UNITED STATES v. KAISER
No. 55
UNITED STATES SUPREME COURT
Argued March 23, 1960.—Decided June 13, 1960.
363 U.S. 299
Joseph L. Rauh, Jr. argued the cause for respondent. With him on the brief were Max Raskin, Harold A. Cranefield, John Silard, Carolyn E. Agger and Julius M. Greisman.
MR. JUSTICE BRENNAN announced the judgment of the Court, and delivered an opinion in which THE CHIEF JUSTICE, MR. JUSTICE BLACK, and MR. JUSTICE DOUGLAS join.
This case presents the questions whether a labor union‘s strike assistance, by way of room rent and food vouchers, furnished to a worker participating in a strike constitutes income to him under
The respondent was employed by the Kohler Company in Wisconsin. The bargaining representative at the Kohler plant was Local 833 of the United Automobile, Aircraft, and Agricultural Implement Workers of America, CIO (UAW). In April 1954, the Local, with the approval of the International Union of the UAW, called a strike against Kohler in support of various bargaining demands in connection with a proposed renewal of their recently expired collective bargaining contract. The respondent was not a member of the Union, but he went out on strike. He had been earning $2.16 an hour at his job. This was his sole source of income, and when he struck he soon found himself in financial need. He went to the Union headquarters and requested assistance. It was the policy of the Union to grant assistance to the many Kohler strikers simply on a need basis. It made no difference whether a striker was a union member. The1
The Union thought that strikers ought to perform picketing duty, but did not require, advise or encourage strikers who were receiving assistance to picket or perform any other activity in furtherance of the strike; but assistance ceased for strikers who obtained work. Respondent performed some picketing, though apparently no considerable amount. After receiving assistance for several months, he joined the Union. This had in no way been required of him or suggested to him in connection with the continued receipt of assistance.
The program of strike assistance was primarily financed through the strike fund of the International Union, which had been raised through crediting to it 25 cents of the
During 1954, the Union furnished respondent assistance in the value of $565.54. In computing his federal income tax for the year, he did not include in gross income any amount in respect of the assistance. The District Director of Internal Revenue informed respondent that the $565.54 should have been added to his gross income and the tax due increased by $108 accordingly. Respondent paid this amount, and after administrative rejection of a refund claim, sued for a refund in the District Court for the Eastern District of Wisconsin. A jury trial was had, and the court submitted to the jury the single interrogatory whether the assistance rendered to respondent was a gift. The jury answered in the affirmative; but the court entered judgment for the Government, n. o. v., on the basis that as a matter of law the assistance was income to the respondent, and did not fall within the statutory exclusion for gifts. 158 F. Supp. 865.
By a divided vote, the Court of Appeals for the Seventh Circuit reversed. 262 F. 2d 367. It held alternatively
At trial, counsel for the Government did not make objection to any part of the District Court‘s charge to the jury or the “gift” exclusion. In this Court, the charge is belatedly challenged, and only as part of the Government‘s position that there should be formulated a new “test” for application in this area.6 We have rejected that contention in our opinion in Duberstein. In the
We think, also, that the proofs were adequate to support the conclusion of the jury. Our opinion in Duberstein stresses the basically factual nature of the inquiry as to this issue. The factual inferences to be drawn from the basic facts were here for the jury. They had the power to conclude, on the record, taking into account such factors as the form and amount of the assistance and the conditions of personal need, of lack of other sources of income, compensation, or public assistance, and of dependency status, which surrounded the program under which it was rendered, that while the assistance was furnished only to strikers, it was not a recompense for striking. They could have concluded that the very general language of the Union‘s constitution, when considered with the nature of the Union as an entity and with the factors to which we have just referred, did not indicate that basically the assistance proceeded from any constraint of moral or legal obligation, of a nature that would preclude it from being a gift. And on all these circumstances, the jury could have concluded that assistance, rendered as it was to a class of persons in the community in economic need, proceeded primarily from generosity or charity, rather than from the incentive of anticipated economic benefit. We can hardly say that, as a matter of law, the fact that these transfers were made to one having a sympathetic interest with the giver prevents them from being a gift. This is present in many cases of the most unquestionable charity.
We need not stop to speculate as to what conclusion we would have drawn had we sat in the jury box rather than those who did. The question is one of the allocation
Affirmed.
MR. JUSTICE FRANKFURTER, whom MR. JUSTICE CLARK joins, concurring in the result.
In 1957 the Commissioner of Internal Revenue ruled that strike benefits paid by unions to strikers on the basis of need, without regard to union membership, were to be regarded as part of the recipient‘s gross income for income tax purposes.
What these rulings reveal largely depends on the viewpoint from which their meaning is read. Only two of the rulings set out in the Appendix, Numbers 1 and 21, dealt expressly with strike benefits, and Number 21 is the 1957 ruling here challenged. Putting this 1957 ruling aside, the conclusion may be drawn from these rulings that the Commissioner has not taxed receipts for which no services were rendered and no direct consideration was given, which did not arise out of an employment relation, and which were relatively small in amount and designed to enable the recipient to provide for his needs so they can be said to have been in a sense “subsistence” payments. None of the rulings holding payments taxable squarely contradicts such a conclusion.
Number 2, taxing union unemployment benefits, does not because the benefits there were paid by the union only to its members, and it can be supposed that members paid dues and lent their support in other ways, and thus there was consideration for the benefits.
Numbers 5, 15, 19, 24 and 25, all holding “subsistence” payments taxable, do not contradict it. The
Number 1, the first strike-benefit ruling, does not squarely contradict a conclusion regarding “subsistence relief” payments made without consideration, because that also only concerned payments to union members.
Only Number 20 casts doubt on the conclusion, but not enough seriously to disturb it. In that ruling, concerning payments by the German Government to persons mistreated by the Nazis, it was left open that some payments, greater than the basis in the property confiscated by the Nazis, might be taxed as income, depending on the circumstances. But it can be reasoned that such payments were windfalls, not related to “subsistence,” and in any event it was not clearly decided that they were income.
So, if one starts with a feeling or assumption that “subsistence relief,” paid without the voluntary giving of consideration, has not been taxed by the Commissioner, material may be adduced to justify one‘s starting point. There are two reasons why such reasoning does not conclude this case in my view. First, it is far from clear that, as a matter of law, the situation before us falls within a hypothetical “subsistence relief” category. Although the taxpayer paid no union dues before or during the taxable year, he did picket, and for part of the year he was a
My second objection is more basic. A fair evaluation of the administrative materials in the Appendix does not lead to the conclusion that the Commissioner has uniformly treated so-called “subsistence relief” as a relevant category of payments, and one not subject to tax. The only reason urged in this case for holding the Commissioner bound to follow rulings of non-taxability which he considers inapplicable is respect for an overriding principle of “equal” tax treatment. The Commissioner cannot tax one and not tax another without some rational basis for the difference. And so, assuming the correctness of the principle of “equality,” it can be an independent ground of decision that the Commissioner has been inconsistent, without much concern for whether we should hold as an original matter that the position the Commissioner now seeks to sustain is wrong.
If I am right about the justification for asking this Court in this case to bind the Commissioner to former relevant rulings, with indifference to the correctness of his present position as an independent matter, the appropriate inquiry is not, “Can such and such a principle be drawn from the administrative rulings?” The right question is, “Is there any rational basis for the prior rulings which does not apply to the present case?” For only if there
There are sixteen rulings set forth in the Appendix in which no tax was imposed: Numbers 3, 4, 6, 7, 8, 9, 10, 11, 12, 13, 14, 16, 17, 18, 20 and 22. Of these, reasons were clearly given in several, and in several others reasons were suggested though not spelled out. In no case was the reason given that the payment was “subsistence relief” and not taxable on that score. The nature of the payment as “subsistence” was mentioned only once, in Number 12, and it was used there as a characterization, not a reason, in a ruling which expressly accepted the nature of the payments as “gifts.” The reasons which have been given suggest two other grounds upon which the Commissioner has excluded many of these payments from tax.
In Number 13, one reason for the ruling was stated to be that the payments “are considered gratuitous and spontaneous.” In light of the circumstances of that case, involving disaster relief, it is natural to suppose that this language reflects an application of the principle that “gifts” are not part of gross income. See also Number 21, explaining Number 13.
The fact that a companion question or even the principal question in some of these cases (see Numbers 12 and 20) was whether the payment should reduce the amount of the deduction permitted by the Code for a casualty loss, emphasizes the explicit treatment of the payments as in return for a loss suffered.
Even in those cases where the thing lost or injured had no basis to the taxpayer for purposes of computing gain or loss, the language of reparation or compensation for loss was used. Thus in Number 3 damages for alienation of affections or defamation were treated as “in compromise” “for an invasion of” a “personal right.” See also McDonald v. Commissioner, 9 B. T. A. 1340, referred to in Number 7. In Number 4 damages for breach of promise to marry were held not taxable because “[a] promise to marry is a personal right not susceptible of any appraisal in relation to market values.” Numbers 6 and 14 involved death payments, and they were called “compensation for [the] loss [of life].” In Number 16 the payment to a mistreated prisoner of war was called “reimbursement.”
It is important to note that in Commissioner v. Glenshaw Glass Co., 348 U. S. 426, 432, n. 8, we recognized just such treatment as “[t]he long history of departmental rulings holding personal injury recoveries nontaxable on the theory that they roughly correspond to a return of capital,” and distinguished those rulings from the case of punitive damages, which we held not to be compensatory and therefore taxable. See also United States v. Supplee-Biddle Hardware Co., 265 U. S. 189, 195.
The rationale of payments in compensation for a loss is not applicable to the present case. Even if we suppose that strike benefits are made to compensate in a sense for the loss of wages, the principle of payments in compensation does not apply because the thing compensated for, the wages, had they been received, would have been included in gross income. See United States v. Safety
Taking stock, then, ten rulings of non-taxability are clearly explainable according to the two legitimate principles of “gift” and “compensation for loss” and should not bind the Commissioner to a principle that “subsistence relief” is not to be taxed. They are Numbers 3, 4, 6, 7, 13, 14, 15, 16, 20, and part of 12. The remaining portion of Number 12 concerns Red Cross disaster relief in the form of food and clothing. A ruling regarding inclusion in gross income was not asked for in that case, which concerned the use of the casualty loss deduction with regard to payments for the loss of capital assets. The relief was referred to as a “gift” in the ruling, and it was simply asserted, without explication, that, as to the food and clothing, “nor do they represent taxable income.” It is not unreasonable to attribute this conclusion to an application of the principle of “gift,” in light of the nature of the Red Cross as a charitable organization.
The rulings imposing no tax which thus remain unexplained as either dealing with “gifts” or payments in compensation for loss are Numbers 8, 9, 10, 11, 17, 18, and 22.
Numbers 8, 9 and 11 dealt with federal old age and death payments under the Social Security Act. Numbers 10 and 17 dealt with unemployment payments under the Social Security Act. In Number 10 the payments were made by the States from the Federal Unemployment Trust Fund set up under that Act, and in Number 17 the payments were under the Social Security plan to cover federal employees.
Number 22 dealt with a state payment to the blind, under a statute authorizing disbursement of money received from the United States for such a purpose.
Except for Number 22, all these payments came out of United States Social Security funds, or in the case of Number 18, a Panamanian analogue. The Commissioner has expressly treated these Social Security payments as related to each other. Number 9 relies on ruling Number 8, Number 17 relies on Number 10, and Number 18 on Number 11. These Social Security rulings rely on no others, and no others rely on them. On the other hand, the Commissioner has uniformly treated as taxable non-governmental payments, either by employers, unions, or “private” groups which have been similar to the Social Security benefits not taxed in their character as “sub-sistence relief,” except for their private nature. See Numbers 1, 2, 5, 15, 19, 24 and 25. In the instances urged on us, the Commissioner has never treated such a non-governmental payment as non-taxable. Having uniformly accorded different treatment to small pension, old age, and unemployment payments, depending on their source, whether they arose out of a private arrangement on the one hand, or under the Federal Social Security program on the other, the Commissioner is not disentitled to treat these strike benefits as he has the non-governmental payments in the past. Surely there is a fair basis for differentiating, for income tax purposes, payments under a comprehensive scheme of federal welfare legislation from private payments, although their ultimate social purposes may be similar. To say that the Social Security rulings control private welfare schemes is to say that the Commissioner has not been entitled to find in the policy of the Social Security legislation, in relation
The remaining ruling, Number 22, deals with a state assistance payment to the blind. Aside from the differences which arise from the fact that this payment involved federal funds, which was set forth in the ruling as one of the relevant facts, it may well have been treated by the Commissioner as a gift, and not unreasonably so, for the blind are a common object of charity. In any case, this payment cannot alone create an administrative practice binding the Commissioner in the present case.
In summary, the relevant instances in which the Commissioner has ruled payments not taxable can all be explained according to principles other than the general principle of “subsistence relief” urged by the taxpayer. Putting aside the question of “gift,” these principles do not cover the present case. Therefore the Commissioner, in seeking to tax these strike benefits, has not denied the taxpayer “equal” treatment.
No one argues that a tax principle regarding “subsistence relief” can be drawn from the statute or the cases. The taxpayer does urge, however, that a principle concerning “alleviative,” “reparations” payments can and should be derived. I have already discussed why such a principle in my view does not include the present strike benefits, which compensate no loss but the loss of wages, and these would have been included in gross income if received. It might be argued that the Court should itself formulate a principle covering “subsistence relief” payments which would cover this case. There are controlling reasons for not formulating such a principle. Such new principles in the tax law are best left to Treasury initiative and congressional adoption. Moreover, the principle of excluding “subsistence” is already reflected in the $600 personal exemption and the graduated rates.
In this case, however, under instructions to the jury that
“[t]he term ‘gift’ as here used denotes the receipt of financial advantage gratuitously, without obligation to make the payment, either legal or moral, and without the payment being made as remuneration for something that the Union wished done or omitted by the plaintiff. To be a gift, the payments must have been made with the intent that there be nothing of value received, or that they were not made to repay what was plaintiff‘s due but were bestowed only because of personal regard or pity or from general motives of philanthropy or charity. If the plaintiff received this assistance simply and solely because he and his family were in actual need and not because of any obligations, as above referred to, or any expectation of anything in return, then such payments were gifts,”
the jury found in a special verdict that the strike benefit payments to taxpayer were a “gift.” These instructions certainly were not unfavorable to the Government.
On the evidence in this case, may the jury‘s verdict stand? There was evidence justifying the view that in the particular circumstances existing in Sheboygan at the time these benefits were paid, the union had assumed the functions normally exercised by private charitable organizations and governmental relief programs, in view of the excessive difficulty in getting adequate relief from them, so that these benefits were dispensed pursuant to such a charitable relief program in what, because of the strike, was a distressed area. The mere fact that the payments were made by the union to men participating in a strike called by the union does not as a matter of tax law conclude the case against a “gift.” When the circumstances negating the business nature of the payment were strong enough, the Commissioner has ruled that even payments by an employer to his employees were gifts. See ruling Number 13 in the Appendix, and see also
I am well aware that this disposition of the case does not preclude different juries reaching different conclusions on the same facts. Some individualization of result is inevitable so long as it is left to courts to determine what is or is not a “gift.” The diversities that may thus result are all the more inevitable in view of the scope left to the fact-finders—whether courts or jury—by our decision today in Commissioner v. Duberstein and Stanton v. United States, ante, p. 278.
APPENDIX TO OPINION OF MR. JUSTICE FRANKFURTER.
As used in the citations to materials in this Appendix, “O. D.” refers to an Office Decision, “I. T.” to an Income Tax Ruling, “Sol. Op.” to a Solicitor‘s Opinion, “S.” to a Solicitor‘s Memorandum, “G. C. M.” to a General Counsel‘s Memorandum, “Rev. Rul.” to a Revenue Ruling, and “T. D.” to a Treasury Decision.
1.
“Benefits received from a labor union by an individual member while on strike are to be included in his gross income for the year during which received, there being no provision of law exempting such income from taxation.”
2.
“Amounts paid by an organized labor union as unemployed benefits to its unemployed members are required to be included in gross income of the recipients.”
3.
Damages for alienation of affections or defamation of character held not to be income. “In the light of these decisions of the Supreme Court [Stratton‘s Independence v. Howbert, 231 U. S. 399, and Eisner v. Macomber,
4.
Damages for breach of promise to marry not gross income. “[A] promise to marry is a personal right not susceptible of any appraisal in relation to market values. . . .” Relying on
5.
Payments to employees “involuntarily thrown out of employment because of lack of work in a certain industry.” Payments made out of a fund established for that purpose under an agreement between “an association of manufacturers” and an “employees’ association” and maintained by deductions from the wages of those em-
ployees who ratify the agreement and by equivalent contributions from the employers. Held, “Any benefits paid to the employee from the fund in excess of the amounts which he has contributed will constitute taxable income to him.” Also held that employees may not deduct their contributions to the fund.6. I. T. 2420, VII-2 Cum. Bull. 123 (1928).
Payment made to taxpayer for the death of her husband on the Lusitania. Payment made by the Government of Germany through the Mixed Claims Commission of the United States and Germany. Held, payment not income. “An award paid for the loss of a life is compensation for the loss, and as such is not embraced in the general con- cept of the term ‘income.’ In the instant case, the award is, in fact . . . to restore [the recipient] . . . to sub- stantially the same financial and economic status as she possessed prior to the death of her husband.”
7. G. C. M. 4363, VII-2 Cum. Bull. 185 (1928); I. T. 2422, VII-2 Cum. Bull. 186 (1928).
Damages for breach of contract to marry are not in- come. Commissioner acquiesces in 9 B. T. A. 1340 which so holds. O. D. 501, 2 Cum. Bull. 70 (1920), and I. T. 2170, IV-1 Cum. Bull. 28 (1925), which held otherwise, revoked.
8. I. T. 3194, 1938-1 Cum. Bull. 114.
Lump sum payments under
9. I. T. 3229, 1938-2 Cum. Bull. 136.
Lump sum death payments under the “Federal old-
age benefits” provisions in
10. I. T. 3230, 1938-2 Cum. Bull. 136-137.
Benefit payments made “under the Federal and State
plan for unemployment compensation” by a state agency
during unemployment periods. The payments are made
from a fund held in the Treasury of the United States,
established under the
11. I. T. 3447, 1941-1 Cum. Bull. 191.
Monthly payments from the Federal Old Age and Sur-
vivors Insurance Trust Fund under
12. Special Ruling, May 11, 1952, 1952-5 CCH Fed. Tax Rep. ¶ 6196.
Ruling was asked with regard to (1) whether money
paid by the Red Cross as disaster relief “will affect the
13. Rev. Rul. 131, 1953-2 Cum. Bull. 112.
Payments “for purposes of rehabilitation not actually compensated for by insurance or other sources” by a cor- poration to employees and their families who were in- jured or sustained damages as a result of a tornado. The size of the payments did not depend upon the length of service of the employee or the nature of his employment, and the ruling states that the payments were “not re- lated to services rendered.” Held, payments not taxable income. “Such contributions, measured solely by need, are considered gratuitous and spontaneous. The objective of the corporation is to try to place the employees in the same economic position, or as near to it as possible, which they had before the casualty.”
14. Rev. Rul. 54-19, 1954-1 Cum. Bull. 179.
Monetary recovery by decedent‘s estate for death
under state Wrongful Death statute. Held, recovery not
taxable as income either to decedent‘s estate or to those
who eventually receive the proceeds. “Proceeds of this
15. Rev. Rul. 54-190, 1954-1 Cum. Bull. 46.
Pension payments to employees from a fund adminis- tered by a union. Fund financed by compulsory employee contributions, based on earnings. It is not stated whether or how the benefits varied. Benefits payable only after age 60 to employees unable to keep their jobs and unable to get other regular employment because of age or disability. Benefits suspended when employee‘s wages reach a certain level. Held, payments subject to income tax. Since they are “directly attributable” to employ- ment they are not without consideration and not gifts, “[a]ccordingly” they are income.
16. Rev. Rul. 55-132, 1955-1 Cum. Bull. 213.
Payments under the War Claims Act of 1948, 62 Stat. 1240, made by the United States to a former prisoner of war on account of an enemy government‘s violation of its obligation to furnish him humane treatment while held prisoner. Held, payments not subject to income tax because “in the nature of reimbursement for the loss of personal rights.”
17. Rev. Rul. 55-652, 1955-2 Cum. Bull. 21.
Unemployment compensation payments made to fed-
eral employees pursuant to the
18. Rev. Rul. 56-135, 1956-1 Cum. Bull. 56.
“Social security benefits” paid by the Republic of Panama under Panama law to United States citizens liv- ing and working in Panama. Held, not subject to income tax. “Such benefits are deemed to be basically similar to the sundry insurance benefit payments made to indi- viduals under the United States social security system which are described and held to be nontaxable to the recipients in I. T. 3447 [Number 11, supra].”
19. Rev. Rul. 56-249, 1956-1 Cum. Bull. 488.
Payments to unemployed workers at M. Co. made from fund to which only M. Co. contributes. Payments sup- plement state unemployment benefits, and are only paid to employees eligible for state benefits. Payments are such that in combination with state benefits they give employee a certain percentage of his salary while laid off, which percentage depends on marital status, number of dependents and wage rate when laid off. Length of pay- ment period depends on size of fund. Held, subject to income tax.
20. Rev. Rul. 56-518, 1956-2 Cum. Bull. 25.
Payments made by German Government to persons
persecuted by Nazi German Government who suffered
damage to “life, body, health, liberty, rights of property
ownership, or to professional or economic advancement.”
Held, because the payments are “in the nature of reim-
bursement of the deprivation of civil or personal rights,”
where they are on account of property taken away they
are not income so long as they are less than taxpayer‘s
basis in the property. Where payments are greater than
21. Rev. Rul. 57-1, 1957-1 Cum. Bull. 15.
Strike benefit payments made on the basis of need to strikers without regard to union membership. Held, tax- able. Payments are not gratuitous because for the union‘s purposes. No conflict with I. T. 3230 (Number 10, supra, relating to state unemployment payments under Federal Fund), or I. T. 3447 (Number 11, supra, relating to Fed- eral Social Security Insurance payments), because “[t]he benefits in these cases were held not to constitute taxable income because it was believed that Congress intended that such benefits be not subject to tax,” and there is no evidence of such intent here. No conflict seen with Rev. Rul. 131 (Number 13, supra), relating to corporation‘s payments to rehabilitate employees after tornado, because payments there were gratuitous and donative. Rev. Rul. 54-190 (Number 15, supra), relating to pension payments from a union fund financed by dues, relied upon.
22. Rev. Rul. 57-102, 1957-1 Cum. Bull. 26.
Payment to a blind person under the Public Assistance Law of Pennsylvania, for the purpose of “providing for and regulating assistance to certain classes of persons requiring relief.” The law authorizes the State “to coop- erate with, and to accept and disburse money received from, the United States Government for assistance to such persons.” Held, payments not taxable as income for they constitute “a disbursement from a general welfare fund in the interest of the general public.”
23. T. D. 6272, § 1.61-11 (b), 1957-2 Cum. Bull. 18, 30.
“Pensions and retirement allowance paid either by the
Government or by private persons constitute gross income
unless excluded by law . . . .”
24. Rev. Rul. 57-383, 1957-2 Cum. Bull. 44.
Payments to unemployed workers from union unem- ployment fund financed through dues. Plan similar to insurance, employee choosing beforehand the class of benefits desired, and paying dues accordingly. Held, taxable.
25. Rev. Rul. 59-5, 1959-1 Cum. Bull. 12.
Benefit payments from “private” unemployment fund financed by dues from members. Dues vary with class of benefits desired. Held, payments are income to the extent that they exceed the contributions to the fund of the recipient. “In the absence of any provision in the Code which expressly excludes unemployment benefits derived from private sources from Federal income taxa- tion, the rationale of the above-cited case [Commissioner v. Glenshaw Glass Co., 348 U. S. 426] and Revenue Ruling [Rev. Rul. 57-383, Number 24, supra, relating to unem- ployment benefits from union fund financed through dues] is applicable.” “[E]ach member must contribute to the fund an amount in relation to the benefits which he desires ultimately to receive. Therefore, the benefits, when received, do not constitute amounts gratuitously paid or received so as to be considered gifts.” Citing Rev. Rul. 54-190 (Number 15, supra, relating to pension payments from union fund financed by dues).
MR. JUSTICE DOUGLAS, concurring.
While I join the opinion of my Brother BRENNAN, my
view of the merits is so divergent from the rest that a
word of explanation is needed. Bogardus v. Commis-
sioner, 302 U. S. 34, 41, in holding payments by stock-
“There is entirely lacking the constraining force of any moral or legal duty as well as the incentive of anticipated benefit of any kind beyond the satis- faction which flows from the performance of a generous act.”
Had a motion for a directed verdict been made by respondent at the close of the evidence, I think with all deference that it should have been granted, since my idea of a “gift” within the meaning of the Internal Revenue Code is a much broader concept than that of my Brethren. As the opinion of the Court points out, this striker (who became a union member without solicitation several months after he began receiving benefits) had no legal or moral duty to picket or to do any other act in furtherance of the strike. There is no evidence that the union made these payments to keep this striker in line. It is said that these strike payments serve the union‘s cause in promoting the strike. Yet the whole setting of the case indicates to me these payments were welfare, plain and simple. Unions, like employers, may have charitable impulses and incentives. Here only the needy got the relief.* Yet since
(so far as the present record shows) respondent acquiesced
MR. JUSTICE WHITTAKER, with whom MR. JUSTICE HARLAN and MR. JUSTICE STEWART join, dissenting.
The question here is whether, in the light of the rule
adopted by the Court today in Commissioner v. Duber-
stein, ante, p. 278, there is a reasonable basis in the evi-
With deference, I am convinced that there was not,
and that, to the contrary, the evidence compels the con-
clusion, as a matter of law, that those strike benefits were
not “gifts” within the meaning of
The International Union is a private labor organization serving as the certified bargaining agent and representa- tive of numerous collective bargaining units of employees. One of its principal purposes, as stated in its constitution, is to call, or approve the call by its local unions, of strikes to obtain better wages, hours and working conditions for those employees, and, of course, to win such strikes. To that end, its constitution provides for the creation of a Strike Fund, out of the dues of its members, for use in assisting its local unions in waging and winning such strikes, and it has actually created and maintains such
a strike fund.3 Article 12, § 15 of its constitution further
“If and when a strike has been approved by the International Executive Board, it shall be the duty of the International Executive Board to render all financial assistance to the members on strike con- sistent with the resources and responsibilities of the International Union.”
Thus there is a clear and specific undertaking by the International Union to furnish assistance to its striking members when, as here, it has approved the strike, and the union has created and maintains a fund for that purpose.
Although the mentioned provisions of the Interna- tional‘s constitution relate to financial assistance to union members, it was stipulated at the trial that:
“The International Union grants strike benefits to non-members of the Union, who participate in a strike, if they do not have sufficient income to pur- chase food or to meet an emergency situation. The Union treats such non-members on the same basis as members of the Union, but non-members as well as members must be strikers before they may receive assistance from the Union.” (Emphasis added.)
It was further stipulated that respondent, who was not a
It is now established that objective intention of the
transferor determines whether transfers constitute “gifts,”
within the meaning of
“This Court has indicated that a voluntary executed transfer of his property by one to another, without any consideration or compensation therefor, though a common-law gift, is not necessarily a ‘gift’ within the meaning of the statute. . . . And, importantly, if the payment proceeds primarily from ‘the con- straining force of any moral or legal duty,’ or from ‘the incentive of anticipated benefit’ of an economic nature . . . it is not a gift. . . . A gift in the statu- tory sense, on the other hand, proceeds from a ‘detached and disinterested generosity,’ . . . ; ‘out of affection, respect, admiration, charity or like impulses.’ . . .” Commissioner v. Duberstein, ante, at p. 285.
I find nothing in this record to indicate that the strike benefit payments by the union to respondent and other striking workers, while they were waging the strike, were made out of any “detached and disinterested generosity,”
or “out of affection, respect, admiration, charity or like
To be sure, the International‘s Secretary-Treasurer
expressed his conclusion at the trial that, in the course of
this strike, the International carried out the “same func-
tion” as would a local welfare agency in furnishing assist-
ance to needy persons. But it is important to distinguish
the very different factors that impelled the union from
those that motivate a local welfare agency in furnishing
such assistance. The union made payments only to
This conclusion is fortified by the consistent and long- standing rulings of the Treasury Department. It has twice ruled that strike benefits do not constitute non- taxable “gifts” to the recipient. In 1920 it held that:
“Benefits received from a labor union by an indi- vidual member while on strike are to be included in his gross income for the year during which received,
there being no provision of law exempting such
income from taxation.” O. D. 552, 2 Cum. Bull. 73 (1920). (Emphasis added.)
And again in 1957, it ruled:
“Strike benefit payments are included within the broad definition of gross income and do not fall within any of the exclusions provided for in the Code, including the exclusions for gifts under section 102. They are paid only upon the event of a strike which is a means employed by the union and its members for securing economic benefits, and, for this reason, they do not constitute amounts gratuitously paid or received.
“Accordingly, the strike benefit payments received under these circumstances do not constitute gifts but constitute income and are includible in the gross income of the recipients even though distributed on the basis of their need and regardless of whether the recipients are members or nonmembers of the union.” Rev. Rul. 57-1, 1957-1 Cum. Bull. 15, 16-17. (Emphasis added.)
Nor do I find in this record any “special circumstances” which might support the jury‘s conclusion that the pay- ments made to respondent were “gifts.” The record shows that it was the union‘s policy at the time of this strike to require strikers to avail themselves of any assistance offered by local community agencies before seeking assist- ance from the union. However, the union decided to waive this requirement with regard to the strike involved here, for the reasons given by the International‘s Secre- tary-Treasurer:
“In this particular case, the community assistance available in Sheboygan County was so small, and so
much red tape involved in obtaining it, we decided that Kohler workers would not have to seek assistance from the community agencies.” “The policy in 1954 was to use community agencies but, as I testified previously, that in the case of the Kohler workers we waived that particular policy because, after checking with the Sheboygan Welfare Agency, we found that the Kohler workers were ex- pected to give up their license plates and not use their automobiles, and restrictions were so great that we didn‘t think we ought to impose those restrictions on the Kohler workers.”
This determination was further evidence that the union‘s purpose in making the payments to respondent and other strikers was a business one, not proceeding from any “‘detached and disinterested generosity‘” nor “‘out of affection, respect, admiration, charity or like im- pulses,‘” Duberstein, ante, p. 285, but proceeding, rather, from the union‘s business purpose to obviate the supposed oppression of the local welfare restrictions upon the strikers, and thereby more effectively to preserve and continue the strike. It corroborates, I think unmistak- ably, the union‘s business purpose in paying the strike benefits, and shows that no genuine charitable or donative intent was involved.
For these reasons I would reverse the judgment of the Court of Appeals and hold that the payments in question were not “gifts” but were “income” and taxable as a matter of law.
Notes
“(1) Compensation for services, including fees, commissions, and similar items;
“(2) Gross income derived from business;“(3) Gains derived from dealings in property;
“(4) Interest;
“(5) Rents;
“(6) Royalties;
“(7) Dividends;
“(8) Alimony and separate maintenance payments;
“(9) Annuities;
“(10) Income from life insurance and endowment contracts;
“(11) Pensions;
“(12) Income from discharge of indebtedness;
“(13) Distributive share of partnership gross income;
“(14) Income in respect of a decedent; and
“(15) Income from an interest in an estate or trust.”
“The International Union, UAW-CIO, has also established a Strike Fund to further assist Local Unions in winning current strikes and to build a fund to protect our members in any future strikes. The Strike Fund of the International Union, UAW-CIO, is not large enough to provide strike assistance on the basis of right, and is not sufficient to meet all of the needs of our members during strike periods.”
The strike funds referred to are provided for by §§ 4 and 11 of Art. 16 of the International‘s constitution.
That voluntary payments by a union may be and often are made with the requisite donative intent is not to be doubted. This was illustrated by the testimony of two union officials at the trial of this case. The Secretary-Treasurer testified about expenditures from the union‘s strike fund to assist in emergencies caused by a tornado at Flint, Michigan, and by a flood in Connecticut. A regional officer testified that the union purchased furniture for a member whose home and its furnishings had burned, viewing that action, somewhat differ- ently than these strike benefits, as an “outright donation” by the union. But plainly such were not the generous and charitable im- pulses that impelled the union to pay the strike benefits to respondent and other strikers to sustain them while they waged the union‘s Kohler strike.“The handling of the emergency health and welfare problems of our members and their families is one of the most important tasks facing our Union during strike periods. We should do everything possible to minimize the hardship of our members and their families during strike periods by using the resources of the community and our Union.
“The International Union, UAW-CIO, has established a Com- munity Services Program in order to assist our members in making full use of community services. These health and welfare agencies have been organized in the community to render services, including financial assistance, medical, hospital and nursing care, legal aid, unemployment compensation (in New York State), family and child