Hughes A. Bagley and Marilyn B. Bagley v. Commissioner of Internal Revenue

Hughes A. Bagley and Marilyn B. Bag-ley, husband and wife, appeal from a final judgment of the United States Tax Court, 1 finding deficiencies in income tax due for the tax year 1978. For reversal appellants argue that (1) the stock option granted to Hughes Bagley was not compensation for services performed and thus the $70,000 paid to Bagley for the termination of the option was taxable as capital gains rather than as ordinary income and (2) the $50,000 Consulting fee paid by Spencer Foods should have been taxed to Herford Trading Corp., a corporation wholly owned by Bag-ley.

Bagley and his…