BINGLER V. JOHNSON, 394 U. S. 741 (1969)

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U.S. Supreme Court

Bingler v. Johnson, 394 U.S. 741 (1969)

Bingler v. Johnson

No. 473

Argued March 3-4, 1969

Decided April 23, 1969

394 U.S. 741


Respondents, who held engineering positions at a laboratory which the Westinghouse Electric Corp. operates under contract with the Atomic Energy Commission, participated in a two-phase Fellowship Program. In the first, or "work-study," phase, a participating employee holds a regular job at Westinghouse and attends university classes part time, for which the tuition and other expenses are paid by the company. A qualified employee may then be granted an educational leave of absence (the second phase) to work on his doctoral dissertation, approval of which by Westinghouse and the AEC is based partly on general relevancy to work at the laboratory. He then devotes full time to the dissertation for a period of several months, during which he receives a "stipend" from Westinghouse ranging from 70% to 90% of his prior salary plus a family allowance; retains seniority status, and receives insurance, stock option privileges, and other employee benefits. He is obligated to submit progress reports while on leave, and, on its completion, to return to Westinghouse for at least two years. Respondents filed refund claims for federal income taxes withheld by Westinghouse from the amounts paid them while on leave, contending that these payments were "scholarships," and hence excludable under § 117 of the Internal Revenue Code of 1954. On rejection of their claims, respondents brought this refund suit in District Court. At the trial, the court instructed the jury in accordance with Treas.Reg. § 1.117-4(c), which was promulgated under § 117 and provides that amounts representing "compensation for . . . employment services" and amounts paid "to enable [an individual] to pursue studies . . . primarily for the benefit of the grantor," are not excludable as scholarships. The jury found that the amounts that respondents received were taxable income. The Court of Appeals, holding the regulation invalid, reversed.

Held: Treas.Reg. § 1.117-4(c) is valid, and the jury properly found that the amounts respondents received were not excludable "scholarships," but taxable "compensation." Pp. 394 U. S. 747-758.

396 F.2d 258, reversed.

Page 394 U. S. 742

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