323 F.2d 751

John D. and Janice L. EDWARDS, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 18723.

United States Court of Appeals Ninth Circuit.

Oct. 16, 1963.

Rehearings Denied Dec. 2, 1963.

John D. Edwards, Bellevue, Wash., in pro. per., and for petitioners.

Louis F. Oberdorfer, Asst. Atty. Gen., Lee A. Jackson, Meyer Rothwacks, and Robert J. Golten, Attys., Dept, of Justice, Washington, D. C., for respondent.

Before CHAMBERS and BARNES, Circuit Judges, and KILKENNY, District Judge.

BARNES, Circuit Judge.

This appeal involves an alleged deficiency in taxpayers’ income tax for 1955. The decision of the Tax Court was adverse to petitioners. (39 T.C. No. 8.) Jurisdiction exists pursuant to Section 7482 of the Internal Revenue Code of 1954.

Two questions are raised:

I

In 1955 taxpayer husband received $13,-027.21 from his employer in settlement of two judgments totaling $15,155.00 obtained for bonuses claimed. In computing the settlement, there was no deduction made for withholding taxes, and there had been no discussion between the parties concerning it. The employer, in fact, neither withheld or paid to the government any withholding taxes nor did it deliver a W-2 Form to the taxpayer.

Edwards first returned the full amount of settlement, less costs and attorneys’ fees, as income. An amended return claimed a credit of $2,604.30, which allegedly was the tax which “should have been paid” by the employer.

II

In 1955 the taxpayer was hospitalized in connection with his work from November 30 through December 23. He was unable to work for a period of five weeks. Prior to and following his absence from employment he had worked a six-day week. (Doc. No. 14, p. 6.) Pursuant to a wage continuation plan he was paid $134 *752for three days of his hospitalization, one day for each of the two months he had previously worked and for the first day of the injury. On his tax return for 1955, taxpayer claimed an exclusion of $96, which was partially disallowed. (Doc. No. 14, pp. 7-8.) The taxpayer brought this issue before the Tax Court, which held that he was entitled to exclude $50 of the $134, i. e., one-half of the $100 maximum weekly exclusion allowable under Section 105(d) of the 1954 Internal Revenue Code. (Doc. No. 14, p. 12.)

Taxpayers subsequently obtained a judgment for pay for the full amount of time he was absent from work, and now urges that he is entitled to the maximum exclusion of $100 per week for the period November 30, to December 31,1955. His salary was $1,250 per month.

Answering the first question raised, we hold that § 31(a) (1) of the 1954 Internal Revenue Code1 and the Treasury Regulation promulgated thereunder, provide that a tax credit is to be given a taxpayer for tax actually withheld from his wages by his employer. Reg-1.31-1 (a) 2 Where no tax has been withheld, the taxpayer can claim no credit for such withholding tax not withheld. Taxpayer is taxed on his gross salary — ordinarily what he received from his employer plus what was withheld; here on what, he received alone, for none was withheld.

Answering the second question— we find that the factual situation before the Tax Court with respect to what wages, taxpayer was entitled to receive due totas incapacity during the month of December 1955, has been changed due to-taxpayer’s apparent winning of his suit in the Supreme Court of the State of Washington, Edwards v. Morrison-Knudsen Co., 379 P.2d 735. Thus he is entitled to a full month’s pay, from his employer, and to deduct up to $100 a week from such salary, (Section 105(d), Internal. Revenue Code of 1954 3) or $500.

The Tax Court decision is affirmed in part, and reversed in part, and remanded to the Tax Court for redetermination, of the amount of deficiency now due.

Edwards v. Commissioner of Internal Revenue
323 F.2d 751

Case Details

Name
Edwards v. Commissioner of Internal Revenue
Decision Date
Oct 16, 1963
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323 F.2d 751

Jurisdiction
United States

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