United States v. Basye

PETITIONER: United States
LOCATION: Allegheny County District Court

DOCKET NO.: 71-1022
DECIDED BY: Burger Court (1972-1975)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 410 US 441 (1973)
ARGUED: Dec 11, 1972
DECIDED: Feb 27, 1973

Erwin N. Griswold - for petitioner
Valentine Brookes - for respondents

Facts of the case


Media for United States v. Basye

Audio Transcription for Oral Argument - December 11, 1972 in United States v. Basye

Warren E. Burger:

We’ll hear arguments first this morning in number 71-1022, United States versus Basye.

Solicitor General, you may proceed whenever you’re ready.

Erwin N. Griswold:

May it please the Court.

This is a Federal Income Tax case.

It is here on the Government’s petition to review a decision of the United States Court of Appeals for the Ninth Circuit.

The case here rises out of one of the interesting developments in modern society.

In California, there is a substantial system of both group medical insurance and group medical practice.

In this particular case, the medical insurance is provided by Kaiser Foundation Health Plan Incorporated and the medical services are provided by a partnership known as Permanente Medical Group.

The individual taxpayers before the court are members of this partnership or their spouses in cases where joint returns were filed.

The years involved are 1960 and 1961 except in one case where 1962 and 1963 are also involved.

The case was heard in a District Court on a stipulation of facts.

The basic stipulation appears at pages at 79 to 88 of the appendix.

And the texts to the stipulation are the full text of three substantial documents attached to in a part of the stipulation.

And the case turns largely on the effect of those documents and payments made pursuant to them under the Federal Tax laws.

The first of these documents is the partnership agreement of the Permanente Medical Group usually referred to in this case simply as Medical Group.

This partnership agreement appears on pages 102 through 113 of the appendix.

The next document appearing at pages 116 through 150 of the appendix is the medical service agreement being a contract entered into as of July 1, 1959 by the Kaiser Foundation Health Plan which is obligated to produce services under its contracts with its members and the Medical Group which thereby undertook the obligation to provide the services.

Under this contract, Medical Group agreed to supply health services to the members of the Health Plan and the Health Plan agreed to make payments to Medical Group.

The question and issue in this case relates to a portion of the payments and I will spell this out in detail in just a moment.

Finally, there is in the appendix at pages 159 through 199, a trust agreement establishing a retirement plan for the Permanente Medical Group.

That is the way it is entitled at the beginning, trust agreement, retirement plan for the Permanente Medical Group on page 159.

This is a typical non-vested retirement plan providing for benefits for physicians only and only to the physicians who persists in their connection with Medical Group or related groups for period stated in the trust.

Potter Stewart:

There are no non-medical employees than other beneficiaries?

Erwin N. Griswold:

There are no non-medical employees in this retirement plan.

Non-medical employees were taking care off in some way, otherwise how is not -- does not appear in the appendix.

Potter Stewart:

Did the plan cover physicians who are not members of the partnership, but who were staff employees?

Erwin N. Griswold:

Did that plan?

Potter Stewart:

Cover physicians, doctors who are not in the partnership, but who were employed by it?

Erwin N. Griswold:


The plan covers physicians who are employees of Permanente Medical Group as well as physician to our partners in Permanente Medical Group.