Thе single question is whether $40,000 paid to Robert M. Kerr, by Unopco Corporation in January, 1931, was a nontaxable gift or taxable as income. The Revenue Act of 1928, § 22, 45 Stat. 797 (26 U.S.C.A. § 22 and note), declares: “‘Gross income’ includes * * * income derived from * * * compensation for personal service, of whatever kind and in whatever form paid.” To be excluded is “the value of property acquired by gift,” etc. The Commissioner held thе payment to be taxable as “a bonus in recognition of valuable and loyal services rendered,” and the Board of Tax Appeals sustained him.
The facts are simple. Universal Oil Products Company owned a process patent for making gasolene. Its stockholdеrs on January 16, 1931, consummated a sale of the entire capital stock for $25,000.000, about $4,100,000 of liquid assets having first been transferred to another сorporation created to receive them called Unop-co Corporation, whose stock was issued propоrtionally to the old stockholders of Universal Oil Products Company. The stockholders thus through this new company preserved unaltered their interests in the reserved assets. On January 9, 1931, the directors of Unopco in formal meeting took this action: “Resolved that the Directors of this Cоrporation recommend to the stockholders of this Corporation that the sum of $607,500 be appropriated, paid and distributed as а bonus to sixty-four former employes, attorneys and experts of Universal Oil Products Company * * * in recognition of their valuable and loyal sеrvices, etc.,” and a stockholders’ meeting was called to pass upon the recommendation. The following day the stockholdеrs met and unanimously adopted a resolution which quoted that of thc-directors and approved it, and then “Resolved further that this Corpоration do appropriate, pay and distribute the said sum of $607,500 as a bonus to sixty-four former and present employes, attorneys and experts of said Universal Oil Products Company in recognition of the valuable and loyal services of said employes, attorneys and еxperts to said Universal Oil Products Company.” About January 20, 1931, the president accordingly delivered a check to-each beneficiary personally or by mail, saying or writing in effect that it was a gift and need not be included in income tax returns. Unopco did’not in its own tax return deduct thеse payments as a business, expense, nor did its stockholders, nor did Universal Oil Products Company. The payments had not been discussed beforе' the stock sale was consummated January-6, 1931. There was no legal obligation to-make them, nor had they been requested.. None of the recipients ever worked for Un-opco or its stockholders personally, but were working for Universal Oil Products Company. A witness testified thаt the discussion preceding the resolution was of a. gift or honorarium.
In a broad sense a benefit done another without legal obligation is a gift;: but construing together the provisions of the income tax statutes, when money is-paid to a present or former employee in consideration of his services he receives it-as a compensation for services, although, not demandable, and it is taxable income to-him. “The payment for services, even though entirely voluntary, was nevertheless compensation within the statute.” Old Colony Trust Co. v. Commissiоner, 279 U.
*399
S. 716, at page 730,
But it is argued that since Kerr and the other beneficiaries were not and never had been employees of Unopcо, or of its stockholders as individuals, the resolutions in rewarding their service to another corporation necessarily authorized only gifts. That contention was made and rejected in the Bass and Schumacher Cases, supra. The same persons in the same proportiоn owned both Universal Oil Products Company and Unopco. Unopco was in fact the residuum of Universal Oil Products Company, the administrator of its affairs reserved from the sale. This payment from the reserved assets was in recognition ■of a felt moral obligation of the old business. From Kerr’s standpoint he received it for his past services, and it was immaterial whether paid technically by the one corporatiоn or the other.
We think, as we did in the Bass Case, that the fact that no deduction was claimed of the payments as business expenses by Unopco or its stockholders, or by Universal Oil Products Company, is unimportant. The last named could claim no deduction in 1931 for it did not make the payments. The stockholders as individuals could claim no personal deduction for the same reason. Unopco appears tо be a mere holding company, and perhaps did no business and made no net income in 1931. There is no necessary correlation bеtween the receipt of taxable compensation for services and the deduction by the payer of the payment as a business expense.
We have considered the case independently, but our conclusion is the same as that heretofore reached touching this same distribution in the First and Second Circuits. Walker v. Commissioner (C.C.A.)
Judgment affirmed.