Julian C. Stanford and Elizabeth C. Stanford v. Commissioner of Internal Revenue

Before us are petitions for review of the decision of the Tax Court of the United States, reported at 34 T.C. 1150 . The petitioners are husband and wife, who filed separate income tax returns on the cash basis for the taxable year 1955. The husband, Julian C. Stanford, will hereafter be called the taxpayer.

The basic and broad question raised by the petitions for review is whether or not the receipt by petitioners in 1955 of 45,-000 German marks ($10,662.48) from Kaufhof A.G., a German corporation [the Corporate successor of Leonhard Tietz A.G.], represents taxable income under the provisions of the Internal Revenue Code.

The Tax Court found as a fact that the payment represented a pension paid to petitioners for services previously rendered by the taxpayer to Leonhard Tietz A.G., and accordingly determined and ordered a deficiency in income tax for the taxable year 1955 in the amount of $1,-326.30 in the case of the taxpayer, and $1,411.40 in the case of taxpayer’s wife.

The background facts are not in dispute but must be stated in some detail in order to give focus to the questions of law which must be resolved. The essential facts may be summarized as follows: Petitioners…