Minor v. United States

772 F.2d 1472 (9th Cir. 1985)

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Nature of the Case

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Facts

Minor (P) was a doctor, and he entered into an agreement with a Corporation to render medical services to its subscribers. In 1967, Corporation adopted a deferred compensation plan for its participating physician. This plan was voluntary, and the doctor could elect a percentage of his fees to be put into deferred compensation. P’s agreement called for 50% of fees until November 1971 and then 10% thereafter. A trust was established to handle the program. The trustees purchased retirement annuities to provide for payment of benefits under the plan. The payments were due on retirement, death, disability, or when the party left the Corporation and went to work for other companies outside the area and not competing with the Corporation. The doctors also agreed to limit their practice after retirement but to continue to provide certain emergency and consulting services and to refrain from providing medical services to competing groups. P included in gross income only the 10% of the fees he actually received. The remaining 90% went into the deferred compensation plan. The IRS argues that P should have included in his gross income the fees that went into trust. The IRS relies on the economic benefit doctrine.