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September 28, 1955

Alden D. STANTON and Louise M. Stanton, Plaintiffs,
UNITED STATES of America, Defendant

The opinion of the court was delivered by: ABRUZZO

Plaintiffs instituted this action to recover the sum of $ 15,056.29 representing income taxes for the calendar year 1943 and interest which they allege was erroneously and illegally assessed and was erroneously and illegally collected by the Collector and Acting Collector of Internal Revenue for the First District of New York.

The action is brought under Title 28 of the United States Code, §§ 1346 and 1402(a).

All factual references will refer to the plaintiff, Alden D. Stanton. The plaintiff, Louise M. Stanton, is the wife of Alden D. Stanton and she was named as a party-plaintiff because she and her husband filed a joint income tax return for the year in question.

 In 1933 or 1934 plaintiff entered the employ of Trinity Church to manage its real property. Thereafter a New York corporation was formed known as Trinity Operating Company, Inc., and plaintiff became president and a member of the board of directors of the operating company. He eventually was named comptroller of the church but was never a vestryman or warden thereof. He was actively engaged on a full-time basis in managing the real estate investments of Trinity Church and its subsidiaries and in reorganizing and rehabilitating their properties, and in 1942 had been receiving an annual salary of $ 22,500.

 Desiring to engage in business on his own, he submitted his resignations on November 9, 1942, as comptroller of Trinity Church and president of the operating company to become effective at the pleasure of the vestry and of the board of directors respectively. The resignations were accepted to become effective November 30, 1942. He was not discharged but resigned voluntarily.

 On November 19, 1942, at a meeting of the board of directors of the operating company the following preambles and resolution were adopted:

 'Whereas Mr. Alden D. Stanton has tendered his resignations from all the offices he held under the Corporation of Trinity Church and its subsidiaries; and

 'Whereas said resignations have been accepted, to be effective as of November 30, 1942;

 'Be It Resolved that in appreciation of the services rendered by Mr. Stanton as Manager of the Estate and Comptroller of the Corporation of Trinity Church throughout nearly ten years, and as President of Trinity Operating Company, Inc., its subsidiary, a gratuity is hereby awarded to him to Twenty Thousand Dollars, payable to him in equal instalments of Two Thousand Dollars at the end of each and every month commencing with the month of December, 1942; provided that, with the discontinuance of his services, the Corporation or Trinity Church is released from all rights and claims to pension and retirement benefits not already accrued up to November 30, 1942.'

 Plaintiff was not present at the meeting nor did he vote on such resolution or participate in any way in the discussions which preceded it. The payments in the aggregate amount of $ 20,000 were paid, $ 9,600 by Trinity Church and $ 10,400 by the operating company, and the reason why the payments were made in instalments rather than in a lump sum was to avoid placing any undue burden on the church and its subsidiaries. There was no consideration whatever which entered into the passing of the resolution nor did the church or any of its subsidiaries owe the plaintiff any money on account of salary or for any other reason. The $ 20,000 was paid to plaintiff as a gratuity and bore no relationship to his salary and was treated by the donor as a gratuity on its books. Neither the church nor the operating company received any federal tax benefit on account of the gratuity paid to the plaintiff, nor were any amounts withheld from such payments.

 Plaintiff had been a member of the pension plan of Trinity Church but contributions paid by him were returned to him subsequent to his resignation.

 Plaintiff and Mrs. Stanton filed joint income tax returns for the years 1942 and 1943 and paid the income tax assessed. In such returns the amount of the gratuity was set forth as a gift but was excluded from gross income. The returns were audited and the Commissioner of Internal Revenue determined that there was a deficiency in taxes from plaintiff for the year 1943 in the amount of $ 10,629.57, based on plaintiff's alleged erroneous exclusion of the gratuity from gross income of the plaintiffs. The deficiency together with interest was assessed against the plaintiffs and they paid the tax and interest in the total amount of $ 15,056.29 to the Collector of Internal Revenue.

 Plaintiffs filed a claim for refund but the claim was rejected and disallowed and they have instituted this action to recover said amount. They are now moving for summary judgment.

 The summary of facts above related are those set forth in the papers submitted by plaintiffs in support of their motion and are not in any way controverted by the defendant, but in opposing this motion the defendant raises the objection that it has had no opportunity to cross-examine the plaintiff, Alden D. Stanton, and Reginald R, Belknap, a vestryman and church warden of Trinity Church who has submitted an affidavit in support of the plaintiffs' application. The defendant contends that the ultimate fact is whether or not a gift was made and that this fact can only be established by showing donative intent; that with respect to this the credibility of plaintiffs' witnesses is of the utmost importance and since the facts are peculiarly within the plaintiffs' knowledge the defendant must ...

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