Before STALEY, HASTIE and SMITH, Circuit Judges.
This appeal involves the taxability of money paid by a corporation to the widow of one of its officers. At his death, Arthur Purdy was president of A.R. Purdy Co., Inc. ("corporation"). Pursuant to a resolution passed by its board of directors, the corporation paid decedent's widow, petitioner,*fn1 $32,727.24 in 1955 and $27,272.76 in 1956. Petitioner failed to report these payments as income on her tax returns, causing the Commissioner to assess a deficiency against her on the basis that they were subject to treatment as ordinary income. The Tax Court upheld the Commissioner, concluding that petitioner failed to establish that the payments constituted a gift.*fn2
On this appeal, petitioner contends that the Tax Court misinterpreted the Supreme Court's decision in Commissioner v. Duberstein, 363 U.S. 278, 80 S. Ct. 1190, 4 L. Ed. 2d 1218 (1960), as announcing a new rule for determining when payments by a corporation to a widow constitute a gift, and that under the holdings in pre-Duberstein Tax Court decisions, the payments here clearly constituted a gift. The Commissioner's position, also based on Duberstein, is broken down into two parts. First, the controlling question is why the transfer was made, and that if made from "detached and disinterested generosity, * * * out of affection, respect, admiration, charity or like impulse," it is a gift, while if the payment is for past services, it receives income treatment. Next, the Tax Court's resolution of that question is a factual one that must be affirmed unless clearly erroneous.
This court recently had occasion in Smith v. Commissioner, 305 F.2d 778 (C.A.3, 1962), to review the decision in Commissioner v. Duberstein, supra, and United States v. Kaiser, 363 U.S. 299, 80 S. Ct. 1204, 4 L. Ed. 2d 1233 (1960). We said that, under those decisions, determination of whether a transfer constitutes a gift is a factual one that rests in the first instance with the trier of fact. That determination is to be made in light of all the relevant facts and circumstances and must be affirmed unless clearly erroneous.
We cannot say, from our review of the record, that the Tax Court's finding is clearly erroneous or charge it with relying on facts not relevant to the inquiry.
The corporation was closely held. Immediately prior to Arthur Purdy's death, its outstanding stock was held as follows:
STOCKHOLDER COMMON STOCK PREFERRED STOCK
(deceased's mother) 588 588
Deceased 2,282 1/2 2,282 1/2
(deceased's sister) 1,825 ...