Hugo Black

“ For years thousands of corporations have filed income tax returns in accordance with the direction to deduct 'a reasonable allowance for salaries or other compensation for personal services actually rendered,' and there has not been any apparent general confusion bespeaking inadequate statutory guidance. ”

“ Hence, it seems to us entirely proper for the trial judge to have submitted the case to the jury with a charge not necessarily calling for a determination of whether all or none of the 'commissions' paid to each defendant were dividends, but permitting a determination of whether the 'commissions' were intentionally made to include substantial amounts which should have been treated as dividends. ”

“ The larger the allowable deduction the smaller are the net taxable income and the tax imposed. The first four counts of the indictment set out attempts by the defendants to evade income taxes of the Consensus Publishing Company for the years 1933 to 1936, through a fraudulent scheme whereby, under the guise of paying commissions which were deducted from gross income, the corporation distributed dividends deduction of which the statute does not permit. ”

“ Moreover, there is the additional circumstance, damaging to the respondents' contention, that year in and year out, 30% of earnings after deduction of expenses was paid to the Cecelia Investment Company as dividends, and 70% to the respondents or other individuals as 'commissions.' This uniformity in the computation of 'compensation' is difficult to reconcile with the variations in extent and kind of personal services which one would expect to find in accounts reflecting bona fide allowances for personal services. ”

“ The respondents have made further contentions which we conclude after consideration are without merit.
The judgment of the Circuit Court of Appeals is reversed and that of the District Court affirmed. It is so ordered. ”

“ In the period covered by the indictment, only the 30% of the distribution going to Cecelia Investment Company was treated as dividends in Consensus' tax returns. The remaining 70%, although referred to in some of the corporation's confidential weekly reports to stockholders during the period as 'dividends', was nevertheless in its income tax return deducted from gross income as 'commissions.' The deductions thus claimed were $10,761 in 1929, $62,961 in 1930, $64,791 in 1931, $57,255 in 1932, $54,538 in 1933, $60,172 in 1934, $76,714 in 1935, and $119,756 in 1936. ”