- 18 -
Nor are we persuaded by petitioner’s endeavor to avoid
application of the well-settled law on redemptions by
characterizing the full amount of the redemption payments solely
for purposes of this proceeding as the payment of personal
service compensation.5 The redemption payments at hand were not,
as petitioner would have it, a substitute for wages. Those
payments were triggered by the demand of Chrysler’s
employee/shareholders that Chrysler redeem its common stock from
the ESOT at fair market value. That demand required that
Chrysler pay to the employee/shareholders nothing more than they
would have otherwise received had they sold their Chrysler common
stock to an unrelated party on a public market. The fact that
the redemption payments were not attributable to the personal
services of the employees is seen quickly from the fact that
Chrysler merely paid the employees for the appreciated value of
their stock. See also Clayton v. United States, 33 Fed. Cl. 628
(1995) (decision on the taxability of distributions from the ESOT
to nonresident alien plan participants), affd. without published
opinion 91 F.3d 170 (Fed. Cir. 1996). The employees did not
5 Although the manner in which a taxpayer reports an
expenditure for financial accounting purposes does not control
its proper characterization for Federal income tax purposes, Thor
Power Tool Co. v. Commissioner, 439 U.S. 522, 542-543 (1979); see
also Old Colony R.R. Co. v. Commissioner, 284 U.S. 552, 562
(1932), we give due regard to the fact that Chrysler reported the
redemption as a purchase of treasury stock for financial
accounting purposes.
Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 NextLast modified: May 25, 2011