International Freighting Corporation, Inc. v. Commissioner

135 F.2d 310 (1943)

Purchase the Printed Copy at bsmsphd.com

Nature of the Case

To access this section all you need to do is click here and register.

Facts

From 1933-1935 DuPont owned all of IFC (P) stock. In 1936 DuPont owned 2/3rds of the stock of P and General Motors owned 1/3rd. During the years 1933-36, P adopted a company bonus plan to motivate employees; it was the same plan that DuPont had for its own employees. Under the Class B part of the plan, awards were made to those employees who had contributed greatly to the success of P and were to be made from a portion of P's profits, which the finance committee would set aside in a Class B fund. Bonus recommendations were to be made by the president or heads of departments, and the executive committee of the board would then have final say on who got a Class B bonus. Bonuses were in the form of common stock in DuPont or cash to be invested in such stock. During 1936, P awarded 150 shares of bonus stock whose cost to P on the date of delivery was $16,153.36 but whose market value was $24,858.75. Each of the employees who got stock paid taxes and they used market value at time of delivery. P took a deduction of $24,858,75. The IRS wanted the taxes on the $8,705.39 difference between acquisition and market value at time of delivery. The Tax Court decided for the IRS. This appeal resulted.