## Facts

- American Brewery, Inc. sponsored a widely publicized Chesapeake Bay fishing contest offering cash prizes for catching specially tagged fish.
- The grand-prize fish, “Diamond Jim III,” carried an identification tag; the published rules promised $25,000 to anyone who caught the fish on hook and line and submitted the fish, tag, and a required affidavit.
- William Simmons, an experienced fisherman, caught Diamond Jim III while fishing; he knew about the contest but did not go out that day intending to catch the prize fish.
- Simmons complied with the contest conditions and received the $25,000 payment from the brewery.
- The IRS assessed a deficiency treating the $25,000 as includible in gross income under I.R.C. §§ 61(a) and 74(a); Simmons paid and sought a refund, claiming the receipt was not income or was excludable as a gift under § 102.
- The district court granted summary judgment for the United States; Simmons appealed.

## Issues

1. Whether a $25,000 cash payment awarded by a commercial sponsor under published contest rules is taxable gross income under I.R.C. §§ 61(a) and 74(a), or excludable as a “gift” under I.R.C. § 102.
2. Whether, on an undisputed record about the contest and payment, summary judgment for the United States was proper.

## Decision

- The Fourth Circuit affirmed the summary judgment for the United States.
- The court held the $25,000 payment was includible in gross income as a contest prize under §§ 61(a) and 74(a).
- The court rejected the § 102 “gift” characterization because the payment arose from a commercial promotion rather than detached generosity.
- The court concluded there was no genuine dispute of material fact and the tax characterization could be resolved as a matter of law.

## Legal Principles

- Gross income under I.R.C. § 61(a) broadly includes clearly realized accessions to wealth unless a specific exclusion applies.
- I.R.C. § 74(a) generally requires inclusion of prizes and awards in gross income absent a statutory exception.
- For I.R.C. § 102, “gift” treatment turns on the transferor’s intent; payments motivated by business purposes (such as advertising or promotional contests) are not gifts.
- The recipient’s subjective intent or the role of chance in obtaining the prize does not, by itself, convert a promotional prize into an excludable gift.

## Conclusion

The court treated the fishing-derby payout as a taxable contest prize rather than a gift because it was paid pursuant to published promotional rules designed to benefit the sponsor’s business, and it affirmed summary judgment for the United States on an undisputed record.


Simmons v. United States, 308 F.2d 160 (4th Cir. 1962)