Phillip L. Parr and Barbara M. Parr, Plaintiffs-appellants, v. United States of America, Defendant-appellee.james David Emerson and Nancy M. Emerson, Plaintiffs-appellants, v. United States of America, Defendant-appellee, 469 F.2d 1156 (5th Cir. 1972)

Doctors Parr and Emerson seek refund of Federal Income Taxes paid on sums received from the University of Florida College of Medicine during the taxable year 1968. Taxpayers, surgical residents at that institution during that year, claim that amounts received up to $3,600.00 were excludable from gross income as fellowship grants under Sec. 117 of the Internal Revenue Code of 1954.¹  In the refund suit the Government moved for summary judgment at the close of Plaintiff's case. Perhaps with some despair and certainly not with any real hope that this Millenium would ever arrive the District Judge stated "* * * I think once and for all the appellate courts ought to rid the court system of these numerous law suits, most of which cases resulted in findings against Plaintiffs in the same or very similar circumstances, and I am going to grant the motion." And that is what he did.² 

Both Appellants were medical doctors at the time they entered the residency program. Doctor Parr was a resident in orthopedic surgery, and Doctor Emerson was a resident in general surgery. Admission to the residency program was on the basis of academic achievement. Payments were not subject to negotiation, and it is clear that the hospital facilities³  were operated primarily for the purpose of training doctors in advanced medical skills. It is likewise clear that Taxpayers attended these institutions for the purpose of advancing their medical knowledge, that is, to become specialists in their respective fields. These facts, however, do not shake us in our conclusion that the overwhelming case law and common sense stand between Taxpayers and the Federal Treasury.

Taxpayer's proof of the purposes for which the hospital facilities are operated avails them nothing. The purposes for which the facilities are operated is relevant only insofar as it might possibly shade the purpose for which payments are made to Taxpayers. It is clear that Taxpayers were compensated for the services they performed. Each of them made rounds, saw patients, took histories, proposed diagnosis, gave pre and post-operative care, and assisted in and performed surgery under the supervision of faculty members. The testimony was undisputed-in fact it was offered by Taxpayers-that these facilities would have had to hire other personnel to undertake these duties had they not been performed by Doctors Emerson and Parr. The recent opinion of Judge Field for the Fourth Circuit in Hembree v. United States, 4 Cir., 464 F.2d 1262 [1972], on nearly identical facts, squarely holds that the primary purpose for which the medical institution is operated is not significant. The primary purpose standard of the regulations⁴  relates to the purpose for which the payments are made. The Court there held that a showing that the Doctor performed services as part of his internship duties which were necessary to the operation of the hospital and would have to be performed by others were the Taxpayers to be excused from their performance, demonstrated that the relationship between hospital and "student" had all the indicia of an employer-employee relationship.

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The hospitals here in many respects treated Appellants as employees⁵  and we think that the evidence demonstrates beyond dispute that for the purposes of Federal Income Tax liability they were employees.

As the Court in Hembree, supra, points out the Supreme Court's decision in Bingler v. Johnson, 1969, 394 U.S. 741, 89 S. Ct. 1439, 22 L. Ed. 2d 695 provides an additional basis for our holding apart from the "primary purpose" concept. The Supreme Court there adopted a common sense approach to the definition of scholarships and fellowships characterizing them as "relatively disinterested, 'no-strings' educational grants." We hold that as a matter of law there were strings attached to the grants in the case before us, which exceeded the incidental duties which are compatible with characterization of a stipend as a scholarship or fellowship.⁶ 

We do not attempt to dictate a per se rule holding that all advanced medical personnel are employees and that all payments to them are subject to taxation. However, we sympathize with the District Court's lamentation that these facts, or facts nearly identical, have been litigated so often that one may wonder whether this is wise or what good it can do. See Bingler v. Johnson, supra; Werzberger v. United States, 8 Cir., 1971, 441 F.2d 1166; Quast v. United States, 8 Cir., 1970, 428 F.2d 750; Rundell v. Commissioner, 5 Cir., 1972, 455 F.2d 639; Anderson v. Commissioner, 1970, 54 T.C. 1547, and numerous other cases. But hope springs eternal. And the heartbeat-the vital life sign to doctors young and old-of hope is the question begging structure of the regulations: Payments made for the "primary purpose-to further the education and training of the recipient" are fellowship grants unless-and the unless is a big unless-the amount provided for such purpose represents compensation. (Note 4, supra). Which is to say, this is not the last word, only the latest.

Summary judgment was eminently proper.

Affirmed.