## Facts

- The IRS reconsidered prior administrative positions that had treated strike and lockout benefit payments as includible in recipients’ gross income regardless of circumstances.
- The ruling relied on a Supreme Court decision upholding a jury’s finding that certain union-provided strike benefits were “gifts” excludable from gross income under I.R.C. § 102(a).
- In the referenced scenario, a labor union provided subsistence-type assistance (room rent and food vouchers) to a financially needy worker participating in a strike, including a period when the worker was not a union member.
- The factfinder in the referenced scenario considered the form and amount of benefits, the recipient’s personal need, the lack of other income, and the availability of public assistance.

## Issues

1. Under what circumstances are strike benefit payments excludable as “gifts” under I.R.C. § 102(a) rather than includible in gross income under I.R.C. § 61?
2. Whether prior IRS guidance treating strike and lockout benefits as taxable irrespective of circumstances should be modified after the Supreme Court’s fact-specific approach.
3. Whether limiting benefits to union members is determinative of gift treatment.
4. Whether lockout benefits follow the same tax characterization framework as strike benefits.

## Decision

- In cases with facts substantially like the referenced Supreme Court scenario, strike benefit payments will be treated as gifts excludable from federal income tax under I.R.C. § 102(a).
- Other strike benefit cases will be examined on their facts to determine whether payments are gifts or taxable gross income.
- The fact that benefits are paid only to union members is not, by itself, determinative of whether the payments are gifts or gross income.
- Prior IRS authorities treating strike and lockout benefits as taxable irrespective of circumstances were modified to reflect this fact-dependent treatment.
- Because prior guidance had tied lockout benefits to the principles governing strike benefits, lockout benefits are subject to the same fact-specific inquiry.

## Legal Principles

- Whether union strike benefits are gifts excludable under I.R.C. § 102(a) or includible in gross income under I.R.C. § 61 is a fact question.
- Factors relevant to gift characterization include the form and amount of the payments, the recipient’s financial need, the lack of other income, and the availability of public assistance.
- Administrative positions treating all strike and lockout benefits as taxable “irrespective of the circumstances” are improper to the extent they ignore the fact-specific inquiry required by controlling authority.
- Membership status (member-only eligibility) does not alone resolve whether payments are gifts or taxable income.
- Lockout benefits are analyzed under the same principles applied to strike benefits.

## Conclusion

The ruling replaced a categorical inclusion rule with a case-by-case approach: strike and lockout benefits are generally scrutinized under I.R.C. §§ 61 and 102(a), with gift exclusion recognized when the circumstances mirror subsistence-style, need-based assistance like the referenced Supreme Court scenario.


Rev. Rul. 61-136, 1961-2 C.B. 20 (1961)