Gaugler v. United States

204 F. Supp. 493, 9 A.F.T.R.2d (RIA) 1531, 1962 U.S. Dist. LEXIS 5159
CourtDistrict Court, S.D. New York
DecidedApril 16, 1962
StatusPublished
Cited by8 cases

This text of 204 F. Supp. 493 (Gaugler v. United States) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gaugler v. United States, 204 F. Supp. 493, 9 A.F.T.R.2d (RIA) 1531, 1962 U.S. Dist. LEXIS 5159 (S.D.N.Y. 1962).

Opinion

LEVET, District Judge.

This is a civil action arising under the Internal Revenue Code of 1939, §§ 22(a), 22(b) (3), 26 U.S.C.A. (I.R.C.1939) §§ 22(a), 22(b) (3). The Court has jurisdiction of the subject matter and of the parties to this action. 28 U.S.C. § 1346 (a) (1).

The parties have agreed that the claim in question is for $61,482.58 together with interest from the 15th day of March, 1953, and the costs and disbursements of this action. (Pre-trial Order, filed February 13, 1962).

The Court, after considering the pleadings, evidence, exhibits, briefs and stipulations of the parties, now makes and files herein its Findings of Fact and Conclusions of Law, separately stated.

FINDINGS OF FACT STIPULATED

1. The plaintiff, Eva L. Gaugler, is a citizen of the United States and until June, 1961 resided in Westchester County which is within the Southern District of New York. She was born May 4, 1892 and was married to Raymond C. Gaugler on November 26, 1914. She does not have a social security number. Her husband, Raymond C. Gaugler, died *494 a resident of the Village of Larchmont, County of Westchester, State of New York on January 11, 1952, leaving a Last Will and Testament wherein plaintiff was named and appointed Executrix. This Last Will and Testament was duly admitted to probate by the Surrogate of the County of Westchester and letters testamentary were duly issued to the plaintiff, who had qualified according to law on or about January 23, 1952, and the plaintiff has ever since that time acted as such Executrix.

2. Raymond C. Gaugler was born August 3, 1892 and had had approximately thirty-four and one-half (34%) years of service with American Cyanamid at the time of his death. In 1928, he was Comptroller of the Company; in 1929, Treasurer; 1932, Vice President, and 1951, President. The cause of his death was cerebral hemorrhage and his physical condition for the six months prior to his death appeared to be good. His annual compensation for the years 1942-1952 was as follows:

The bonus set forth opposite each year is the amount based on that year’s operations although it was actually received by Mr. Gaugler in the subsequent year.

3. The aggregate amount of the aforesaid salary and bonus so paid to or due Raymond C. Gaugler constituted all of the compensation to which he had a legally enforceable right against American Cyanamid Company.

4. Amounts totalling $72,727.27 were paid to the plaintiff in her individual capacity by American Cyanamid Company in the year 1952. This amount is equal to the amount Raymond C. Gaugler would have received in salary had he remained in the employ of the company for the balance of the year 1952.

5. At the time of his death, there were $4,174,966 shares of common stock of American Cyanamid Company outstanding. Three Hundred Six (306) shares were owned by plaintiff and 2,-907 shares by her husband. Neither plaintiff nor her husband held any of the preferred stock of American Cyanamid Company as of January 11, 1952.

6. On January 16, 1952, the following resolution was unanimously adopted by the Executive Committee of American Cyanamid Company:

“RESOLVED: That, for the period commencing January 11, 1952 and ending December 31, 1952, this Company make voluntary payments to Mrs. Eva L. Gaugler, the widow of Mr. R. C. Gaugler, late President of this Company, at the times and equal to the salary which would have been payable to Mr. Gaugler for that period at his salary rate in effect at the time of his death.”

7. Pursuant to such resolution, the aforesaid payments totalling $72,727.27 were paid to the plaintiff in her individual capacity. Said payments were deducted from ordinary income on the Federal in *495 come tax returns of the American Cyanamid Company.

8. Plaintiff has never owned more than a fraction of a per cent of American Cyanamid’s outstanding common stock and has never owned any of its preferred stock. She has never been a director, officer or employee of American Cyanamid, has never rendered any services to it.

9. For the calendar year 1952, plaintiff and Raymond C. Gaugler, by plaintiff, his Executrix, filed a joint income tax return prior to March 15, 1953 with the District Director of Internal Revenue, Upper Manhattan District and paid to said District Director a joint tax of $141,338.82.

9A. The Commissioner of Internal Revenue included in plaintiff Eva L. Gaugler’s taxable income for said taxable year the aforementioned $72,727.27.

10. On or abount February 9, 1956, plaintiff and Raymond C. Gaugler, by plaintiff, his Executrix, filed with the said District Director of Internal Revenue a claim for refund in the amount of $61,-482.51, or such greater amount as may be legally refundable, together with interest. Thereafter, by registered letter dated September 5, 1957, the Director of Internal Revenue, Upper Manhattan District, rejected the aforesaid claim for refund.

11. In each case of payment to widows of deceased officers and employees American Cyanamid had paid the officer or employee, or his estate, all sums due as salary and bonus for services rendered. (See Schedule “A” — Appendix).

12. No payments were made to the plaintiff on account of the death of her husband under any pension, profit sharing, stock bonus, stock option or similar plan of the American Cyanamid Company, although the Company paid the premiums on $2,000. of a $20,000. policy with Prudential Insurance Co. of America on the life of the decedent, the full proceeds of which were payable and paid to the plaintiff. (Pre-trial Order, filed February 13, 1962).

OTHER FINDINGS

13. George R. Martin, now director and executive president of American Cyanamid, with one George G. Allen, now deceased, and one Kenneth C. Towe, were members of the executive committee who passed the resolution (PI. Ex. 1) in January 1952. (SM 7-8, 12).

14. The executive committee had all the powers of the board of directors when the board was not in session. (SM 9).

15. The executive committee decided that the amount that should be given to Mrs. Gaugler would be an amount equal to Mr. Gaugler’s fixed salary over a period of the rest of 1952. (SM 14).

16. These payments were made semimonthly. Deceased had received a salary semi-monthly before. (SM 17).

17. There was no written plan concerning such payments. (SM24).

18. The committee considered previous payments to widows. (SM 24-25).

19. The minutes of the executive committee contain the following statement:

“He [Mr. Towe] stated that it has been the practice in the event of the death of valued employees and officers with long service with the company to pay, for varying lengths of time, their widows amounts equal to their salaries.” (Gov’t Ex. A).

20. Mr. Bell, a past president of the corporation, died in the latter part of December 1950, and payments to the widow equal to what Mr. Bell’s salary would have been for the balance of 1950 and for the full year of 1951 were authorized by the executive committee.

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Bluebook (online)
204 F. Supp. 493, 9 A.F.T.R.2d (RIA) 1531, 1962 U.S. Dist. LEXIS 5159, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gaugler-v-united-states-nysd-1962.