This section contains the nature of the case and procedural background.

In 1960, Mr. and Mrs. Gotcher (Ps) took a twelve-day expense-paid trip to Germany to tour the Volkswagen facilities there. The trip cost $1372.30. P's employer, Economy Motors, paid $348.73, and Volkswagen of Germany and Volkswagen of America shared the remaining $1023.53. Upon returning, P bought a twenty-five percent interest in Economy Motors, the Sherman, Texas Volkswagen dealership, that had been offered to him before he left. Today he is President of Economy Motors in Sherman and owns fifty percent of the dealership. Ps did not include any part of the $1372.30 in their 1960 income. D determined that the taxpayers had realized income to the extent of the $1372.30 for the expense-paid trip and asserted a tax deficiency of $356.79, plus interest. Ps paid and filed suit for a refund. The district court held that the cost of the trip was not income to Ps or, in the alternative, was income and deductible as an ordinary and necessary business expense. D appealed.

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