Wolder v. Commissioner
493 F.2d 608 (2d Cir. 1974)
Wolder was a lawyer who made a
deal with Boyce. He would give her free legal services for life, and she
would give him money in her will.
Boyce died, and Wolder got his
inheritance. The IRS claimed that
the money Wolder received should be counted as gross income. Wolder objected.
Wolder argued that 26
U.S.C. §102(a) exempted inheritance
from gross income.
§102(a) says that "Gross income does not
include the value of property acquired by gift, bequest, devise, or
The IRS argued that it was
really an inheritance, it was
payment for services rendered and was therefore taxable under 26
The Tax court found for the
IRS. Wolder appealed.
The Appellate Court reversed.
The Appellate court looked
to §61(a) which says that
"Except as otherwise provided in this subtitle, gross income means
all income from whatever source derived, including...compensation for
The Court found that §102(a) was an exemption for things not covered by §61(a). Since the money Wolder received was
compensation for services, it is fully covered by §61(a) and the §102(a) exemption does not apply.
The Court reasoned that
Wolder didn't receive a bequest, what he received was a payment for his
services. It wasn't an inheritance
at all, it was just a contract with a deferred payment.