T.C. Summary Opinion 2001-63
UNITED STATES TAX COURT
ELLIOT VIRGIL WILKERSON, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 429-00S, 3379-00S. Filed April 30, 2001.
Elliot Virgil Wilkerson, pro se.
Robert W. West, for respondent.
COUVILLION, Special Trial Judge: These consolidated cases
were heard pursuant to section 7463 in effect when the petitions
were filed.1 The decisions to be entered are not reviewable by
any other court, and this opinion should not be cited as
authority.
1
Unless otherwise indicated, section references
hereafter are to the Internal Revenue Code in effect for the
years at issue.
- 2 -
Respondent determined deficiencies of $714 and $8,804 in
petitioner's Federal income taxes for 1997 and 1998,
respectively.
The sole issue for decision is whether, by virtue of an
agreement between petitioner's employer and the labor union of
which petitioner was a member, the compensation paid to
petitioner for the 2 years at issue is excludable from income
under section 61(a).
Some of the facts were stipulated. Those facts and the
accompanying exhibits are so found and are incorporated herein by
reference. Petitioner's legal residence at the time the
petitions were filed was Dothan, Alabama.
During the years at issue, petitioner was an equipment
operator for Great Northern Nekoosa Corp., a subsidiary of
Georgia Pacific Corp. (the company) at a wood-chipping mill known
as the Cedar Springs operation. Petitioner began his work with
the company in 1978. He was a member of Local 1703 of the United
Paperworkers International Union, AFL-CIO (the union). There was
a collective bargaining agreement between the company and the
union.
Sometime prior to the years at issue, the company made plans
to construct a new mill at Cedar Springs and considered having
the new mill operated by contract employees who would not be
members of the union. As expected, the union vehemently opposed
- 3 -
such plans; however, after several conferences and meetings
between the union and the company, an agreement was reached that
would allow union workers to operate the new mill. A memorandum
of understanding (the memorandum) was entered into between the
company and the two unions that represented the employees. In
the memorandum, the employees agreed that there would be "no
grievances, arbitrations, NLRB charges, or any other litigation
surrounding the new longwood chipping operations." This
provision represented a forfeiture of rights that the employees
had in the collective bargaining agreement. The new mill,
accordingly, was staffed by the company's union employees,
including petitioner. For the 2 years at issue, petitioner's
employment was at the new mill and was subject to the terms of
the memorandum.
For the year 1997, petitioner's wages with the company were
$60,300, and, for 1998, his wages were $60,461. On his Federal
income tax return for 1997, petitioner included the $60,300 as
income; however, he later filed an amended return for 1997 in
which he excluded from income the $60,300 in wages he earned with
the company. On his Federal income tax return for 1998,
petitioner did not include as income any wage or salary income,
including the $60,461 paid to him by the company.
- 4 -
Petitioner's 1997 amended return was not processed by the
Internal Revenue Service as a return but was instead treated as a
claim for refund, which was disallowed.
In the notice of deficiency for 1998, respondent determined
that the $60,461 petitioner earned from the company during 1998
constituted salary or wage income. In the notice of deficiency
for 1997, respondent determined that petitioner failed to include
in income a State income tax refund of $2,540 petitioner received
that year.
Petitioner conceded the State income tax refund for 1997 but
contends he made an overpayment of taxes for 1997 because of his
inclusion of the wages he received from the company that year.
For 1998, petitioner contends the wages he received that year
from the company are not includable in gross income.
Petitioner contends that, because he and the other employees
of the company forfeited certain rights they otherwise possessed
as employees under the collective bargaining agreement, they were
reduced to what he referred to as "nonentities", and, as such,
their income is not taxable. Petitioner argues that he and his
fellow employees were reduced to a status "less than all other
taxpayers" and, therefore, should not be liable for Federal
income taxes.
Petitioner cited no authority for his position, and, indeed,
there is no such authority to support his position.
- 5 -
Section 61 provides that gross income includes "all income
from whatever source derived," unless otherwise provided. The
Supreme Court has consistently given this definition of gross
income a liberal construction "in recognition of the intention of
Congress to tax all gains except those specifically exempted."
Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 430 (1955); see
also Roemer v. Commissioner, 716 F.2d 693, 696 (9th Cir. 1983),
revg. 79 T.C. 398 (1982) (all realized accessions to wealth are
presumed taxable income, unless the taxpayer can demonstrate that
an acquisition is specifically exempted from taxation).
Moreover, section 1.61-2(a)(1), Income Tax Regs., provides that
"wages, salaries, commissions paid salesmen * * * are income to
the recipients unless excluded by law".
The amounts petitioner received from his employer
represented payments for his services. Those amounts represented
compensation for services rendered. Those amounts are includable
in gross income. Whatever rights petitioner surrendered or
forfeited in his employment relationship with the company have no
bearing on the tax consequences of the amounts paid to petitioner
for his services. Petitioner's argument, therefore, is rejected,
and respondent is sustained.
- 6 -
Reviewed and adopted as the report of the Small Tax Case
Division.
Decisions will be entered
for respondent.