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 inheritance..."
    • The IRS argued that it was really an inheritance, it was payment for services rendered and was therefore taxable under 26 U.S.C. 61(a).
  • 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 services..."
    • 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.