Opinion
Docket No. 30180.
1952-06-26
JESSE S. RINEHART AND EVELYN H. RINEHART, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
Thomas L. Dalrymple, Esq., and Donald M. Hawkins, Esq., for the petitioners. James A. Scott, Esq., for the respondent.
INCOME— COMPENSATION FOR SERVICES— SECTION 22(a).— Money paid to the petitioner by his employer to assist in the purchase of a house at a new work location was compensation for services taxable under section 22(a). Thomas L. Dalrymple, Esq., and Donald M. Hawkins, Esq., for the petitioners. James A. Scott, Esq., for the respondent.
The Commissioner determined a deficiency of $1,971.64 in the income tax of the petitioners for 1947. The only issue for decision is whether $4,000, which the petitioner received from his employer in order to assist him in purchasing a house, was taxable income.
FINDINGS OF FACT.
The petitioners are husband and wife who now reside in Toledo, Ohio. Their joint return for 1947 was filed with the collector of internal revenue for the tenth district of Ohio.
The petitioner had been employed in Vineland, New Jersey, as controller of Kimble Glass Company. That company was purchased by Owens-Illinois Glass Company in June 1946 and the petitioner has been an employee of the latter company since that date. Owens- Illinois Glass Company moved some of the people, including the petitioner, who were in the executive offices of the business at Vineland, to Toledo, Ohio, on or about March 1, 1947. Twenty-six employees made the move.
Owens-Illinois Glass Company made an offer, to each of the 26 persons moved from Vineland to Toledo, to pay the lesser of 25 per cent of the purchase price or $4,000 toward the purchase price of a home purchased in Toledo, provided the employee was unable to find suitable rental housing. Only those employees who actually purchased houses pursuant to the plan received any benefit from it. The reason for the offer was that a housing shortage, particularly in rental property, existed in Toledo at the time.
The petitioner purchased a house in Toledo in October 1947 for $21,500. He notified Owens-Illinois Glass Company that he was purchasing the house, and the company, on October 10, 1947, gave him a check for $4,000 pursuant to its offer. The petitioner closed the deal for the purchase of the house on October 13, 1947.
Owens-Illinois Glass Company deducted the $4,000 as a payroll expense on its return for the period including October 1947.
The petitioners did not report the $4,000 as income on their joint return for 1947.
The Commissioner in determining the deficiency added the $4,000 to the net income disclosed on the return and explained that it was included under section 22(a).
All facts stipulated by the parties are incorporated herein by this reference.
OPINION.
MURDOCK, Judge:
The petitioners do not contend that the $4,000 was a gift but claim that it did not represent taxable income since it merely reduced the cost of the house. The petitioner testified that he thought the price of the house was too high and he would not have bought it if he had not been able to obtain the $4,000 from his employer. Suppose he had thought that meat prices in Toledo were too high and his employer had offered to pay 25 per cent of his meat bills until a total of $4,000 had been paid. Could it be successfully maintained that the $4,000 paid for meat was not income? This $4,000 was paid to the petitioner by his employer. It was paid because the employer wanted the services to continue and obviously would not have been paid if the situation had been otherwise. The employer regarded the $4,000 as additional compensation and took a deduction on its return on that basis. It was compensation for services and, as such, was expressly taxable to the recipient under section 22(a).
The case which the petitioner cites are distinguishable. The petitioner in James Brown, 10 B.T.A. 1036, was not an employee of Bache who paid a part of the amount which went to the seller when Brown acquired some stock, and the amount paid by Bache could not represent compensation to Brown. Eaton, in the case of Cyrus S. Eaton, 37 B.T.A. 715, agreed to buy a large block of stock at a price in excess of the market provided the corporation, the stock of which he was purchasing, would give him some other shares. It was held that the total amount which he paid was the purchase price of all of the shares acquired, both from the sellers and the corporation. There is no parallel here. The case of David A. DeLong, 43 B.T.A. 1185, does not involve comparable facts. It was held in Otto Sorg Schairer, 9 T.C. 549, that an employee did not sustain a loss when his employer compensated him for the difference between basis and amount realized upon the sale of his residence when he moved from one place to another to accommodate his employer. Section 23(e) does not allow deductions for any losses ‘compensated for by insurance or otherwise.‘ But here the $4,000 paid to the petitioner was not to compensate him for any loss. He sustained no loss. It was to enable him to buy a house which thereafter belonged to him. The Schairer case is not authority for holding that the $4,000 was not income to the petitioner.
Decision will be entered under Rule 50.