Graybar Electric Company, Inc. v. Commissioner of Internal Revenue ( 1959 )

PER CURIAM.

The taxpayer, Graybar Electric Company, Inc., petitions for review of a decision of the Tax Court which found deficiencies for four taxable years, 1947 through 1950, in amounts totalling $214,-593.24, of which $138,115.19 is still in controversy. The deficiencies arose from payments made to the estates or surviving relatives of deceased stockholders, taxpayer claiming that they were special death benefit payments which were reasonable compensation for services rendered by the deceased stockholders, all of whom had been its officers or employees, and thus deductible as ordinary and necessary business expenses under § 23(a)(1)(A) of the 1939 Code.

The Commissioner claimed that the payments were made with respect to stock purchased from the estates of its decedent stockholder-employees and not for services rendered, and that, in any event, the taxpayer had failed to discharge its burden of proving by a clear preponderance of the evidence that the payments were of the nature it claimed.

The taxpayer’s argument that the special death benefit payments were for services rendered by the employee-stockholder during his life is not supported by the facts. Although the stock of Gray-bar was 100% owned by its employees, 100% of the employees did not own stock. An employee not owning stock could by even more meritorious service have made a greater contribution to the company yet his estate would have received no special death benefit payments. These payments were strictly an attribute of the stock. They cannot be considered as post-mortem payments for services.

The taxpayer also urges that the Tax Court’s decision is contrary to its decision on the same state of facts in Estate of Albert L. Salt v. Commissioner, 17 T.C. 92 (Acq.1952-1 C.B. 4). The court there did say that the special death benefit payments were made to the widow “under the Plan and not as a stockholder of Graybar” but this does not answer, nor is it determinative of, the question of whether the payments were for the decedent’s past services.

Judge Raum carefully reviewed the Plan and its development as a part of the company’s employee ownership program and held that the taxpayer had failed to show that the payments qualified for deductions as business expenses. With that result we concur and affirm for the reasons stated in his opinion reported at 29 T.C. 818.

Affirmed.