On the record in this case, the jury, as finder of the facts,
acted within its competence in concluding that the strike
assistance, by way of room rent and food vouchers, rendered by a
labor union to respondent, who was participating in a strike and
was in need, was a "gift" within the meaning of §102(a) of the
Internal Revenue Code of 1954, and hence was excluded from income
for income tax purposes.
Commissioner v. Duberstein, ante,
p.
363 U. S. 278. Pp.
363 U. S.
299-305.
262 F.2d 367, affirmed.
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 §
61(a) of the Internal Revenue Code of 1954, [
Footnote 1] and whether the assistance furnished
to
Page 363 U. S. 300
this particular worker, who was in need, constituted a "gift" to
him, and hence was excluded from income by § 102(a) of the Code.
[
Footnote 2]
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. The
Page 363 U. S. 301
Union representatives questioned respondent as to his financial
resources, and his dependents. He had no other job, and needed
assistance with respect to the essentials of life. He was single
during the period in question, and the Union provided him with a
food voucher for $6 a week, redeemable in kind at a local store;
the voucher was later increased to $7.50 a week. The Union also
paid his room rent, which amounted to $9 a week. If in need,
married strikers and married strikers with children received
respectively larger food vouchers. [
Footnote 3] The over-all policy of the International Union
was not to render strike assistance where strikers could obtain
state unemployment compensation or local public assistance
benefits. But the former condition does not prevail in Wisconsin,
[
Footnote 4] and local public
assistance was available only on a showing of a destitution
evidently deemed extreme by the Union.
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
Page 363 U. S. 302
$1.25 per capita monthly assessment the International required
from the local unions. The Local also had a small strike fund built
up through monthly credits of 5 cents of the local members' dues,
and contributions were received in some degree, not contended to be
substantial, from other unions and outsiders. The constitution of
the International Union required that it be the authorizing agency
for strikes, and imposed on it the general duty to render financial
assistance to the members on strike. [
Footnote 5]
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
Page 363 U. S. 303
that the assistance was not within the concept of income of §
61(a) of the Code, and that, in any event, the jury's determination
that the assistance was a gift, and hence excluded from gross
income by § 102(a), had rational support in the evidence, and
accordingly was within its province as trier of the facts. We
granted the Government's petition for certiorari because of the
importance of the issues presented. 359 U.S. 1010. Later, when the
Government petitioned for certiorari in No. 376,
Commissioner
of Internal Revenue v. Duberstein, and acquiesced in the
taxpayer's petition in No. 546,
Stanton v. United States,
it suggested that those cases be set down for argument with the
case at bar because they illustrated in a more general context the
"gift" exclusion issues presented by this case. We agreed, and the
cases were argued together. We conclude, on the basis of our
opinion in the
Duberstein case, p.
363 U. S. 278
ante, that the jury in this case, as finder of the facts,
acted within its competence in concluding that the assistance
rendered here was a gift within § 102(a). Accordingly, we affirm
the judgment of the Court of Appeals. Therefore, we think it
unnecessary to consider or express any opinion as to whether the
assistance in fact constituted income to the respondent within the
meaning of § 61(a).
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. [
Footnote 6] We have rejected that
contention in our opinion in
Duberstein. In the
Page 363 U. S. 304
absence of specific objection at trial, or of demonstration of
any compelling reason for dispensing with such objection, we do not
here notice any defect in the charge, in the light of the
controlling legal principles as we have reviewed them in
Duberstein.
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
Page 363 U. S. 305
of power to decide the question, and once we say that such
conclusions could with reason be reached on the evidence, and that
the District Court's instructions are not overthrown, our reviewing
authority is exhausted, and we must recognize that the jury was
empowered to render the verdict which it did.
Affirmed.
[
Footnote 1]
"Except as otherwise provided in this subtitle, gross income
means all income from whatever source derived, including (but not
limited to) the following items:"
"(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."
[
Footnote 2]
"Gross income does not include the value of property acquired by
gift. . . ."
[
Footnote 3]
After the increase referred to, married strikers without
children received a $15 weekly food voucher; those with one child,
an $18 voucher.
[
Footnote 4]
Compare N.Y. Labor Law, § 592 (compensation payable
after seven weeks of striking).
[
Footnote 5]
Article 12, § 1 provides that "The International Executive Board
. . . shall have the power to authorize strikes." Section 15 of
that article provides that, upon such authorization,
"it shall be the duty of the International Executive Board to
render all financial assistance to the members of strike consistent
with the resources and responsibilities of the International
Union."
The strike funds referred to are provided for by §§ 4 and 11 of
Art. 16 of the International's constitution.
[
Footnote 6]
Specific challenge to the instructions was not made by the
Government until its reply brief in this Court, and then only on
the basis we have noted.
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. Rev.Rul. 57-1,
1957-1 Cum.Bull. 15. This ruling, if valid, governs this case. The
taxpayer assails the ruling on three grounds. First, it is urged
that, in a series of rulings since 1920, the Commissioner has
treated both public and private "subsistence relief" payments as
not constituting gross income; that union strike benefits are not
relevantly different from such "subsistence relief"; and that, with
due regard to fair tax administration, the Commissioner is
constrained so to treat strike benefits in order to accord "equal
treatment." Second, it is urged that both the Commissioner's
rulings and court decisions have evolved an exclusion from the
statutory category of "gross income," not explicitly stated in the
statute, for "alleviative" receipts which do not result in any
"enrichment,"
i.e., "reparation" payments made in
compensation for some loss or injury suffered by the recipient, and
that strike benefits fall within this exclusion. Third, it is urged
that strike benefits in general, or at least these strike benefits
in particular, are to be deemed "gifts" within the meaning of the
statutory exclusion from gross income of "gifts."
Page 363 U. S. 306
The taxpayer's first ground, that of the denial by the
Commissioner to strike benefits of consistent treatment accorded
other public and private "subsistence relief" payments, depends
wholly upon past rulings of the Commissioner. In chronological
order, the substance of the Commissioner's rulings deemed relevant
to this ground by the taxpayer are set out in the Appendix to this
opinion,
post, p.
363 U. S. 317. Set out as well are the rulings deemed
pertinent by both parties to the theory of "alleviate"
"reparations" receipts. The two theories overlap, and much of the
material relevant to them is the same. For each ruling are included
the relevant facts, the Commissioner's conclusion, with his
reasons, and supporting authority, when given.
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
Page 363 U. S. 307
payments in those cases were either made from funds partly or
wholly sustained by the employer (Numbers 5 and 19), or the
recipient had become eligible for benefits by paying into the fund
from which the payments were made (Numbers 15, 24, and 25). Thus,
it can be said that there was consideration for the payments, as
there is, for example, consideration for insurance. In Numbers 24
and 25 it is in fact clear that the benefits paid varied with the
recipient's contribution to the fund, and, in Number 15, the fact
is not stated one way or the other."
"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
Page 363 U. S. 308
member of the union. The Commissioner has regularly taxed
"subsistence" payments by unions to union members, as well as
payments made from a fund to which the recipient contributed, or to
which his employer contributed.
See Numbers 1, 2, 15, 19,
24 and 25. Although it may be possible to distinguish all these
rulings on the ground that, here, taxpayer's contribution to the
union was minimal, and that the strike benefits were in fact paid
to members and non-members alike, they hardly furnish solid basis
for a claim of uniform treatment of nontaxability by the
Commissioner of payments like the strike benefits in this case.
My second objection is more basic. A fair evaluation of the
administrative materials in the
363
U.S. 299app|>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 nontaxability 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
Page 363 U. S. 309
is no such rational basis can the Commissioner be said to be
denying "equal" treatment. Accordingly, I think that the rulings in
which the Commissioner has not imposed a tax must be analyzed to
ascertain whether the only principle which can explain them is a
principle that "subsistence relief" is not taxable, or whether they
can be reasonably explained, individually or severally, as the
result of the application of some other principle or principles
which do not govern the present strike benefits. I think the
Commissioner's prior rulings of nontaxability can all be explained
in a way which leaves the Commissioner free to assert that the
strike benefits in this case are, unless "gifts," part of gross
income, without denying "equal" treatment.
There are sixteen rulings set forth in the
363
U.S. 299app|>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 payment 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. "
Page 363 U. S. 310
"In Numbers 3, 4, 6, 7, 14, 16, 20, and with regard to part of
Number 12, the reasons given or suggested were that the payment
involved was to be treated as compensation for a loss or injury
that had been suffered and that it was not taxable either because
not greater in amount than the loss or because the thing lost or
damaged had no ascertainable market value, and so it could not be
said that there had been any net profit to the taxpayer through the
effectual exchange of the thing lost for the payment received.
Although not articulated there, such reasons may well have applied
also in Number 13, whose express ground was one of 'gift.'"
"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.'
"
Page 363 U. S. 311
The principle at work here is that payment which compensates for
a loss of something which would not itself have been an item of
gross income is not a taxable payment. The principle is clearest
when applied to compensation for the loss of what is ordinarily
thought of as a capital asset,
e.g., insurance on a house
which is destroyed.
See Number 12. If a capital asset is
sold for no more than its basis, there is no taxable gain. The
result, then, is the same if it is destroyed and there is paid in
compensation no more than its basis. There are, to be sure,
difficulties, not present where ordinary assets are involved, in
applying this principle to compensation for the loss of something
which has no basis and which is not ordinarily thought of as a
capital asset, such as health or life or affection or reputation.
With those difficulties, we have no concern. The relevant question
is whether the Commissioner has, or reasonably could have, applied
a principle of reparation to deal with these cases, and the reasons
given by him in Numbers 3, 4, 6, 7, 12, 14, 16, and 20 show that he
has.
It is important to note that, in
Commissioner v. Glenshaw
Glass Co., 348 U. S. 426,
348 U. S. 432,
note 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,
265 U. S.
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
Page 363 U. S. 312
Car Heating & Lighting Co., 297 U. S.
88. That is not so in any of the rulings set out, where
the thing lost and compensated for was not an item of taxable
income, but an aspect of capital or analogous to capital, which
obviously would not have been included in gross income had it been
retained.
Taking stock, then, ten rulings of nontaxability 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. "
Page 363 U. S. 313
"Number 18 dealt with payments by the Government of Panama under
an Act 'basically similar' to the United States Social Security
Act."
"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 nongovernmental payments, either by
employers, unions, or "private" groups which have been similar to
the Social Security benefits not taxed in their character as
"subsistence 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 nongovernmental payment
as nontaxable. 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 nongovernmental 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 the relation
Page 363 U. S. 314
to the tax statutes, a reason for excluding its benefits from
taxation, while this policy does not apply to other payments.
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.
Page 363 U. S. 315
Finding these strike benefits not otherwise outside the
statutory concept of "gross income," the decisive factor for me in
this case is whether the strike benefits are to be deemed a "gift."
As a matter of ordinary reading of language, I could not conclude
that all strike benefits are, as a matter of law, "gifts." I should
suppose that a strike benefit does not fit the notion of "gift." A
union surely has strong self-interest in paying such benefits to
strikers. The implications arising out of the relationship between
a union which calls a strike and its strikers are such that,
without some special circumstances, it would be unrealistic for a
court to conclude that payments made by the union for which only
strikers qualify, even though based upon need, derive solely from
the promptings of benevolence.
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.
Page 363 U. S. 316
For me, then, the question is whether there is anything in this
particular record to justify a jury in finding, as it must be
deemed to have found under these instructions, that the payment to
taxpayer was, unlike the ordinary strike benefit, wholly a
benefaction because of need, uninfluenced by the union's
self-interest in promoting the success of the strike. The trial
judge held that the record precluded the jury's verdict; the Court
of Appeals reinstated that verdict.
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
363
U.S. 299app|>Appendix, and
see also Rev.Rul. 59-58,
1959-1 Cum.Bull. 17, holding that the value of turkeys, hams, etc.,
given by an employer to employees at Christmas or some other
holiday need not be reported as income. Although it is, for me, a
very close question, I find sufficient evidence in the record to
support the theory that, in making these payments, the union was
exercising a wholly charitable function. On this view, restricted
to the particular set of circumstances under which the special
verdict was rendered, I would therefore hold the payment
Page 363 U. S. 317
in this case to be a gift, and would affirm the judgment
below.
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 factfinders -- whether courts or jury
-- by our decision today in
Commissioner v. Duberstein and
Stanton v. United States, ante, p.
363 U. S. 278.
|
363
U.S. 299app|
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 O.D. 552, 2 Cum.Bull. 73 (1920).
"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. I.T. 1293, I-1 Cum.Bull. 63 (1922).
"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. Sol.Op. 132, I-1 Cum.Bull. 92 (1922).
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, 252
Page 363 U. S. 318
U.S. 189, it must be held that there is no gain, and therefore
no income, derived from the receipt of damages for alienation of
affections or defamation of personal character. In either case, the
right invaded is a personal right, and is in no way transferable.
While a jury endeavors roughly to compute the amount of damage
inflicted, in the very nature of things, there can be no correct
estimate of the money value of the invaded rights. The rights, on
the one hand, and the money, on the other, are incomparable things
which can not be placed on opposite sides of an equation. If an
individual is possessed of a personal right that is not assignable
and not susceptible of any appraisal in relation to market values,
and thereafter receives either damages or payment in compromise for
an invasion of that right, it cannot be held that he thereby
derives any gain or profit."
Revoking S. 1384, 2 Cum.Bull. 71, 72 (1920), which had held such
damages taxable, and relying on T.D. 2747 (unpublished), where "it
was held that damages for personal injuries due to accident do not
constitute income."
4. I.T. 1804, II-2 Cum.Bull. 61 (1923).
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 Sol.Op.
132,
supra, Number 3, and
Eisner v. Macomber,
252 U. S. 189.
5. I.T. 1918, III-1 Cum.Bull. 121 (1924).
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 employees
Page 363 U. S. 319
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 concept of the
term 'income.' In the instant case, the award is, in fact . . . to
restore [the recipient] . . . to substantially 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 income.
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 § 204(a) of the Social Security Act, 49
Stat. 620, to "aged individuals not qualified for benefits (under §
202 of the Act)" upon their reaching age 65. Payments amount to 3
1/2% of the total wages paid to the individual with respect to
employment after Dec. 31, 1936, and prior to reaching 65.
Held, payments not subject to income tax.
Page 363 U. S. 320
9. I.T. 3229, 1938-2 Cum.Bull. 136.
Lump sum death payments under the "Federal old-age benefits"
provisions in §§ 203 and 204(b) of the Social Security Act to the
estates of those deceased. Amount paid equals 3 1/2% of wages
earned after Dec. 31, 1936, if death occurs before 65; if death
occurs after 65 amount paid is the difference between what the
deceased had already been paid under the Social Security Act and 3
1/2% of his total wages after Dec. 31, 1936, or the difference
between what the deceased has already been paid under the Social
Security Act and what he was entitled to be paid under that Act
during his life, whichever difference is higher.
Held,
citing I.T. 3194, Number 8,
supra, that "likewise" these
payments are not subject to income tax.
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 Social Security Act,
called the Federal Unemployment Trust Fund. Money is deposited in
the fund by the various States under the provisions of the Social
Security Act.
Held, payments not subject to income
tax.
11. I.T. 3447, 1941-1 Cum.Bull. 191.
Monthly payments from the Federal Old Age and Survivors
Insurance Trust Fund under § 202 of the Social Security Act, as
amended, 53 Stat. 1360.
Held, payments not subject to
income tax.
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
Page 363 U. S. 321
deductibility of losses sustained by the taxpayer in the
casualty," and (2) whether disaster relief in the form of food,
clothing, medical supplies, etc., will affect "the loss deduction
[for casualty losses provided by the Code]."
Held, amounts
received
"from the American Red Cross by a disaster victim in the form of
cash or property for the purpose of restoring or rehabilitating
property of the victim which was lost or damaged in the casualty
should be applied to reduce the amount of the deductible loss
sustained by the taxpayer,"
but
"[f]ood, medical supplies, and other forms of subsistence
received by the taxpayer which are not replacements of lost
property do not reduce the amount of any loss deduction to which he
is otherwise entitled nor do they represent taxable income to
him."
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 corporation to
employees and their families who were injured 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
related 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
Page 363 U. S. 322
nature, that is, compensation for loss of life, are not embraced
in the general concept of the term
income,'" citing I.T. 2420,
Number 6, supra.
15. Rev.Rul. 54-190, 1954-1 Cum.Bull. 46.
Pension payments to employees from a fund administered 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 employment, 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 federal employees
pursuant to the Social Security Act, as amended, 68 Stat. 1130.
Payments in amounts to equal payments employees would receive if
covered by state unemployment compensation laws in States where
employed and subject to the same conditions as such state payments
would be. Payments made either by State, acting as agent of the
United States, or by the Secretary of Labor.
Held,
payments not subject to income tax, relying on I.T. 3230, Number
10, supra (relating to state
Page 363 U. S. 323
unemployment payments out of federally administered fund under
the Social Security Act). The principle applied there considered
equally applicable here.
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 living 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 individuals 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 supplement 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 payment
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 reimbursement 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
Page 363 U. S. 324
basis, they may or may not be income, depending on the
circumstances of the case. No ruling made with regard to payments
not on account of property taken away.
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, taxable.
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 Federal 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, 62 P.S. § 2501
et seq., for the purpose of
"providing for and regulating assistance to certain classes of
persons . . . requiring relief." The law authorizes the State "to
cooperate 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. . . . "
Page 363 U. S. 325
". . . Amounts received as pensions or annuities under the
Social Security Act or the Railroad Retirement Act are excluded
from gross income."
24. Rev.Rul. 57-383, 1957-2 Cum.Bull. 44.
Payments to unemployed workers from union unemployment fund
financed through dues. Plan similar to insurance, employee choosing
beforehand to 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 taxation, 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 unemployment 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. Commissioner, 302 U. S.
34,
302 U. S. 41, in
holding payments by stockholders
Page 363 U. S. 326
to employees were, on the facts there present, gifts, said:
"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 satisfaction 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
Page 363 U. S. 327
(so far as the present record shows) respondent acquiesced in
the submission to the jury, the United States received more favored
consideration than it could claim as of right.
* An administrative letter from the national union to the local
unions dated March 6, 1952, states in part:
"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 Community
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
care and other such services. These services can be used by our
members during strike periods as well as in lay-off periods. Our
members support and pay for such services through taxes for
Federal, state and local public agencies and through contributions
for voluntary community agencies."
"
* * * *"
". . . Emergency strike assistance may be given to strikers who
cannot meet their minimum needs with their own individual
resources, who cannot qualify for such assistance from community
agencies. Local Unions requiring strike assistance from the
International Union must make their application for assistance to
their Regional Director."
The parties stipulated to the following:
". . . The International Union grants strike benefits to
nonmembers of the Union who participate in a strike if they do not
have sufficient income to purchase food or to meet an emergency
situation. The Union treats such nonmembers on the same basis as
members of the Union, but nonmembers as well as members must be
strikers before they may receive assistance from the Union."
"In order to obtain strike benefits from the Union, each
applicant must appear before a Union Counselor who asks him a
series of questions which are contained on a printed Counseling
form."
"
* * * *"
". . . The Union makes a distinction between applicants in
granting strike benefits to them, depending on their marital status
and number of dependents. At the time the Kohler strike aid program
began, a single person received a food voucher for $6.00 per week;
a married couple without dependents received a food voucher for
$10.00 a week; a married couple with two children, a food voucher
for $13.85 a week. On June 28, 1954, the Union increased the amount
of aid to the people on the Kohler strike: aid for a single person
was increased to $7.50 a week; for a married couple without
dependents aid was increased to $15.00 a week; aid for a married
couple with one child was increased to $18.00 a week."
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. Duberstein,
Page 363 U. S. 328
ante, p.
363 U. S. 278,
there is a reasonable basis in the evidence to support the jury's
conclusion that the strike benefits paid to respondent by the union
were nontaxable "gifts," within the meaning of § 102(a) of the 1954
Internal Revenue Code. [
Footnote
2/1]
With deference, I am convinced that there was not, and that, to
the contrary, the evidence compels the conclusion, as a matter of
law, that those strike benefits were not "gifts" within the meaning
of § 102(a), as construed by the Court in the
Duberstein
case. [
Footnote 2/2]
The International Union is a private labor organization serving
as the certified bargaining agent and representative 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
Page 363 U. S. 329
a strike fund. [
Footnote 2/3]
Article 12, § 15 of its constitution further provides that:
"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 consistent 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 International's
constitution relate to financial assistance to union members, it
was stipulated at the trial that:
"The International Union grants strike benefits to nonmembers of
the Union who participate in a strike if they do not have
sufficient income to purchase food or to meet an emergency
situation. The Union treats such nonmembers on the same basis as
members of the Union, but nonmembers as well as members
must be
strikers before they may receive assistance from the
Union."
(Emphasis added.)
Page 363 U. S. 330
It was further stipulated that respondent, who was not a member
of the union during the early months of the strike, "received from
the International Union" strike benefits totaling $565.54 during
the taxable year 1954. [
Footnote
2/4]
It is now established that objective intention of the transferor
determines whether transfers constitute "gifts," within the meaning
of § 102(a).
Bogardus v. Commissioner, 302 U. S.
34;
Commissioner v. Duberstein, 363 U.S. at
363 U. S. 278. In
Duberstein, the Court, in attempting to shed additional
light on the factors determinative of whether requisite donative
intent impelled the transfer, said:
"This Court has indicated that a voluntarily 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 constraining 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 statutory 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.
363 U. S.
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,"
Page 363 U. S. 331
or "out of affection, respect, admiration, charity or like
impulses." To the contrary, it seems plain enough that those
payments were made by the union to enable and encourage respondent
and other striking workers to continue the strike which had been
called or approved by the union, and were not motivated by
benevolence. Those payments were therefore made in furtherance of
one of the union's principal economic objectives -- the winning of
the strike -- and hence proceeded primarily from "the incentive of
anticipated benefit of an economic nature" to the union, and from
"the constraining force" of the union's promise to assist striking
workers in winning the strike.
Duberstein, ante, p.
363 U. S. 285.
Because of the economic advantages to be obtained by the union from
winning the strike, the union had a manifest self-interest in
financially sustaining the strikers while they carried on its
strike. This shows as a matter of law that the payments were not
made with the donative intent required to constitute "gifts" within
the meaning of § 102(a) and of the
Bogardus and
Duberstein cases. Wholly apart from the immediate
objective which the union sought to achieve by paying these strike
benefits, they could qualify as "gifts," as the Court recognizes,
only if they were made, as said in
Duberstein, with a
"detached and disinterested generosity," and this record shows that
it was principally private business purposes, not detached and
disinterested generosity, that prompted the union to make the
payments in question.
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 function" as would a local
welfare agency in furnishing assistance 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
Page 363 U. S. 332
strikers to sustain them while they carried on the strike,
whereas a welfare agency assists the needy solely from humanitarian
impulses, without purpose to obtain any benefit for itself and
whether the needy recipients are strikers or not. Public welfare
payments represent the charitable response of the community to
relieve hardships arising from conditions beyond its control, but
the strike benefits shown by this record were designed, principally
at least, for the purpose of sustaining the strikers while they
carried on the union's strike to victorious end. The motivation of
a public welfare agency in supplying basic needs to the unemployed
is purely charitable in nature, but payments by a private union to
striking workers to enable them to continue to successful
conclusion a strike called or approved by the union cannot
reasonably be said to have proceeded primarily from any such
charitable impulse. [
Footnote
2/5]
This conclusion is fortified by the consistent and longstanding
rulings of the Treasury Department. It has twice ruled that strike
benefits do not constitute nontaxable "gifts" to the recipient. In
1920, it held that:
"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,
Page 363 U. S. 333
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 payments 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 assistance 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
Secretary-Treasurer:
"In this particular case, the community assistance available in
Sheboygan County was so small, and so
Page 363 U. S. 334
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
expected 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 impulses,"
Duberstein, ante, p.
363 U. S. 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 unmistakably, 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 that 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.
[
Footnote 2/1]
Section 102(a) provides: "Gross income does not include the
value of property acquired by gift, bequest, devise, or
inheritance." 26 U.S.C. § 102(a).
[
Footnote 2/2]
Although the plurality opinion apparently considers it
unnecessary to decide whether the strike benefits received by
respondent constitute "income," and deals only with the question
whether they were excludable "gifts," I think it is clear that
those payments were "income." Strike benefits constitute realized
gains to their recipients, as a partial substitute for lost wages,
rather than lost capital, and are materially different in nature
from the various categories of realized gains which have been
treated as nontaxable through administrative fiat. (
See
the Treasury Rulings detailed in MR. JUSTICE FRANKFURTER's
concurring opinion.) Strike benefits are, therefore, within the
reach of the "gross income" provision of the Code.
See
Commissioner v. Glenshaw Glass Co., 348 U.
S. 426,
348 U. S.
429-430.
[
Footnote 2/3]
The evidence shows an administrative letter was written by the
International to its locals describing the nature and purpose of
its strike fund as follows:
"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."
[
Footnote 2/4]
While the Court of Appeals emphasized respondent's status as a
nonmember when he began receiving strike benefits from the union,
the parties' stipulation nullifies any possible basis for
distinguishing between members and nonmembers in deciding the
question before us, and indeed the Court does not purport to rest
its decision on any such distinction.
[
Footnote 2/5]
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 differently than these strike benefits, as an
"outright donation" by the union. But plainly such were not the
generous and charitable impulses 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.