Lucy H. Harper v. United States

Appellant United States appeals from an order of the District Court, 314 F. Supp. 360 , declaring that certain payments made by Graybar Electric Company, Inc., to Appellee Harper were gifts and therefore not subject to inclusion in gross income. Appellant argues that under Commissioner of Internal Revenue v. Duberstein, 363 U.S. 278 , 80 S.Ct. 1190 , 4 L.Ed.2d 1218 (1960), the payments in question cannot be found to have been gifts and that they must therefore be included in the recipient’s gross income.

Mr. Harper was an employee of Gray-bar Electric Company until his death in 1954. At the time of his death, voting trust certificates representing 5,640 shares of Graybar common stock, issued to Mr. Harper, were held as community property by Mr. Harper and Appellee, Lucy Harper, his wife. The stock was subject to a restrictive agreement which required that, upon the death of the employee stockholder, the stock be offered to Graybar at its par value, $20 per share. Graybar exercised its option in this instance on March 11, 1955, and paid decedent’s estate $12,800. The shares, for estate tax purposes, were valued at par value.

In 1958 and 1959, Mrs. Harper received from Graybar the…