Bingler v. Johnson case brief

Bingler v. Johnson case brief summary
394 U.S. 741 (1969)

SYNOPSIS:
Respondent taxpayers brought suits against appellant district director for refunds after they were taxed on amounts received from their employer for attending college. A jury, instructed by the judge using 26 C.F.R. § 1.117-4(c), found the amounts were taxable. The United States Court of Appeals for the Third Circuit reversed the judgment on the verdict, holding § 1.117 invalid, and district director appealed.

OVERVIEW:
-Johnson, was employed by Westinghouse.
-Westinghouse gave Johnson a scholarship so he could go back to school and get his PhD.
-The scholarship gave Johnson a stipend and paid for his tuition.
-Johnson had to agree to provide reports of his progress, as well as commit to come back to work for Westinghouse after he finished his degree.
-The IRS stated that the scholarship money was taxable as gross income.
-Johnson disagreed.

HOLDING:
The Court held that the definitions of scholarships and fellowships, in 26 C.F.R. § 1.117-4(c), as relatively disinterested, no-strings educational grants, with no requirement of any substantial quid pro quo from the recipients, were proper.

ANALYSIS:
-Under § 1.117-4(c), as set out in the trial court's instructions, the jury properly found that the amounts received by taxpayers were taxable compensation.
-The Court noted that there was an employer-employee relationship, that there was a close relation between taxpayers' prior salaries and the amount of their stipends, that employee benefits were continued, that topics studied were required to relate at least generally to the work of the employer, and that taxpayers were required to hold positions with the employer throughout the program and to return to employer to work for a substantial period of time after completion of their leave.
-Under these circumstances, the amounts paid to taxpayers were income, not excludable scholarships.

RULE:
-If your employer gives you money to go to college, then that is considered to be compensation for employment, and not actually a scholarship.

OUTCOME: The Court reversed the judgment of the court of appeals and reinstated the judgment of the district court.


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