*1
v. HELVERING.*
BOGARDUS
probation.
period of
during
reduced
Antinori,
U.
S. v.
No. 230.
man, con-
5). Perhaps
is desirable that
it
Appeals, Second Circuit.
Court
upon probation,
be
put
victed and
should
March
1937.
he, may
trial,
not
able
if
to review the
but
;ed, he
do
no sentence is
so when
im^
not,
has
done
nothing more
may
punishment he must
than fix the maximum
punish him
undergo, if
be decided
it ever
appeal
must
therefore
all.
first
be dismissed.
second,
true
it
As to
that,
first sen
appeal from the
since the
Judge
nullity,
the District
was a
tence
Hudgins,
v.
jurisdiction, Riddle
still
conse
(C.C.A.8);
dismissed. first, appeal vacating treated be dis must nevertheless the first from there event because missed; though in that appeal. from judgment first sentence dismiss- from the
Appeal
ed. the fine' affirmed. imposing
Judgment sentence Appeal the second
imprisonment dismissed. granted 81 L.E’d. —.
*Writ certiorari *2 issued in propor themselves the old company tions. This new had no as other sets, manage and its business was to and invest the fund The transferred. shareholders had no interest in the United Company, Gasoline and had of course parted all with -interest in the Universal Company. Oil Products The former em ployees company of that in remained its SWAN, dissenting. Judge, Circuit employ Bogardus among A them. few — days after these transactions com pleted president Corpo the Unopco ration at a meeting shareholders de “during years clared that these while we forward, were struggling moving and loyal had the support had of a number of employees particularly, most and thought it would generous be a nice and thing for us appreciation show our and to remember them gift in form the * * * honorarium; all of stock the Cravath, Gersdorff, Wood, de Swaine & acquiesced it; holders glad and were to do City Wilmer, (Richard of New York H. and the result was that it was understood C, Washington, George Tyler D. and G. that w*e would come forward and make Whitney, and William D. both of New presents to these City, petitioner. York counsel), that were to be slated for it.” bene The Morris, Atty. Gen., W. Asst. and James comprised patent ficiaries attorneys, so Monarch, Key, Sewall Louis and J. John J. experts licitors and them re —some Sp. Pringle, Jr., Atty. Gen., Assts. to tained since 1922 engineers and 1923— respondent. chemists; and one was the sister of an HAND, SWAN, Before L. and AU- employee who had been killed an ex HAND, Judges. N. Circuit GUSTUS plosion. adopted by The resolution the board of company directors was that HAND, Judge. “pay and distribute the said sum Six Plundred Seven Thousand Five Hundred involves This case whether ($607,500) sixty-four Dollars as a bonus to taxpayer, Bogardus, “compen received (64) employees, attorneys former and ex personal under sation for service” section perts of said Oil Universal Com Products (a) (26 Revenue Act U. pany, recognition in valuable and note), 22 and S.C.A. 1931 the § loyal employees, attorneys of said $10,000 Corporation paid him experts and to said Universal Oil Products following Pie had circumstances. been Company” in sums as the directors employ in the of the Universal Oil Prod Unopco Corporation should decide. The Company; long ucts how what ca made no effort to deduct these disclose; pacity the record does not expense of its business its tax income salary year $6,000 return, did charge donees $2,000 and he had received bonus they with themselves what The received. year. company the end of the had held Board has them all liable for a tax extraordinarily been successful its busi income, calculated ness, granting which consisted of licenses Appeals and the Circuit Court of for the patents for oil refining; under methods of ruling First Circuit has affirmed the revenues, beginning its one, Judge Morton dissenting. Walker very large, and end of 1930 become its as Helvering, extremely Very early sets valuable. in the year sold its shareholders all their payments may “gifts” Such be at once Corpora to the United Gasoline shares under section (b) (3), subdivision $25,000,000, having just tion for before note, “compensa U.S.C.A. § $4,100,000 treasury, from their withdrawn personal tion for under service” subdivi they company, transferred a new (a). (b) sion Subdivision was indeed en organized purpose, “Exclusions,” titled called the and since it declared Unopco Corporation, prescribed exempt whose shares items “shall be more, if for nothing not be would be taxation,” it would (cid:127)from instance the what he ex donor believed that, for that unnatural assume past full measure sub the’ was within emption, would have then anything employee evident (a). Nevertheless division *3 to”; not least “entitled that in fairness did he of them that some reflection cent; might prof anything “owe” a and that “gains by or possibility could no give law only beyond not the items what any specific its,” the among or of exact, enumerated; bpt employee could would what for the which that subdivision justice past serv- insurance; demand. Even so the compensation example, life in the gift ices would be the the cause of and “inheritances” injury; for or sickness except sense donor that for very possibil them a remote the as well—unless spon- to rate, would never have been moved ity. any the “exclu In cases at not generosity, gift would taneous but the gross in exceptions from sions” were not hand, pay the other for services. the out of On come, included and must have been em- employers that Furthermore, feel subdivi sometimes their abundant caution. full; ployees that exempt have never'been under all (b) (3) sion did not they services deserved more than their specific items which it con conditions the received; between have that the account tained; bequest or example, though for a equitable them balance. quite not merely qualifying is to for device executors they “compensation”; are personal Such are serv “compensation is for not relation, past not the Merriam, result 263 the (United ices” v. U.S. States they allocated specifically are a return 179, 240, 29 A.L.R. 69, 44 S.Ct. 68 L.Ed. example, a For such, to the donee’s services. if it conditional 1547), it becomes bill; patient may it surgeon's increase Bowers, 22 performance. Ream v. F. his on Grant, “compensation,” though gift; would be 39 (C.C.A.2); Rose F. (2d) 465 yet, present only because if he made him a And in all (C.C.A.5). 338 indeed (2d). taxability bound skill, of bonuses solicitude kindness the cases where the mooted, be. friendship, them not in a warm would the like has been the satisfy A some they donor must not be moved to legal gifts; except as been have uneasiness, that scruple, taxpayer’s position some some sense were, the would not plausible. outstanding there an which those claim have been even whether, they recognize opinion sen- though gifts, would he is been were whose has to pay- “compensation personal services”; something the sitive: which makes also Colony ment more than an unconstrained act like Trust Co. v. decisions Old that determining Revenue, regard. Internal affection or In 279 Commissioner question, any proved L.Ed. the claim 49 73 absence of U.S. they both. When the deduction the tax return is that could be donor donor’s is, very obligor, significance. an that when he is under little is not legal payment, to make the no sanction the parties have In case at bar the depend upon must therefore decision his stipulated that were “the properly upon his more intent' — by made made intended said very gen the courts motive —and so have Unopco Corporation, any of its stock Commissioner, erally put Fisher v. it. 59 * * * compensation holders (C.C.A.2); Schumacher F.(2d) * * * any any by rendered (Ct.Cl.) States United * * * employees Un- said said Hawley, (C. Bass v. opco Corporation any or to of its stock- C.A.5); Commissioner, Botchford v. * * * recipients All holders. (2d) (C.C.A.9). F. * * * employees Uni- said however, have, Company at time versal Oil Products found much We * * * payment that learning what intent or motive help be, prior This and, while issue remains un thereto.” means must settled, scarcely profitable not been it seems cata donees evidence; shareholders, does we rather need a but it not mean that logue test determine what shareholders had not those which to evidence is benefited services, clearly may had, nobody agree that a man since relevant. We employee else The intent gift meaning old without could. and motive “compensation”; necessarily though probably shareholders was it as that of uncommon, donor, Unopco especially Corporation, cases will be which independent payment “in could recog he declares that have intent and mo- tive; pre- and that past nition of” services. We will assume intent and motive were may at least it have been. There was no the sharehold- though cisely same as donees, inconsistency harboring such a motive employers of the ers had compensate along with a desire to others therefore There is were not. outcome. their contribution to the So between regard in this difference no real all, Commissioner, supra, gift far tend- as it is relevant at and Fisher v. this case ed confirm conclusion. substan- the Board’s there Nor is F.(2d) 192. actuated motive which in the tial difference Order affirmed. these; can- decision for that SWAN, Judge (dissenting). self-interest upon the donor’s not stand assumptions; by very except strained agree I cannot deci Board’s *4 very president sion, would retiring expressed opinion, bonus to as its that person- morale of the remotely affect payments question “were additional com succes- donee’s large; pensation or even the nel at ren consideration services doubtful, here is indeed The answer sor. dered to and Universal were not tax-free decided we should have conclusively but on the gifts” whole binding is Board, ours. had the decision been with the express court. The Board made no find appear to determining considerations The ing payments by that were intended which like those have been a little Unopco us to or stockholders as additional its salaries salvage. The control an award compensation recipients. for services of the paid while had been Indeed, bonuses which stipulated pay it was that “said enough fair was doubt were success ments were made or intended to be stood; hopes highest but the things then by Unopco Corporation any made said or realized, seemed finally and it had been payment of its stockholders com by generous” “recognize” to “nice and any pensation for services rendered or “loyal prize, sharing the those services” to for any be rendered consideration come contributed to make them which had by any given given toor be of said em “honorarium” true. The the words use ployees, attorneys experts to said Un particularly significant; was “bonus” opco Corporation any or to of its stock by such intent are'often shades of best seen evidentiary holders.” The facts were un is choices. “Honorarium” unconscious disputed, and I think the court is free to except denote a never used to word decide whether as matter of law the payment; very type compensatory is the payments taxable or nontaxable. were See sort; and of taxable transactions of this Operating General & Utilities Co. v. Hel only is less definite. Left “bonus” a little 200, 206, vering, U.S. we should therefore have been to ourselves Commissioner, 80 L.Ed. Washburn v. say actu- disposed to that were these (C.C.A. 8); Burnet by a donees ated sense in fairness the that Lexington Co., Ice & Coal 62 F.(2d) something more had deserved than ; 4) (C.C.A. Commissioner v. Bon past, ship got in now that the had come 8, 1937) Feb. wit primarily decision in. But the is not all; first to us Commissioner had _ open, If the I am constrain- his, own; then the Board its ed to a different conclusion from that exactly, taxpayer more had show by my my reached brothers. To mind the that the the Board Commissioner'had that facts indicate the shareholders of wrong, and he must show us not that by Unopco, selling reason their Univer- wrong, was conclu- the Board but that its such sums, sal shares for fabulous were beyond any sion was inference reasonable “spontaneous an gener- moved to act go evidence. that from the We cannot osity,” by rather than actuated a sense far, doubts, would have been whatever our pay services, obligation of moral in- indeed, place; had been in its so we adequately compensated in past, impalpable determinants, are the that they had benefited —if that distinc- generally cases its conclusion will test tion is to be between taxable and final. recipients gifts. nontaxable of these employees, payments attorneys, are were one Nor embarrassed because Universal, experts many was to the an sister of em whom had ployee who connection with company’s company was killed in had no that quite nothing It 1922. There is service. true that the motive in since to indicate could not have been to their instance com that not been ade- services, generously, pensate for his quately, her but it was to or even compensate rendered, her for his loss nevertheless: Universal nor feeling any any shareholder “equitable were not the accounts years. un- Not during all these balance” shares til the Universal after sug- president and the sold gen- nice “a it would be gested that appreciation their thing” show erous honorarium gift or the form ever considered. matter of the sister recipients was One in 1919. life had lost employee who pure- her was Certainly payment compensa- taxed ly and cannot nothing to services; yet there tion actu- her was payment indicate pay- from the motive different ated others. ments to *5 voluntary employer makes a When employee, it is reasonable payment to very special infer, in the absence ad circumstances, intended as v. Com Fisher compensation: ditional When (C.C.A. 2). F.(2d) 192 missioner, 59 stranger, natural payment is Lunaford gift. that of inference Commissioner, 6). (C.C.A. F.(2d) 740 employer, corporate Stockholders employ to its strangers legally though as addi intended ees, may Hawley, 62 compensation. Bass v. tional stock 5). There the (C.C.A. F.(2d) 721 owned employer corporate of the pay made the company, which holding to be served an interest ment loyalty good will maintaining em corporate to their of the case the stockhold present ployer. In the possible receive can ers pres former or payments to benefit deci employees of Universal. ent goes majority of the court sion of authority ex previous than further cept v. Commissioner Walker Cravath, Gersdorff, Wood, de Swaine & 61, involving 12, 1937) 88
Feb. City Whitney, (Wm. D. of New York at bar. as the case transaction the same Wilmer, City, H. Richard York New dissent in that Morton’s agree Judge I with Tyler, C., George G. Washington, D. case. peti- City, counsel), York of New
tioner. Morris, Atty. Gen., Asst. W. James Monarch, Key, Louis Sewall John J. Atty. Gen., Pringle, Jr., Sp. Assts. to the J. respondent. HELVERING. HAND, SWAN, and OLSEN Before L. AU- HAND, Judges. Circuit No. 229. N. GUSTUS Appeals, Second Circuit. Court Circuit HAND, Judge. 8, 1937. March appeal from an order is an This Appeals, determining Tax Board of de- year ficiency in income tax for the Olsen, against Robert M. as administrator