Case Of Duberstein V Commissioner And Stanton V. United States

Krasimira Schrib ACTG 441
Brief
Duberstein v Commissioner and Stanton v. the United States
Facts:
Duberstein v Commissioner
Duberstein was a president of Duberstein Iron and Metal Company. He did business with Berman, who was president of Mohawk Metal Corporation for approximately 7 years. Occasionally Berman asked Duberstein for referrals for new customers, which Duberstein provided. The provided information was very helpful for Berman’s Company, so in act of gratitude Berman, gave Duberstein a new Cadillac as a gift. Berman deducted the car as a business expense on its company taxes, but Duberstein did not include the car in his personal taxes believe that

Was the money Stanton received a gift or compensation?
Analysis:
In the first case, Duberstein argued that the Cadillac should not be included in his taxable income because he did not expect anything in return for the information he provided. He did not want to accept the car because he already had two cars and did not need or desire another.
The court indicates that determining whether something is a gift or not depends on the intention of the transferor (Bogardus v. Commissioner, 302 U.S. 34) and the lack of any legal or moral obligation to make such a payment does not establish that as a gift, especially if the payment proceeds from “the incentive of anticipated benefit” of an economic nature. It is irrelevant if the donor wants the item.
The court stated that the motives behind the gift are significant in this case, and the court believes that the car was gifted as a compensation for the past information Berman received and as an investment for the future

The court ruled that this is a payment and he is entitled to the taxes for it. The court reached this decision only taking the intention and motives of the donor but not the donee. The donee, Duberstein, did not encourage the donor to make a gift. The gift of the car was solely the decision of the donor, Berman, and it should not be taxable for Duberstein.
In the second case, Stanton was working at Trinity church for 10 years and received a payment of $20,000 when he resigned to open his own business. Stanton did not claim the money he received in his tax return. The court ruled that this is a gift because the money was given as result of respect and the church did not expect any further economic relationship between the donor, The Trinity church and the donee, Stanton, and it does not need to be included in the taxpayer’s tax return.
In both cases, the court’s definition of “gift” is unclear. The court affirms that a gift is something that must be given with no expectation of getting something in return or receiving something of value and should not be taxable. On the other hand, if the payments are given for the past or future economic benefits, they should be taxable. The court determined also that the courts must take into consideration the intention of the donor and should decide each case