United States V. Gotcher - Impact of Decision

Impact of Decision

For income tax purposes, the case is notable for the articulation of the "primary benefit to the provider doctrine." If individual receives an economic gain, but the primary benefit is to the provider of the gain, then such gain is not income to the individual. The articulation of the doctrine is open to question, as almost all payments could be characterized as providing the primary benefit to the provider. A business only pays employees for the benefit of labor which will provide greater returns than expenses and contract consideration is only furnished to receive a preferred gain. However, employee income (as compensation for services) and contract consideration (as compensation for services, gains from dealings in property, and many other categories) are regularly taxed.

That this case attributes income only to Mrs. Gotcher, clearly diminishes any benefit derived from her presence in Germany to Mr. Gotcher’s employer, or the Volkswagens. Although the evidence was nonexistent as to her presence being necessary to her husband’s conducting of business in this case, one can imagine other scenarios where a spouse performs significant work to advance the conducting of his or her partner’s business.

Examples might include: companies that expect attendees to bring his or her spouse, partners who organize social events for other spouses while the attendees are in meetings, partners who engage in unofficial accounting, transcribing, or decision-making with his or her attendee partner, etc. The statement, “a single trip by a wife with her husband to Europe has been specifically rejected as not being the exceptional type of case justifying a deduction,” has insidious ramifications for tax (and social) consequences of women (or men) that perform legitimate work on behalf of their partner or spouse. It creates a presumption wherein a partner or spouse’s presence is not seen as necessary to the conducting of business.

Perhaps the concurring opinion articulates even more clearly the popular belief about women’s informal work performed on behalf of their partner’s business. It states, “Attributing income to the little wife who was neither an employee, a prospective employee, nor a dealer, for the value of a trip she neither planned nor chose still bothers me.”