## Facts

- Two consolidated federal income tax cases required interpreting the exclusion from gross income for “the value of property acquired by gift” under the 1939 Internal Revenue Code.
- In Duberstein, a business executive had provided business referrals to a long-time business associate; the associate later gave him a Cadillac after stating the referrals had been especially helpful.
- The corporate donor deducted the Cadillac’s cost as a business expense; the recipient excluded its value from income as a gift.
- The Tax Court found the Cadillac was taxable income, not a gift; the Sixth Circuit reversed.
- In Stanton, a church corporation paid a departing longtime officer $20,000 described as a “gratuity” in “appreciation” of past services.
- The church treated the payment as an expense; Stanton excluded it as a gift, paid an assessed deficiency, and sued for a refund.
- The district court, after a bench trial, entered judgment for Stanton based on a bare finding that the payment was a “gift”; the Second Circuit reversed.

## Issues

1. What standard governs whether a particular transfer is a “gift” excludable from gross income for federal tax purposes.
2. Whether the Cadillac transfer in Duberstein was a tax “gift” or taxable income.
3. Whether the $20,000 payment in Stanton was a tax “gift” or taxable compensation, and whether the trial court made adequate findings to support its characterization.

## Decision

- The Court declined to announce a rigid legal test or categorical rule for identifying tax “gifts,” holding the inquiry depends on the totality of the facts.
- Duberstein: the Sixth Circuit was reversed; the Tax Court’s determination that the Cadillac was not a gift was reinstated because it was not clearly erroneous.
- Stanton: the Second Circuit’s judgment was vacated and the case was remanded because the district court’s conclusory “gift” finding was insufficient for proper review under the governing standard.

## Legal Principles

- Whether a transfer is an excludable “gift” turns primarily on the transferor’s intent, determined objectively from all surrounding facts and circumstances rather than labels used by the parties.
- A statutory “gift” generally reflects “detached and disinterested generosity,” such as affection, respect, admiration, or charity; transfers driven by anticipated economic benefit, quid pro quo, or business advantage are generally not gifts.
- The gift characterization is a fact-dominated determination entrusted to the trial-level factfinder; appellate review is limited and applies a clearly erroneous standard to the factfinder’s conclusion.
- No bright-line rule excludes transfers between employers and employees or between business associates from being gifts; context is probative but not controlling as a matter of law.
- Tax treatment by the donor (such as deducting the transfer as a business expense) and evidence of the recipient’s understanding of the transfer’s business connection are relevant to discerning intent.

## Conclusion

The Court held that tax “gift” status depends on the transferor’s objectively determined intent as shown by the full factual setting, rejected categorical tests, and emphasized deference to trial-level determinations: it reinstated the Tax Court’s finding that the Cadillac was taxable income and remanded Stanton for adequate factfinding under the same standard.


Comm’r v. Duberstein, 363 U.S. 278 (1960)