opinion of counsel was that we would be permitted to make these payments and it would be treated in the same manner as if he [Mr. Carter] were still alive, or as an employee would be considered exactly as far as the tax implications were concerned.”
The trier had this oral evidence of Salomon Bros.’s most significant agent (for this purpose), together with the other, minor indications favoring the Service.4 There were, of course, substantial considerations supporting the taxpayer, but the trial judge was privileged to balance them comparatively and discount their importance. Unlike the court, I think, for instance, that the fact-finder could (though he did not have to) downgrade the firm’s post-transfer statements as to its intention; the admissibility of these declarations does not require the trier to give them much weight when he is more persuaded by other evidence closer to the transfer.
Duberstein thrice directs the trial judge to the “totality of circumstances in the case”, “consideration of all the factors”, “the totality of the facts of each case” (363 U.S. at 287, 288, 289, 80 S. Ct. at 1198), and thrice sanctions his use of “experience with the mainsprings of human conduct”, “the data of practical human experience”, “informed experience with human affairs.” 363 U.S. at 289, 292, 80 S.Ct. at 1198, 1200. Whatever I might have done myself, I cannot say that here the judge was clearly wrong in his evaluation of the totality, in the light of informed and practical experience.
There remains to say only that, for me, the Duberstein teaching, insisting on the totality of the individual facts, reduces the impact of decisions by other courts on what are necessarily other factual patterns. In the only two rulings reversing outright a Tax Court holding of taxability (Kuntz v. Commissioner of Internal Revenue, 300 F.2d 849 (6th Cir. 1962) and Olsen’s Estate v. Commissioner of Internal Revenue, 302 F.2d 671 (8th Cir. 1962)), there was no live and explicated testimony like that of William Salomon, but, at most, merely formal and summary indications in the authorizing resolutions that the payments were regarded as compensation.5 Affirmances of a trier’s finding of a gift, like Fanning v. Conley, 357 F.2d 37 (2d Cir. 1966), are, it goes without explanation, in quite a different class. As for the implied suggestion that the Tax Court should, in a case like this, bow to the assumed trend in the district courts, I see two obstacles: first, that nothing in the federal model of tax-determination sets one group of triers above another; and, second, that Duber-stein contemplated lack of “symmetry” between “the variety of forums in which federal income tax cases can be tried” (363 U.S. at 290, 80 S.Ct. at 1199).

. In Poyner v. C.I.R., 301 F.2d 287 (1962), the Fourth Circuit sent the case buck to the Tax Court to take account of all relevant factors.

. The court also said: “If the burden of proof in this case had been upon the respondent [appellee], a different result would be required.”

. “Q. At the administrative committee meeting immediately following Mr. Carter’s death was any decision made as to a continuation of his salary? A. It was our desire to continue this salary, yes, sir.
Q. Would it be a fair statement that fifteen checks represent a continuation? A. Whatever was left for the balance of the fiscal year.
Q. His salary was continued to the end of the partnership’s fiscal year? A. Yes, sir.
Q. The record in this case also shows that during the year 1960 Salomon Bros, drew two checks to the order of Mrs. Carter in the amounts of $21,448.76 and $30,028.28 respectively. Do you recall any discussion taking place in the administrative committee regarding these payments? A. The discussion was prior to these payments of our desire to continue through the fiscal year salary and share of profits. I assume that these two payments were the share of profits, not the payment that was mentioned before which was a profit sharing plan which would be automatic. At that time, of course, we didn’t know what the figures would be.
Q. Would you say it is a fair statement that the administrative committee decided to continue Mr. Salomon’s salary? A. Mr. Canter, sir. [Carter was also known as Canter]
Q. I’m sorry, Mr. Canter’s salary to the end of the year, and to pay him what he would have earned under the profit sharing arrangement had he lived to the end of the year? A. Yes, sir. That is true.
Q. In arriving at these decisions, were Mr. Carter’s services to the company a factor in arriving at this decision? A. Without question.
Q. Mr. Salomon, I believe you testified that the administrative committee referred the decision to make these payments to Mrs. Carter to its counsel. A. Yes, sir.
Q. Did you receive a reply from your counsel rendering an opinion as to these payments? A. We did.
Q. Would you indicate what the opinion of counsel was? A. The opinion of counsel was that we would be permit*72ted to make these payments and it would be treated in the same manner as if he were still alive, or as an employee would be considered exactly the same as far as the tax implications were concerned.
Q. Were the payments to Mrs. Canter deducted on the partnership return? A. They were.”

. The' filing by the firm of the information return (Form 1099) ; the firm’s claiming of a tax deduction (though not for compensation paid) ; the failure to inquire into Mrs. Carter’s financial status; the measurement of the payment by the exact amounts Mr. Carter would have earned if he had remained alive.

. The same is true of Poyner v. Commissioner of Internal Revenue, 301 F.2d 287, 291-292 (4th Cir. 1962).