I'm back from vacation, but busy preparing for the start of classes, so I offer another Classic Lesson that I have been saving. I hope you enjoy it. I will return next week with a new Lesson based on a recent case.
I find tax more interesting than football. But I know I am not like most people. So I enjoy using the classic case of Hornung v. Commissioner, 47 T.C. 428 (1967), because it not only teaches students a bit about football history, it also helps them understand a really important tax concept: the doctrine of constructive receipt. As a bonus, it is also one of those fun cases where the taxpayer and the IRS take the opposite of their normal positions, with amusing consequences.
Paul Hornung was an outstanding football player in the 1960’s, winning a bunch of very well known awards: the Heisman Trophy, the NFL MVP award, and induction into both the professional and college football halls of fame. Here's a Sports Illustrated tribute to him.
Hornung also won a Corvette on December 31, 1961, when his team (the Green Bay Packers) beat the New York Giants for the National Football League Championship. Remember, at that time the NFL was the main football league so this was, basically, the Super Bowl. The AFL was only just starting and it was several years before the first designated “Super Bowl” game occurred between the leagues.
Hornung was selected by Sport Magazine as the game’s most valuable player. That selection came with an award: a brand-spanking new 1962 Corvette. The award was announced in Green Bay at the conclusion of the game in the late afternoon of Sunday, December 31, 1961. The car was in Manhattan. Hornung picked up the car the next week at a lunch given in his honor by the magazine. He sold the car a few months later for just over $3,000. He did not report any income from receiving the Corvette, either in 1961 or in 1962. When the IRS audited his 1962 return, he claimed that if receipt of the Corvette was income, it was income in 1961, not 1962, under the doctrine of constructive receipt. To see how that worked out for him, you will need to dive below the fold.
August 13, 2018 in Bryan Camp, Celebrity Tax Lore, Tax | Permalink
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