Lewis and Taylor, Inc. v. Commissioner of Internal Revenue

Lewis and Taylor, Inc., a California corporation, appeals from an adverse ruling by the Commissioner of Internal Revenue, affirmed by the Tax Court of the United States holding the corporation liable for federal taxes due on $7,-191.87 which the corporation had paid to the estate of Robert S. Abrons, a long-term employee subsequent to his death allegedly as additional compensation due Abrons. The Commissioner had ruled that the sum in question had been paid by the corporation to Abrons’ estate in partial payment for the repurchase of 50 shares of stock in the corporation held by Abrons at the time of his death, and was in no sense employment compensation. We reverse.

Jurisdiction is conferred upon this court by Section 7482 of the Internal Revenue Code of 1954.

Lewis and Taylor, Inc., is a small family-owned corporation formed in 1945 by Messrs. Taylor and Lewis. In 1947 it employed Abrons as office manager at an annual salary of $2,700, which was raised to $7,800 in 1958, with annual bonuses commencing in 1953. Abrons became a stockholder in 1952 when all stockholders executed a buy-sell agreement under which the surviving stockholders would purchase pro rata the stock of any…