At the same time that an individual ("Johnson") had companies controlled by Johnson offer employment to the taxpayer, Johnson indicated to the taxpayer that Johnson would provide in his will that the taxpayer would receive 1/9 of Johnson's estate on death. Johnson later amended his will to provide that the taxpayer would receive 10% of the his estate provided the taxpayer was still then an employee. When the taxpayer's employment later was terminated, the taxpayer sued and received lump sums from the companies, which he included in his income as employment income, and also received a lump sum of $3,080,000 from Johnson, which represented approximately 10% of the net value of Johnson's estate at that time.
McArthur J. found that if the interest in the estate had been paid to the taxpayer in the normal course of events, it would not have been employment income, and the damages received in settlement of a claim for this amount accordingly were non-taxable.