U.S. Court of Appeals for the Eighth Circuit, 1971

Bernard McMenamy Contractor, Inc. v. Commissioner of Internal Revenue

U.S. Court of Appeals for the Eighth Circuit · Decided May 7, 1971 · Aldrich, Lay, Bright

442 F.2d 359; 27 A.F.T.R.2d (RIA) 1307; 1971 U.S. App. LEXIS 10336 (Federal Reporter, Second Series)

Counsel

Hal B. Coleman, Clayton, Mo., for appellant., Richard Halberstein, Atty., Tax Div., Dept, of Justice, Washington, D. C., Johnnie M. Walters, Asst. Atty. Gen., Meyer Rothwacks, Harry Baum, Attys., Tax Div., Dept, of Justice, Washington, D. C., for appellee.

Cases that cite this one

19 later published cases cite this decision.

Lansons, Inc. v. Commissioner (United States Tax Court 1978)
Boggs v. Commissioner (United States Tax Court 1984)
E. F. Higgins & Co. v. Commissioner (United States Tax Court 1980)
Thompson v. Commissioner (United States Tax Court 1980)
Briggs v. Commissioner (United States Tax Court 1980)
Tamko Asphalt Products, Inc. v. Commissioner (United States Tax Court 1979)
Shelby U.S. Distributors, Inc. v. Commissioner (United States Tax Court 1979)
Pulver Roofing Co. v. Commissioner (United States Tax Court 1978)
Epstein v. Commissioner (United States Tax Court 1978)
Fairfax Auto Parts, Inc. v. Commissioner (United States Tax Court 1976)
Quality Brands, Inc. v. Commissioner (United States Tax Court 1976)
Liberty Machine Works, Inc. v. Commissioner (United States Tax Court 1974)
Shedco, Inc. v. Commissioner (United States Tax Court 1998)
Bernstein v. Greenpoint Savings Bank (In re Lane) (United States Bankruptcy Court, E.D. New York 1993)
Stevens v. Commissioner (United States Tax Court 1985)
Sol Walker & Co. v. United States (Court of Claims 1980)
Pittman Const. Co., Inc. v. United States (United States District Court Eastern District of Louisiana 1977)
King v. United States (United States District Court, Nebraska 1974)
Cornell-Young Company v. United States of America, Macon Prestressed Concrete Company v. United States (5th Cir. 1972)

This list shows which later cases cite this one. It does not say how they treated it, and no review of that has been done. Not a substitute for Shepard’s or KeyCite — verify before relying.

Opinion

ALDRICH, Circuit Judge.

Taxpayer corporation, contrary, perhaps, to usual practice, requested a qualification ruling on its profit-sharing plan only after it had put it into effect. By the time the ruling came down, unfavorably, several tax years had passed. The Commissioner asserted an income tax deficiency on the ground that the contributions made to the plan were not deductible under the Internal Revenue Code of 1954, 26 U.S.C. § 401, upon which taxpayer had relied. The Tax Court affirmed, by a divided court, 54 T.C. 1057 (1970), and taxpayer appeals. 1

The difficulty with taxpayer’s plan is that the formula, by taking into account the number of years of past service, resulted in overweighing “the contributions or benefits provided [for] * * * employees who are officers, [or] shareholders * * * ” as against other employees beyond the extent of their difference in pay, as expressly forbidden by the statute. 26 U.S.C. § 401(a) (4). Taxpayer asserts that it is not only natural, but fair, to afford larger benefits to those longer in service, and that when a plan is initiated and in effect being funded, and the senior employees may be nearer retirement, it is fair to make larger contributions on their account. This may or may not be true, having in mind that during the pre-plan years these employees received what, presumably, would have been paid into the plan on their behalf had it been in effect, and are now receiving it a second time. But if it be fair, it is nonetheless irrelevant. The question is the extent to which Congress was willing to afford a present income tax deduction to the employer. Even if it is reasonable to weigh a plan in terms of past service, it is nevertheless not improper for Congress to exclude any plan which discrim-mates economically in favor of a special class. Cf. Commissioner of Internal Revenue v. Pepsi-Cola Niagara Bottling Corp., 2 Cir., 1968, 399 F.2d 390. The fact that a taxpayer may advance a good reason for its plan is not the point. Deductions are a matter of grace, and short of total arbitrariness it is for Congress to weigh the reasons.

Almost this precise case was recently decided in favor of the government. Auner v. United States, 7 Cir., 1971, 440 F.2d 516. We concur.

Affirmed.

. A companion case, No. 20,626, involving the Trustee under the Plan, raises no separate question.

Case-law data current through December 31, 2025. Source: CourtListener bulk data.