Court Opinion

ID: 9644270
Source: CourtListenerOpinion
Date Created: 2023-08-22 20:51:45.585161+00
Date Added: 2024-06-11T18:11:10.591496
License: Public Domain

SWAN, Circuit Judge
(dissenting).
I cannot agree that the Board’s decision, as expressed in its opinion, that the payments in question “were additional compensation in consideration of services rendered to Universal and were not tax-free gifts” is conclusively binding upon the court. The Board made no express finding that the payments were intended by Unopco or its stockholders as additional compensation for services of the recipients. Indeed, it was stipulated that “said payments were not made or intended to be made by said Unopco Corporation or any of its stockholders as payment or compensation for any services rendered or to be rendered or for any consideration given or to be given by any of said employees, attorneys or experts to said Unopco Corporation or to any of its stockholders.” The evidentiary facts were undisputed, and I think the court is free to decide whether as a matter of law the payments were taxable or nontaxable. See General Utilities & Operating Co. v. Helvering, 296 U.S. 200, 206, 56 S.Ct. 185, 80 L.Ed. 154; Washburn v. Commissioner, 51 F.(2d) 949, 951 (C.C.A. 8); Burnet v. Lexington Ice & Coal Co., 62 F.(2d) 906, 909 (C.C.A. 4); Commissioner v. Bonwit (C.C.A. 2, Feb. 8, 1937) 87 F.(2d) 764.
If the question is open, I am constrained to a different conclusion from that reached by my brothers. To my mind the facts indicate that the shareholders of Unopco, by reason of selling their Universal shares for such fabulous sums, were moved to an act of “spontaneous generosity,” rather than actuated by a sense of moral obligation to pay for services, inadequately compensated in the past, from which they had benefited — if that distinction is to be the test between taxable and nontaxable gifts. The recipients of these payments were employees, attorneys, and experts of Universal, many of whom had had no connection with that company since 1922. There is nothing to indicate that their services had not been adequately, or even generously, paid for by Universal when they were rendered, nor *650that any shareholder had any feeling that the accounts were not in “equitable balance” during all these years. Not until after the Universal shares had been sold and the president of Unopco suggested that it would be “a nice and generous thing” to show their appreciation in the form of a gift or honorarium was the matter of these payments ever considered. One of the recipients was the sister of an employee who had lost his life in 1919. Certainly the payment to her was purely a gift and cannot be taxed as compensation for services; yet there is nothing to indicate that the payment to her was actuated by any different motive from the payments to the others.
When an employer makes a voluntary payment to his employee, it is reasonable to infer, in the absence of very special circumstances, that it is intended as additional compensation: Fisher v. Commissioner, 59 F.(2d) 192 (C.C.A. 2). When the payment is by a stranger, the natural inference is that of a gift. Lunaford v. Commissioner, 62 F.(2d) 740 (C.C.A. 6). Stockholders of a corporate employer, though legally strangers to its employees, may make gifts intended as additional compensation. Bass v. Hawley, 62 F.(2d) 721 (C.C.A. 5). There the stock of the corporate employer was owned by a holding company, which made the payment and had an interest to be served in maintaining the loyalty and good will of the employees to their corporate employer. In the present case the stockholders of Unopco can receive no possible benefit from payments to former or present employees of Universal. The decision of the majority of the court goes further than any previous authority except Walker v. Commissioner (C.C.A. 1, Feb. 12, 1937) 88 F.(2d) 61, involving the same transaction as the case at bar. I agree with Judge Morton’s dissent in that case.