01 Bogardus v.

Comissioner
302 U.S. 34 (1937)
Sutherland, J.

Subject Matter: Donor’s Tax  Meaning of Gift

Summary: Bogardus received $10,000 from Unopco Corporation for services they rendered to Universal Oil, a company
previously bought out whose stockholders formed Unopco. Unopco despite being no longer related to Universal after the
buyout still payed the employees (some no longer even employees) “gifts” and “honoraria” to thank them for their loyalty.
The Commissioner taxed the payments as compensation. The Supreme court held that despite the erroneous use of
honoraria and bonus the facts and circumstances show that what was given was actually a gift and not payment for
services.

Doctrines:

When all the facts and circumstances clearly prove an intent to make a gift, the erroneous use of the terms "honorarium"
and "bonus" cannot convert the gift into a payment for services.

Payments made to present and former employees of a corporation by its former stockholders, acting through a new
corporation which had taken over part of the property of the other, held not "compensation for personal services," taxable
to the recipients as income under § 22(a) of the Revenue Act of 1928, but "gifts," exempted from taxation by subdivision
(b)(3) of that section. 

Parties:

Petitioner Bogardus  An employee

Respondent Commissioner of Internal Revenue
Facts:

1. Bogardus received ($10,000) from a distribution aggregating over $600,000 made by the Unopco Corporation at the
instance of the stockholders to those who somehow aided Universal Oil Company.
2. Universal established Unopco prior to its entire stock being bought by United Gasoline. Unopco did not do any
business besides buying the assets of Universal Oil and therefore is only in the business of investing. (Stockholders of
Universal went to Unopco withs same proportion of holdings)
3. During the Unopco board meeting, they decided to show appreciation to those who aided Universal through Gifts or
Honoraria  Resolution on Jan. 9, 1931
4. It was stipulated: "Said payments were not made or intended to be made by said Unopco Corporation or any of its
stockholders as payment or compensation for any services rendered or to be rendered or for any consideration given
or to be given by any of said employees, attorneys or experts to said Unopco Corporation or to any of its
stockholders."
5. The Board of Tax Appeals sustained the determination of the Commissioner, and the court below, upon review,
affirmed the order of the Board.

Issues:

1. WON The Payments to the employees of Universal, like Bogardus, by Unpoco were gifts – YES

Ratio:

Yes – The Payments were considered gifts

 The recipients of the bounty here in question never were employees of the Unopco, or of any of its stockholders.
Universal, in whose employ some of the recipients then were, was at the time in no way connected with the Unopco or
any of its stockholders. Some of the recipients had not been in the employ even of the Universal for many years (One
wasn’t even an employee)
 Neither the Universal nor anyone else was under any obligation, legal or otherwise, to pay any of the recipients,
including petitioner, any salary, compensation, or consideration of any kind. Such is the express stipulation of the
parties.
 The disbursements were not made or intended to be made for any services rendered or to be rendered or for any
consideration given or to be given by any of said employees, attorneys, or experts to said Unopco or to any of its
stockholders.
 The disbursements were authorized, and the burden borne, by persons who were then strangers to the
Universal and its employees, under no obligation, legal or otherwise, to that company or to any of its present
or former employees. 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.

 In sum: the stockholders of the Unopco, having at the time no connection with the Universal, but rejoicing in the fact of
their own great good fortune, and mindful of the former loyal support of a number of employees of the Universal
Company, and desiring to remember them "in the form of a gift or honorarium," resolved to make through the Unopco
the distribution in question. In doing so, they were moved to an act of "spontaneous generosity."

 Provisions:
o Section 22(a) of the applicable revenue Act provides that "gross income," among other things, includes
"compensation for personal service, of whatever kind and in whatever form paid."
o Subdivision (b)(3), immediately following, provides that "the value of property acquired by gift, bequest, devise, or
inheritance" shall not be included in gross income, and shall be exempt from taxation under the income tax title.

Dispositive: Judgment reversed.

Others/Notes: