CHARLES R. WOLLE, Judge, United States District Court
On December 31, 2001, the court held a hearing by telephone conference call on the cross-motions for summary judgment pending in this tax refund suit. Having reviewed the summary judgment record and the parties' briefs, the court now grants summary judgment in favor of the defendant United States of America (USA) and against plaintiff Highway Farms, Inc. (Highway Farms).
The burden in this suit is on the taxpayer to show that the IRS' initial determination was wrong and to show facts from which a correct determination of tax liability can be made. See United States v. Pfister, 205 F.2d 538, 542 (8th Cir. 1953).
Summary judgment is appropriate only when a party has demonstrated that it is entitled to judgment as a matter of law, with no genuine issues of material fact remaining for trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-51 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986). Once the movant has demonstrated that no genuine factual dispute stands in the way of a judgment entry, the burden shifts to the resisting party to present specific admissible evidence showing a genuine dispute on that issue, precluding judgment. City of Mount Pleasant v. Associated Elec. Coop., 838 F.2d 268, 271-72 (8th Cir. 1988).
The court adopts and incorporates herein the stipulation of undisputed facts filed by the parties on December 10, 2001.
In tax years 1995 and 1996, plaintiff Highway Farms made payments in-kind of hogs to its two officers in exchange for their performance of agricultural labor. The Internal Revenue Code excludes from wages for FICA tax withholding purposes remuneration paid in any medium other than cash for agricultural labor. The dispute in this suit is whether those payments constituted "wages" for FICA tax purposes. The court finds that the payments in-kind were taxable "wages".
No genuine issue of fact remains. The bonuses plaintiff paid its employees were not bona fide transactions with economic substance. See Gregory v. Helvering, 293 U.S. 465, 469 (1935) (transfer lacked substance despite extensive paperwork documenting it). Although plaintiff contends a purpose for the hog transfer was to motivate employees, it is undisputed that the only two employees to receive hog bonuses in tax years 1995 and 1996 were brothers who served as officers of the family-owned farm corporation. The transfers occurred within days of the date Highway Farms would have sold them in the ordinary course of its business and in accordance with the demands of Highway Farms' ongoing hog operation. The officer employees who received the bonuses did not market their hogs separately from other Highway Farm hogs. Rather, the transferred hogs and the Highway Farms hogs were loaded onto the same truck and sold to the same hog buyer on the same terms. Because the hogs were market-ready at the time of transfer, there was little risk that they could not almost immediately be converted into cash.
The hog bonuses were disguised cash transfers whose sole purpose was tax avoidance. The bonuses were the equivalent of cash bonuses, subject to FICA taxes.
The clerk of court shall enter summary judgment in favor of the defendant United States of America and against plaintiff Highway Farms, Inc.