United States v. Gotcher
United States Court of Appeals for the Fifth Circuit
401 F.2d 118 (1968)
John Gotcher (plaintiff) was a prospective co-owner of a struggling Volkswagen dealership. To boost dealer confidence in VW and the German economy, VW paid for Gotcher and his wife to tour VW's German facilities over 12 days, though the trip's formal business activities took up only two of those days; Gotcher also attended daily VW presentations and toured the country's economic landmarks. After the trip, Gotcher became a part owner of the dealership, and VW's U.S. sales rose. The IRS Commissioner (defendant) taxed Gotcher on the value of the trip; Gotcher paid the assessment and sued for a refund, and the district court held the trip's cost was not taxable income. The Commissioner appealed.
Whether the value of an expenses-paid trip is excluded from an employee's gross income for federal tax purposes when the employer's primary purpose in sending the employee was to help the employee promote the employer's business.