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Edward A. v. Commissioner of Internal Revenue

January 16, 1979

EDWARD A. AND MARGARET E. RUESTOW, APPELLANTS
v.
COMMISSIONER OF INTERNAL REVENUE, APPELLEE.



Before MOORE and MANSFIELD, Circuit Judges, WYATT, District Judge.

Upon this appeal by Edward A. Ruestow and Margaret E. Ruestow from a decision of the United States Tax Court finding that $28,000 received by Edward A. Ruestow from his former employer upon his being involuntarily terminated as an employee in 1973 constituted taxable income rather than a gift as contended by Ruestow, subjecting appellants to a deficiency of $9,842 in payment of their federal income tax for the year 1973, the decision of the Tax Court is affirmed.

There was ample evidence that the payment of $28,000 represented severance pay, see § 61, Internal Revenue Code of 1954, 26 U.S.C. § 61; 26 C.F.R. § 1.61-2(a)(1), voluntarily paid as additional compensation for Ruestow's past services and in anticipation of its producing an economic benefit to the employer to the extent that it might preserve Ruestow's good will and create the general impression among prospective employees and others that the employer was an attractive firm for employment purposes. Under the circumstances we cannot label the Tax Court's findings clearly erroneous, which is the standard of review, see Commissioner v. Duberstein , 363 U.S. 278, 290-91 (1960). The fact that the payment for services was voluntarily made did not render it a gift rather than taxable compensation. Old Colony Tr. Co. v. Comm'r Int. Rev. 279 U.S. 716, 730 (1920).

19790116

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