Court Opinion

ID: 6891171
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:41:48.584955+00
Date Added: 2024-06-11T16:05:50.590479
License: Public Domain

SWAN, Circuit Judge
(dissenting).
Although the amount of tax involved in this litigation is small, the principles involved appear of sufficient importance to justify a brief statement of my reasons for disagreement with the majority opinion.
Section 22 of the Revenue Act of 1928, 26 U.S.C.A. Int.Rev.Acts, page 354, provides that gross income includes “compensation for personal service, of whatever kind and in whatever form paid, or from professions * * Article 53 of Treasury Regulation 74 reads as follows:
“Art. 53. Compensation paid other than in cash. — Where services are paid for with something other than money, the fair market value of the thing taken in payment is the amount to be included as income. If the services were rendered at a stipulated price, in the absence of evidence to the contrary such price will be presumed to be the fair value of the compensation received. i(j f)
In 1931 Attorney Lynch accepted from his clients a partial assignment of the judgment awarded them against the McArdle Estate in payment of his $5,000 fee. The Tax Court disposed of the case on the ground “that we are unable to find that the assignment of a part of the award had any market value in the year received or at any time prior to the death of the decedent,” and therefore held that the sum of $5,000 was properly includible in the return for the period January 1 to January 24, 1938, un ler section 42 of the Act. In affirming, the majority opinion states that the assignment, although taken in payment, should not “be regarded as property within the meaning of the income tax law.” Neither the Tax Court’s theory nor my colleagues’ seems to me consonant with' the statutory mandate that “compensation * * * in whatever form paid” be included in the attorney’s income for the year of payment —in the case at bar 1931.
It is true that the exact amount for which the attorney could have sold the partial assignment immediately after his receipt of it on November 18, 1931 was not proved; but that it had some value seems to me indisputable. The McArdle Estate had assets of some $400,000 and the allowed claims totaled less than $140,000. The uncertainty as to the date when the Surrogate would order payment of the judgment awarded the Lynch sisters, and the possibility that certain devisees might thereafter appeal, as they did on December 1, 1931, were perhaps enough “evidence to the contrary” to preclude application of the presumption declared in Article 53 of the Regulations that the fair value of the partial assignment was the stipulated price of the services, but these considerations are not enough to support a finding that it had no value “in the year received or at any time prior to the death of the decedent.”1 *751Whatever its value in 1931 should have been returned as income in that year, and any sum in excess of such value realized in 1940, when cash of $5,000 was received, should, in my opinion, be reported as a gain realized on an asset of the decedent’s estate.
I do not read the cases cited in the majority opinion as pointing to a contrary conclusion. The obtaining of a judgment by a creditor against his debtor is not a payment of the creditor’s claim. But if the judgment creditor assigns the judgment, or a part of it, to his attorney in payment for fees, I can see no reason why the value of the thing assigned is not realized as income whether the property assigned be an undivided interest in real estate, a part of a judgment against a debtor, or the promissory note of a third party. I think the order should be reversed.

 Certainly in 1935 it had a value of at least the-sum then paid, namely, $1,839.50.