Cases by Issue - Federal Taxation

Internal Revenue Commissioner v. Banks

Mon, 05 Jan 2009 17:47:46 +0000

Case Basics

Docket No.

03-892

Petitioner

Commissioner of Internal Revenue

Petitioner Type

Petitioner

Respondent

Sigitas J. Banaitis

Respondent Type

Respondent

Consolidation

Commissioner of Internal Revenue v. Sigitas J. Banaitis, No. 03-907

Heard By

Rehnquist Court (1994-2005)

Decided By

Rehnquist Court (1994-2005)

Opinion

543 U.S. 426 (2005)

Granted

Monday, March 29, 2004

Argued

Monday, November 1, 2004

Decided

Monday, January 24, 2005

Advocates

James R. Carty (argued the cause for Respondent Banks)

David B. Salmons (argued the cause for Petitioner)

Philip N. Jones (argued the cause for Respondent Banaitis)

Facts of the Case

Sigitas Banaitis and John Banks separately argued to the U.S. Tax Court that contingency fees paid to lawyers could be deducted from taxable gross income. The court disagreed and ruled for the Internal Revenue Service. The IRS said Banaitis and Banks owed taxes on contingency fees. Banaitis appealed to the Ninth Circuit Court of Appeals, which ruled that under Oregon law contingency fees could not be taxed as income. Banks appealed to the Sixth Circuit Court of Appeals, which ruled contingency fees were never taxable income. Other federal appeals courts ruled to the contrary. The U.S. Supreme Court consolidated Banaitis' and Banks' cases.

Question

Does a taxpayer's gross income from litigation proceeds include contingency fees paid to lawyers?

Conclusion

Decision: 8 votes for Internal Revenue Commissioner, 0 vote(s) against
Legal provision: Internal Revenue Code

Yes. In a unanimous, 8-0 opinion delivered by Justice Anthony Kennedy, the Court held that if a litigant's recovery constituted income, the litigant's income included the contingency fee paid to his or her lawyer. The Court held that an economic gain assigned in advance to another party - as in a contingency-fee agreement - could not be excluded from gross income.

United States v. Galletti

Mon, 05 Jan 2009 17:44:54 +0000

Case Basics

Docket No.

02-1389

Petitioner

United States

Petitioner Type

Petitioner

Respondent

Abel C. Galletti, et al.

Respondent Type

Respondent

Heard By

Rehnquist Court (1994-2005)

Decided By

Rehnquist Court (1994-2005)

Opinion

541 U.S. 114 (2004)

Granted

Monday, June 23, 2003

Argued

Monday, January 12, 2004

Decided

Tuesday, March 23, 2004

Advocates

David R. Haberbush (argued the cause for Respondents)

Kent L. Jones (argued the cause for Petitioner)

Facts of the Case

Abel Galletti and his wife, along with another couple, the Briguglios, formed a business partnership. The partnership underpaid its federal employment taxes, and the IRS assessed the unpaid taxes against the partnership (meaning the partnership would be forced to pay the taxes). According to the Internal Revenue Code, if a tax debt is assessed within three years after the return was filed, the government has 10 additional years to collected the money.

More than three years later, the Gallettis and the Briguglios separately filed for bankruptcy. The IRS made a claim in bankruptcy court against the two couples for the taxes assessed against the partnership. The couples objected, arguing that because the partners themselves had not been separately assessed, the statute of limitations had not been extended to the partners.

The bankruptcy court ruled against the IRS, holding that the IRS must assess tax claims against individual partners, not just the partnership, in order to later collect on those claims from the individuals. The district court and a Ninth Circuit Court of Appeals panel both affirmed the decision.

Question

To qualify for the 10-year extension in the statute of limitations, does the government need to assess - beyond just the partnership that owes money - each individual partner for the debt?

Conclusion

Decision: 9 votes for United States, 0 vote(s) against
Legal provision: Internal Revenue Code

No. In a unanimous opinion delivered by Justice Clarence Thomas, the Court held that the IRS' assessment against the partnership was sufficient to extend the statute of limitations by 10 years to collect the money from the partners themselves. The Internal Revenue Code does not require the government to make separate assessments of a single debt against people or entities secondarily liable in order to extend the statute of limitations. The statute of limitations extension is attached to the debt - without reference to the entities who owe the debt.

Boeing Co. v. United States

Mon, 05 Jan 2009 17:47:57 +0000

Case Basics

Docket No.

01-1209

Petitioner

Boeing Co.

Petitioner Type

Petitioner

Respondent

United States

Respondent Type

Respondent

Consolidation

No. 01-1382

Heard By

Rehnquist Court (1994-2005)

Decided By

Rehnquist Court (1994-2005)

Opinion

537 U.S. 437 (2003)

Argued

Monday, December 9, 2002

Decided

Tuesday, March 4, 2003

Advocates

Kent L. Jones (Argued the cause for the respondent)

Kenneth S. Geller (Argued the cause for the petitioner)

Facts of the Case

In 1971, Congress enacted tax provisions providing special tax treatment for export sales made by an American manufacturer through a subsidiary that qualified as a "domestic international sales corporation" (DISC). Regarding research and development (R&D;) expenses, Treasury Regulation 26 CFR section 1.861-8(e)(3) provides what must be treated as a cost when calculating combined taxable income (CTI), and how those costs should be allocated among different products and apportioned between the DISC and its parent. Under this regulation, the Internal Revenue Service reallocated Boeing's company sponsored R&D; costs for 1979 to 1987, thereby decreasing the untaxed profits of its export subsidiaries and increasing its taxable profits on export sales. Subsequently, Boeing filed suit, arguing that it had an unqualified right to allocate its company sponsored R&D; expenses to specific products and to exclude any allocated R&D; from being treated as a cost of another product. In granting Boeing summary judgment, the District Court found section 1.861-8(e)(3) invalid due to a specific DISC regulation giving the taxpayer the right to group and allocate income and costs by product or product line. The Court of Appeals reversed.

Question

Was Boeing Co. required to take into account expenses incurred for R&D; in accordance with applicable Treasury regulations in calculating its "combined taxable income" for purposes of determining taxation with respect to its domestic international sales corporation and foreign sales corporation?

Conclusion

Decision: 7 votes for United States, 2 vote(s) against
Legal provision: Internal Revenue Code

Yes. In a 7-2 opinion delivered by Justice John Paul Stevens, the Court held that section 1.861-8(e)(3) is a proper exercise of the Secretary of the Treasury's rulemaking authority. The Court reasoned that the general regulation classifying all R&D; as an indirect cost attributable to all export sales was not arbitrary as it provided consistent treatment for costs items used in computing domestic taxable income and combined taxable income. Justice Stevens wrote that the rule's "allocation of R&D; expenditures to all products in a category even when specifically intended to improve only one or a few of those products is no more tenuous than the allocation of a chief executive officer's salary to every product that a company sells even when he devotes virtually all of his time to the development of an Edsel." Justice Clarence Thomas filed a dissenting opinion, in which Justice Antonin Scalia joined.

United States v. Fior D'Italia, Inc.

Mon, 05 Jan 2009 17:46:36 +0000

Case Basics

Docket No.

01-463

Petitioner

United States

Petitioner Type

Petitioner

Respondent

Fior D'Italia, Inc.

Respondent Type

Respondent

Heard By

Rehnquist Court (1994-2005)

Decided By

Rehnquist Court (1994-2005)

Opinion

536 U.S. 238 (2002)

Argued

Monday, April 22, 2002

Decided

Monday, June 17, 2002

Advocates

Tracy J. Power (Argued the cause for the respondent)

Eileen J. O'Connor (Argued the cause for the petitioner)

Facts of the Case

Employers must pay Federal Insurance Contribution Act (FICA) taxes, calculated as a percentage of the wages, including tips, that their employees receive. In 1991 and 1992, Fior D'Italia restaurant paid FICA taxes based on the tip amount its employees reported, but the reports also showed that the tips listed on customers' credit card slips far exceeded the reported amount. The IRS made a compliance check and assessed additional FICA taxes using an "aggregate estimation" method, under which it examined the credit card slips; found the average percentage tip paid by those customers; assumed that cash- paying customers paid at same rate; calculated total tips by multiplying the tip rates by Fior D'Italia's total receipts; subtracted the tips already reported; applied the FICA tax rate to the remainder; and assessed additional taxes owed. Fior D'Italia filed a refund suit, claiming that the tax statutes did not authorize the IRS to use the aggregate estimation method. The District Court ruled for Fior D'Italia, and the Court of Appeals affirmed.

Question

Does the law, under which the Federal Insurance Contribution Act taxes are paid, authorize the IRS to assess a restaurant for FICA taxes based upon its aggregate estimate of all the tips that the restaurant's customers paid its employees?

Conclusion

Decision: 6 votes for United States, 3 vote(s) against
Legal provision: Internal Revenue Code

Yes. In a 6-3 opinion delivered by Justice Stephen G. Breyer, the Court held that the law authorizes the IRS to use the aggregate estimation method. The Court reasoned that the law, by granting the IRS assessment authority, necessarily granted it the power to decide how to make that assessment within certain limits. In rejecting Fior D'Italia's reasonability arguments, the Court said the law does not require the IRS to determine total tip income by estimating each individual employee's tip income separately, then adding individual estimates together to create a total. Justice David H. Souter, with whom Justices Antonin Scalia and Clarence Thomas joined, dissented. The IRS's method "raises anomaly after anomaly, to the point that one has to suspect that the Government's practice is wrong," argued Justice Souter.

United States v. Craft

Mon, 05 Jan 2009 17:46:41 +0000

Case Basics

Docket No.

00-1831

Petitioner

United States

Petitioner Type

Petitioner

Respondent

Craft

Respondent Type

Respondent

Heard By

Rehnquist Court (1994-2005)

Decided By

Rehnquist Court (1994-2005)

Opinion

535 U.S. 274 (2002)

Argued

Monday, January 14, 2002

Decided

Wednesday, April 17, 2002

Advocates

Jeffrey S. Sutton (Argued the cause for the respondent)

Kent L. Jones (Argued the cause for the petitioner)

Facts of the Case

When Don Craft failed to pay federal income tax liabilities for the failure to file federal income tax returns for the years 1979 through 1986, a federal tax lien attached to "all [of his] property and rights to property," pursuant to 26 USC section 6321. After the notice of the lien was filed, Dan and his wife Sandra L. Craft jointly executed a quitclaim deed purporting to transfer to her his interest in a piece of real property in Michigan that they owned as tenants by the entirety. Subsequently, the Internal Revenue Service (IRS) agreed to release the lien and allow the Crafts to sell the property with half the net proceeds to be held in escrow pending determination of the Government's interest in the property. After Sandra brought an action to quiet title to the escrowed proceeds, the Government claimed that its lien had attached to the husband's interest in the tenancy by the entirety. The District Court granted the Government summary judgment. The Court of Appeals, however, held that no lien attached because the husband had no separate interest in the entireties property under Michigan law.

Question

Does a tenant by the entirety possess property or rights to property to which a federal lien may attach?

Conclusion

Decision: 6 votes for United States, 3 vote(s) against
Legal provision: Internal Revenue Code

Yes. In a 6-3 opinion delivered by Justice Sandra Day O'Connor, the Court held that each tenant possesses individual rights in the estate sufficient to constitute "property" or "rights to property" for the purposes of the lien. By determining that Michigan law granted the husband the right to use the property, the right to receive income produced by it, the right to exclude others from it, the non-unilateral right to alienate the property, and the right of survivorship, Justice O'Connor reasoned that the rights Michigan law granted to the husband as a tenant by the entirety qualified as "property" or "rights to property" under section 6321 and, therefore, the federal tax lien could attach to the husband's property. Justice Antonin Scalia filed a dissenting opinion, in which Justice Clarence Thomas joined. Justice Thomas also filed a dissenting opinion, in which Justices Scalia and John Paul Stevens joined.

United Dominion Industries v. United States

Mon, 05 Jan 2009 17:44:15 +0000

Case Basics

Docket No.

00-157

Petitioner

United Dominion Industries

Petitioner Type

Petitioner

Respondent

United States

Respondent Type

Respondent

Heard By

Rehnquist Court (1994-2005)

Decided By

Rehnquist Court (1994-2005)

Opinion

532 U.S. 822 (2001)

Argued

Monday, March 26, 2001

Decided

Monday, June 4, 2001

Advocates

Kent L. Jones (Department of Justice, argued the cause for the respondent)

Eric R. Fox (Argued the cause for the petitioner)

Facts of the Case

Under the Internal Revenue Code of 1954, a taxpayer may carry back its "product liability loss" up to 10 years in order to offset prior years' income. United Dominion Industries, Inc. predecessor in interest, AMCA International Corporation, was the parent of an affiliated group filing consolidated returns for the years 1983 through 1986. AMCA calculated its product liability loss (PPL) on a consolidated basis, or a "single-entity" approach. The government's "separate-member" approach would have prohibited 5 of AMCA's 26 members from contributing to the group's total PPL. In 1986 and 1987, AMCA petitioned the Internal Revenue Service for a refund based on its PPL calculations. Ultimately, the District Court applied AMCA's single-entity approach, concluding that if the affiliated group's consolidated return reflects consolidated net operating losses in excess of the group's aggregate product liability expenses, the total of those expenses is a PLL that may be carried back. In reversing, the Court of Appeals applied the separate-member approach.

Question

Must an affiliated group of corporations' product liability loss be figured on a consolidated, single-entity basis?

Conclusion

Decision: 8 votes for United Dominion Industries, 1 vote(s) against
Legal provision: Internal Revenue Code

Yes. In an 8-1 opinion delivered by Justice David H. Souter, the Court held that an affiliated group's product liability loss must be figured on a consolidated, single-entity basis, and not by aggregating product liability losses separately determined company by company. Justice Souter wrote for the Court that "'the Internal Revenue Code vests ample authority in the Treasury to adopt consolidated return regulations to effect a binding resolution of the question presented in this in this case.' To the extent that the Government has exercised that authority, its actions point to the single-entity approach as the better answer. To the extent the Government disagrees, it may amend its regulations to provide for a different one."

United States v. Cleveland Indians Baseball Co.

Mon, 05 Jan 2009 17:44:25 +0000

Case Basics

Docket No.

00-203

Petitioner

United States

Petitioner Type

Petitioner

Respondent

Cleveland Indians Baseball Co.

Respondent Type

Respondent

Heard By

Rehnquist Court (1994-2005)

Decided By

Rehnquist Court (1994-2005)

Opinion

532 U.S. 200 (2001)

Argued

Tuesday, February 27, 2001

Decided

Tuesday, April 17, 2001

Advocates

Carter G. Phillips (Argued the cause for the respondent)

James A. Feldman (Department of Justice, argued the cause for the petitioner)

Facts of the Case

Under a grievance settlement agreement, the Cleveland Indians Baseball Company owed 8 players backpay for wages due in 1986 and 14 players backpay for wages due in 1987. The Company paid all of the back wages in 1994. No award recipient was a Company employee in that year. The Company also paid its share of employment taxes on the back wages according to 1994 tax rates and wage bases. The payments were subject to Social Security and Medicare taxes under the Federal Insurance Contributions Act (FICA) and taxes on wages to fund unemployment benefits under the Federal Unemployment Tax Act (FUTA). Both tax rates and the amount of the wages subject to tax have risen over time. After the Internal Revenue Service denied the Company's claims for a refund of the payments, the Company initiated suit in Federal District Court. The court, bound by precedent, ordered the Government to refund FICA and FUTA taxes. The Court of Appeals affirmed.

Question

Is backpay subject to federal taxes, under the Federal Insurance Contributions Act and the Federal Unemployment Tax Act, based on the year the money should have been paid out?

Conclusion

Decision: 9 votes for United States, 0 vote(s) against
Legal provision: Internal Revenue Code

No. In a unanimous opinion delivered by Justice Ruth Bader Ginsburg, the Court held that back wages are subject to FICA and FUTA taxes by reference to the year the wages are in fact paid. "Although the regulations, like the statute, do not specifically address backpay, the Internal Revenue Service has consistently interpreted them to require taxation of back wages according to the year the wages are actually paid, regardless of when those wages were earned or should have been paid," wrote Justice Ginsburg for the Court. Justice Antonin Scalia filed an opinion concurring in the judgment.

United States v. Hatter

Mon, 05 Jan 2009 17:44:21 +0000

Case Basics

Docket No.

99-1978

Petitioner

United States

Petitioner Type

Petitioner

Respondent

Hatter

Respondent Type

Respondent

Heard By

Rehnquist Court (1994-2005)

Decided By

Rehnquist Court (1994-2005)

Opinion

532 U.S. 557 (2001)

Argued

Tuesday, February 20, 2001

Decided

Monday, May 21, 2001

Advocates

Steven S. Rosenthal (Argued the cause for the respondents)

Paul R. Q. Wolfson (Department of Justice, argued the cause for the petitioner)

Facts of the Case

In 1982, when Congress extended Medicare to federal employees, then-sitting federal judges began to have Medicare taxes withheld from their salaries. In 1983, Congress then required federal judges to participate in Social Security, except for those who contributed to a "covered" retirement program. A "covered" program was defined to include any retirement system to which an employee had to contribute, which did not encompass the noncontributory pension system for federal judges, whose financial obligations and payroll deductions therefore had to increase. A group of federal judges, who were appointed before 1983, filed suit arguing that the 1983 law violated the Constitution's Compensation Clause, which guarantees federal judges a "Compensation, which shall not be diminished during their Continuance in Office." Ultimately, the Court of Federal Claims ruled that a 1984 judicial salary increase cured any violation. In reversing, the Federal Circuit held that the Compensation Clause prevented the government from collecting Medicare and Social Security taxes from the judges and that the violation was not cured by the 1984 pay increase.

Question

Did Congress violate the Compensation Clause when it extended the Medicare and Social Security taxes to the salaries of sitting federal judges? If so, was the violation cured when Congress increased the salaries of all federal judges by an amount greater than the new taxes?

Conclusion

Decision: 5 votes for United States, 2 vote(s) against
Legal provision: Article 3, Section 1, Paragraph 2: Good Behavior and Compensation Clause of Federal Judges

In a 6-1 opinion delivered by Justice Stephen G. Breyer, the Court held that the Compensation Clause prevents the government from collecting Social Security taxes from federal judges who held office before Congress extended those taxes to federal employees and that the Compensation Clause violation was not cured by the 1984 pay increase for federal judges. In a 5-2 split, the Court held that the Government could collect Medicare taxes from the same class of judges. On the Medicare question, Justice Breyer, wrote that "this Court has held that the Legislature cannot directly reduce judicial salaries even as part of an equitable effort to reduce all Government salaries. But a tax law, unlike a law mandating a salary reduction, affects compensation indirectly, not directly. And those prophylactic considerations that may justify an absolute rule forbidding direct salary reductions are absent here, where indirect taxation is at issue."

Gitlitz v. Commissioner

Mon, 05 Jan 2009 17:44:20 +0000

Case Basics

Docket No.

99-1295

Petitioner

Gitlitz

Petitioner Type

Petitioner

Respondent

Commissioner

Respondent Type

Respondent

Heard By

Rehnquist Court (1994-2005)

Decided By

Rehnquist Court (1994-2005)

Opinion

531 U.S. 206 (2001)

Argued

Monday, October 2, 2000

Decided

Tuesday, January 9, 2001

Advocates

Darrell D. Hallett (Argued the cause for the petitioners)

Kent L. Jones (Department of Justice, argued the cause for the respondent)

Facts of the Case

In 1991, P. D. W. & A., Inc., an insolvent corporation taxed under Subchapter S, excluded its entire discharge of indebtedness amount from its gross income. David Gitlitz and other shareholders were assessed tax deficiencies because they used the untaxed discharge of indebtedness to increase their basis in S corporation stock and to deduct suspended losses. Ultimately, the Tax Court held that Gitlitz and others could not use an S corporation's untaxed discharge of indebtedness to increase their basis in corporate stock. In affirming, the Court of Appeals held that the discharge of indebtedness amount first had to be used to reduce certain tax attributes of the S corporation and that only the leftover amount could be used to increase their basis. In so holding, the court assumed that the excluded discharge of indebtedness is an item of income subject to passthrough to shareholders.

Question

Does the Internal Revenue Code permit taxpayers to increase bases in their S corporation stock by the amount of an S corporation's discharge of indebtedness excluded from gross income? If the Code permits such an increase, does the increase occur before taxpayers are required to reduce the S corporation's tax attributes?

Conclusion

Decision: 8 votes for Gitlitz, 1 vote(s) against
Legal provision: Internal Revenue Code

Yes and yes. In an 8-1 opinion delivered by Justice Clarence Thomas, the Court held that excluded discharged debt is an "item of income," which passes through to shareholders and increases their bases in an S corporation's stock and that pass-through is performed before the reduction of an S corporation's tax attributes. Justice Thomas wrote that the Code "simply does not say that discharge of indebtedness ceases to be an item of income when the S corporation is insolvent. Instead it provides only that discharge of indebtedness ceases to be included in gross income." "In order to determine the 'tax imposed,' an S corporation shareholder must adjust his basis in his corporate stock and pass through all items of income and loss. Consequently, the attribute reduction must be made after the basis adjustment and pass- through," continued Justice Thomas.

Baral v. United States

Mon, 05 Jan 2009 16:14:40 +0000

Case Basics

Docket No.

98-1667

Petitioner

Baral

Petitioner Type

Petitioner

Respondent

United States

Respondent Type

Respondent

Heard By

Rehnquist Court (1994-2005)

Decided By

Rehnquist Court (1994-2005)

Opinion

528 U.S. 431 (2000)

Argued

Tuesday, January 18, 2000

Decided

Tuesday, February 22, 2000

Advocates

Walter J. Rockler (Argued the cause for the petitioner)

Kent L. Jones (Department of Justice, argued the cause for the respondent)

Facts of the Case

David H. Baral made two remittances to the Internal Revenue Service towards his 1988 income tax, which was due on April 15, 1989. The first was a standard withholding from Baral's wages throughout 1988 by his employer. The second was an estimated income tax remitted in January 1989 by Baral himself. Baral received an extension until August 15, but did not file the return until June 1, 1993. On the return, Baral claimed a $1,175 overpayment and asked the IRS to apply this excess as a credit toward his outstanding tax obligations for the 1989 tax year. The IRS denied the requested credit citing 26 U. S. C. Section 6511, which states that "the amount of the credit or refund shall not exceed the portion of the tax paid within the period immediately preceding the filing of the claim, equal to 3 years plus the period of any extension of time for filing the return." According to the IRS, Baral had paid no portion of the overpaid tax between February 1, 1990 and June 1, 1993, and therefore he faced a ceiling of zero on any allowable refund or credit. Baral commenced suit for a refund in the Federal District Court, which granted the IRS summary judgment. In affirming, the Court of Appeals concluded that both remittances were paid on April 15, 1989.

Question

Are remittances of withholding tax and estimated income tax paid on the due date of the taxpayer's income tax return?

Conclusion

Decision: 9 votes for United States, 0 vote(s) against
Legal provision: Internal Revenue Code

Yes. Justice Clarence Thomas delivered the opinion of the unanimous Court, which held that remittances of withholding tax and estimated income tax are paid on the due date of a calendar year taxpayer's income tax return. The Court concluded that the ceiling on Baral's requested credit was zero, because, rather than being paid within the look-back period, between February 1, 1990 and June 1, 1993, both the withholding and the estimated taxes had been paid on April 15, 1989. The decision means that the three-year time limit for seeking a refund begins running when someone's withholding and estimated tax payments are made to the government. The deadline does not depend on when the person's income tax return is filed, the court said.

Drye v. United States

Mon, 05 Jan 2009 16:14:29 +0000

Case Basics

Docket No.

98-1101

Petitioner

Drye

Petitioner Type

Petitioner

Respondent

United States

Respondent Type

Respondent

Heard By

Rehnquist Court (1994-2005)

Decided By

Rehnquist Court (1994-2005)

Opinion

528 U.S. 49 (1999)

Argued

Monday, November 8, 1999

Decided

Tuesday, December 7, 1999

Advocates

Daniel M. Traylor (Argued the cause for the petitioners)

Kent L. Jones (Department of Justice, argued the cause for the respondent)

Facts of the Case

In 1994, Irma Drye died, leaving a $233,000 estate. The sole heir to the estate under Arkansas law was Rohn Drye, Jr., her son. Drye owed the Federal Government approximately $325,000 in unpaid tax assessments. The Internal Revenue Service (IRS) had valid tax liens against all of Drye's "property and rights to property" under federal law, 26 USC section 6321. Several months after Drye was appointed the administrator of his mother's estate, he disclaimed his interest in the estate, which then passed under state law to his daughter. Arkansas law provides that the disavowing heir's creditors may not reach property thus disclaimed. Drye's daughter then proceeded to use the estate's proceeds to establish a family trust (Trust), of which she and her parents are the beneficiaries. Under state law the Trust was shielded from creditors seeking to satisfy the debts of the Trust's beneficiaries. After Drye revealed his beneficial interest in the Trust to the IRS, the IRS filed a notice of federal tax lien against the Trust. Ultimately, the District Court ruled in favor of the Government and its lien. In affirming, the Court of Appeals interpreted precedent to mean that state law determines whether a given set of circumstances creates a right or interest, but federal law determines whether that right or interest constitutes "property" or "rights to property" under section 6321, thus subjecting it to federal tax liens.

Question

Does an heir's interest to an estate constitute "property" or "rights to property" such that federal liens are valid against the heir's interest, even if the heir has disclaimed the interest under state law?

Conclusion

Decision: 9 votes for United States, 0 vote(s) against
Legal provision: Internal Revenue Code

Yes. In a unanimous opinion delivered by Justice Ruth Bader Ginsburg, the Court held that Drye's disclaimer did not defeat the federal tax liens. The Court read the Internal Revenue Code to look to state law for a delineation of a taxpayer's rights or interests, but to leave to federal law the determine whether those rights or interests constitute "property" or "rights to property" under section 6321. Justice Ginsburg wrote for the Court that "Drye had the unqualified right to receive the entire value of his mother's estate...or to channel that value to his daughter. The control rein he held under state law, we hold, rendered the inheritance 'property' or 'rights to property' belonging to him within the meaning of [section] 6321, and hence subject to the federal tax liens that sparked this controversy."

United States v. United States Shoe Corp.

Mon, 20 Jun 2011 04:06:30 +0000

Location

United States Shoe Corporation

One Eastwood Drive Cincinnati OH 45227

Cincinnati, OH 45227

United States

39° 10' 7.122" N, 84° 24' 25.5024" W

See map: Google Maps

Case Basics

Docket No.

97-372

Petitioner

United States

Petitioner Type

Petitioner

Respondent

United States Shoe Corp.

Respondent Type

Respondent

Heard By

Rehnquist Court (1994-2005)

Decided By

Rehnquist Court (1994-2005)

Opinion

523 U.S. 360 (1998)

Argued

Wednesday, March 4, 1998

Decided

Tuesday, March 31, 1998

Advocates

Lawrence G. Wallace (Department of Justice, argued the cause for the petitioner)

James R. Atwood (Argued the cause for the respondent)

Facts of the Case

The Harbor Maintenance Tax (HMT) obligates exporters, importers, and domestic shippers to pay 0.125 percent of the value of the commercial cargo they ship through the Nation's ports. From April to June 1994, United States Shoe Corporation paid the HMT for articles it exported. U.S. Shoe then filed a protest with the Customs Service alleging that, to the extent the toll applies to exports, the HMT violates the Export Clause of the Constitution, which provides that "No Tax or Duty shall be laid on Articles exported from any State." The Customs Service refuted the accusation, stating that the HMT is a statutorily mandated user fee. U.S. Shoe then sued for a refund in the Court of International Trade (CIT). Granting U.S. Shoe summary judgment, the CIT held that the HMT qualifies as a tax, reasoning that the tax is assessed ad valorem directly upon the value of the cargo itself, not upon any services rendered for the cargo. The Court of Appeals for the Federal Circuit affirmed.

Question

Does the Harbor Maintenance Tax, as applied to goods loaded at U.S. ports for export, violate the Export Clause?

Conclusion

Decision: 9 votes for United States Shoe Corp., 0 vote(s) against
Legal provision: 26 U.S.C. 4461

Yes. In a unanimous opinion delivered by Justice Ruth Bader Ginsburg, the Court held that "the [Harbor Maintenance Tax], which is imposed on an ad valorem basis, is not a fair approximation of services, facilities, or benefits furnished to the exporters, and therefore does not qualify as a permissible user fee." The Court noted that the Export Clause does not categorically bar Congress from imposing any tax on exports and that a charge designed as compensation for government-supplied services, facilities, or benefits would pass scrutiny.

Atlantic Mutual Ins. Co. v. IRS

Mon, 05 Jan 2009 16:14:47 +0000

Case Basics

Docket No.

97-147

Petitioner

Atlantic Mutual Ins. Co.

Petitioner Type

Petitioner

Respondent

IRS

Respondent Type

Respondent

Heard By

Rehnquist Court (1994-2005)

Decided By

Rehnquist Court (1994-2005)

Opinion

523 U.S. 582 (1998)

Argued

Monday, March 2, 1998

Decided

Tuesday, April 21, 1998

Advocates

Kent L. Jones (Argued the cause for the respondent)

George R. Abramowitz (Argued the cause for the petitioner)

Facts of the Case

The Internal Revenue Code allowed property and casualty insurers to fully deduct "loss reserves," or unpaid losses. The Tax Reform Act of 1986 altered the deduction formula. Under the Act, increases in loss reserves that constitute "reserve strengthening," or additions to the loss reserve, were excepted from a one time tax benefit because it would result in a tax deficiency. Treasury regulation and the Commissioner of Internal Revenue interpreted the law to say that any increase in loss reserves constituted reserve strengthening. The Commissioner then determined Atlantic Mutual Insurance Company had engaged in reserve strengthening. The Tax Court disagreed with the government's interpretation. It held reserve strengthening referred only to increases resulting from computational methods. The Court of Appeals reversed the decision. It held reserve strengthening to encompass any increase in loss reserves.

Question

Is the government's interpretation of reserve strengthening correct in determining property and casualty insurers' liability?

Conclusion

Decision: 9 votes for IRS, 0 vote(s) against
Legal provision: Internal Revenue Code

Yes. In a unanimous decision, announced by Justice Antonin Scalia, the Court ruled that the IRS interpretation of reserve strengthening seemed "reasonable accommodation." It was fair and unabusive. Furthermore, the language of the provision was broad enough to embrace all increases in the reserves.

United States v. Romani

Mon, 05 Jan 2009 16:14:50 +0000

Case Basics

Docket No.

96-1613

Petitioner

United States

Petitioner Type

Petitioner

Respondent

Romani

Respondent Type

Respondent

Heard By

Rehnquist Court (1994-2005)

Decided By

Rehnquist Court (1994-2005)

Opinion

523 U.S. 517 (1998)

Argued

Monday, January 12, 1998

Decided

Wednesday, April 29, 1998

Advocates

Patrick F. McCartan (Argued the cause for the respondents)

Kent L. Jones (Department of Justice, argued the cause for the petitioner)

Facts of the Case

Both a judgment lien and federal tax liens encumbered the real property of Francis Romani's Pennsylvania estate, worth $53,001, following his death. The estate's administrator sought a county court's permission to transfer the property to the judgment creditor. The Government objected to the conveyance, arguing that 31 USC section 3713(a), which provides that a Government claim "shall be paid first" when a decedent's estate cannot pay all of its debts, prioritized its payment. Nevertheless, the court authorized the conveyance. Ultimately, the Pennsylvania Supreme Court affirmed. The court concluded that Federal Tax Lien Act of 1966 modified the Government's preference and recognized the priority of many state claims over federal tax liens.

Question

Does the federal priority statute, 31 USC section 3713(a), require that that a federal tax claim be given preference over a judgment creditor's perfected lien on real property where such a preference is not authorized by the Federal Tax Lien Act of 1966?

Conclusion

Decision: 9 votes for Romani, 0 vote(s) against
Legal provision: 31 U.S.C. 3713

No. In an opinion delivered by Justice John Paul Stevens, the Court held that section 3713(a) does not require that a federal tax claim be given preference over a judgment creditor's perfected lien on real property. Justice Stevens reasoned that section 3713(a) has been limited by Federal Tax Lien Act of 1966, which provides that says a federal lien for back taxes is not valid until the government files proper notice with state or local officials. Accordingly, Justice Stevens wrote that the Tax Lien Act "represents Congress' detailed judgment as to when the Government's claims for unpaid taxes should yield to many different sorts of interests... in many different types of property... specifically crafted for tax collection purposes." Justice Antonin Scalia filed an opinion concurring in part and concurring in the judgment.

United States v. Brockamp

Mon, 05 Jan 2009 16:16:04 +0000

Case Basics

Docket No.

95-1225

Petitioner

United States

Petitioner Type

Petitioner

Respondent

Brockamp

Respondent Type

Respondent

Consolidation

No. ?

Heard By

Rehnquist Court (1994-2005)

Decided By

Rehnquist Court (1994-2005)

Opinion

519 U.S. 347 (1997)

Argued

Tuesday, December 3, 1996

Decided

Tuesday, February 18, 1997

Advocates

Robert F. Klueger (Argued the cause for the respondent)

Lawrence G. Wallace (Department of Justice, argued the cause for the petitioner)

Facts of the Case

Stanley B. McGill, whose estate is administrated by Marion Brockamp, paid the Internal Revenue Service money he did not owe. McGill, or his representative, submitted an administrative refund claim several years past the end of the applicable filing period set forth in the Internal Revenue Code of 1986. McGill asked the court to extend the statutory period for an "equitable" reason, namely that he had a mental disability that caused the delay. Although such a reason is not mentioned in the Internal Revenue Code, the Court of Appeals read the statute as if it contained an implied "equitable tolling" exception, which the court found justified, and therefore permitted the actions to proceed.

Question

May courts toll, for nonstatutory reasons, the statutory time limitations for filing tax refund claims set forth in the Internal Revenue Code of 1986?

Conclusion

Decision: 9 votes for United States, 0 vote(s) against
Legal provision: Internal Revenue Code

No. In a unanimous decision authored by Justice Stephen G. Breyer, the Court ruled that Congress did not intend the "equitable tolling" doctrine to apply to the Internal Revenue Code of 1986's time limitations for filing tax refund claims. Justice Breyer wrote that allowing such exceptions to the filing deadline "could create serious administrative problems by forcing the IRS to respond to, and perhaps litigate, large numbers of late claims."

Commissioner v. Estate of Hubert

Mon, 05 Jan 2009 16:15:53 +0000

Case Basics

Docket No.

95-1402

Petitioner

Commissioner

Petitioner Type

Petitioner

Respondent

Estate of Hubert

Respondent Type

Respondent

Heard By

Rehnquist Court (1994-2005)

Decided By

Rehnquist Court (1994-2005)

Opinion

520 U.S. 93 (1997)

Argued

Tuesday, November 12, 1996

Decided

Tuesday, March 18, 1997

Advocates

Kent L. Jones (Department of Justice, argued the cause for the petitioner)

David D. Aughtry (Argued the cause for the respondent)

Facts of the Case

The executors of Otis C. Hubert's substantial estate filed a federal estate tax return about a year after his death. Subsequently, the Commissioner of Internal Revenue issued a notice of deficiency, claiming underreporting of federal estate tax liability caused by the estate's asserted entitlement to marital and charitable deductions. While the estate's redetermination petition was pending in the Tax Court, the interested parties settled on the use of the estate's assets. The agreement divided the estate's principal, assumed to be worth $26 million, equally between marital trusts and a charitable trust. It also provided that the estate would pay its administration expenses either from the principal or the income of the assets. The estate paid about $500,000 of its nearly $2 million of administration expenses from principal and the rest from income. It then recalculated its tax liability, reducing the marital and charitable deductions by the amount of principal, but not the amount of income, used to pay the expenses. The Commissioner concluded that using income for expenses required a dollar for dollar reduction of the deductions. The Tax Court disagreed, finding that no reduction was required by reason of the executors' power, or the exercise of their power, to pay administration expenses from income. The Court of Appeals affirmed.

Question

Does the cost of administering an estate necessarily reduce the allowed estate-tax deduction for assets left to a spouse or charity?

Conclusion

Decision: 7 votes for Estate of Hubert, 2 vote(s) against
Legal provision: Internal Revenue Code

No. In an opinion authored by Justice Anthony M. Kennedy, the Court ruled that a taxpayer does not have to reduce the estate tax deduction for marital or charitable bequests by the amount of the administration expenses that were paid from income generated during administration by assets allocated to those bequests. "When income is used . . . to pay administration expenses, this does not require the estate tax deductions be diminished," wrote Justice Kennedy.

O'Gilvie v. United States

Mon, 05 Jan 2009 16:15:47 +0000

Case Basics

Docket No.

95-966

Petitioner

O'Gilvie

Petitioner Type

Petitioner

Respondent

United States

Respondent Type

Respondent

Consolidation

No. 95-977

Heard By

Rehnquist Court (1994-2005)

Decided By

Rehnquist Court (1994-2005)

Opinion

519 U.S. 79 (1996)

Argued

Wednesday, October 9, 1996

Decided

Tuesday, December 10, 1996

Advocates

Linda D. King (on behalf of the Petitioner in No. 95-977)

Stephen R. McAllister (Argued the cause for petitioners in 95-966)

Cornelia T. L. Pillard (Department of Justice, argued the cause for the respondents)

Kent L. Jones (on behalf of the Respondent)

Facts of the Case

After her death from toxic shock syndrome, Betty O'Gilvie's husband and two children received a jury award of $1,525,000 actual damages and $10 million punitive damages in a tort suit based on Kansas law against the maker of the product that caused Betty's death. The O'Gilvie's paid income tax on the portion of the award that represented punitive damages, but then sought a refund. Subsequently, Betty O'Gilvie's husband sued the Government for a refund and the Government sued the O'Gilvie children to recover the refund it had made earlier. In finding for the O'Gilvies, the District Court found that 26 USC section 104(a)(2), as read in 1988, excluded from gross income the "amount of any damages received... on account of personal injuries or sickness." The Court of Appeals reversed.

Question

Does the exclusionary provision of 26 USC section 104(a)(2), which excludes from gross income the "amount of any damages received... on account of personal injuries or sickness," apply to punitive damages received by a plaintiff in a tort suit for personal injuries?

Conclusion

Decision: 6 votes for United States, 3 vote(s) against
Legal provision: Internal Revenue Code

No. In a 6-3 opinion delivered by Justice Stephen G. Breyer, the Court held that the punitive damages received by the O'Gilvies were not received "on account of" personal injuries," and therefore the provision did not apply and the damages were taxable. Agreeing with the Government's definition, Justice Breyer reasoned that the exclusionary provision applied to those personal injury lawsuit damages that were awarded by reason of, or because of, the personal injuries, and not to punitive damages that do not compensate injury, but are private fines to punish and deter reprehensible conduct. Justice Antonin Scalia, who was joined by Justices Sandra Day O'Connor and Clarence Thomas, dissented.

United States v. Reorganized CF& I Fab. of UT

Mon, 05 Jan 2009 16:24:39 +0000

Case Basics

Docket No.

95-325

Petitioner

United States

Petitioner Type

Petitioner

Respondent

Reorganized CF& I Fab. of UT

Respondent Type

Respondent

Heard By

Rehnquist Court (1994-2005)

Decided By

Rehnquist Court (1994-2005)

Opinion

518 U.S. 213 (1996)

Argued

Monday, March 25, 1996

Decided

Thursday, June 20, 1996

Advocates

Steven Jack McCardell (Argued the cause for the respondents)

Kent L. Jones (Argued the cause for the petitioner)

Facts of the Case

The Employee Retirement Income Security Act of 1974 obligated CF&I; Steel Corporation (CF&I;) to make annual funding contributions to pension plans they sponsored. The required contribution for the 1989 plan totaled $12.4 million. CF&I; failed to make the payment and petitioned the Bankruptcy Court for Chapter 11 reorganization. The Government filed a proof of claim for tax liability arising under the Internal Revenue Code, 26 U.S.C. Section 4971(a), which imposes a 10 percent "tax" on any "accumulated funding deficiency" of plans such as CF&I;'s. The court allowed the claim, but rejected the Government's argument that the claim was entitled to priority as an "excise tax" under the Bankruptcy Code. The Bankruptcy Court also subordinated the Section 4971 claim to those of all other general unsecured creditors under the Bankruptcy Code's provision for equitable subordination. The court later approved a reorganization plan for CF&I; giving lowest priority (and no money) to claims for non-compensatory penalties. The District Court and the Court of Appeals affirmed.

Question

Is the Internal Revenue Code's 10% tax liability claim on any "accumulated funding deficiency" in pension plans an "excise tax" under the Bankruptcy Code? May the Government's tax claims be given a lower priority than competing claims by other creditors in bankruptcy proceedings?

Conclusion

Decision: 9 votes for United States, 0 vote(s) against
Legal provision: Internal Revenue Code

No and no. In an opinion authored by Justice David H. Souter, the Court held that the Internal Revenue Code's 10% tax liability claim on any "accumulated funding deficiency" in pension plans, 26 U.S.C. Section 4971(a), does not create an excise tax under the Bankruptcy Code. Additionally, the Court held that the subordination of the Government's tax claim to those of other creditors was an error.

United States v. Noland

Mon, 05 Jan 2009 16:24:31 +0000

Case Basics

Docket No.

95-323

Petitioner

United States

Petitioner Type

Petitioner

Respondent

Noland

Respondent Type

Respondent

Heard By

Rehnquist Court (1994-2005)

Decided By

Rehnquist Court (1994-2005)

Opinion

517 U.S. 535 (1996)

Argued

Monday, March 25, 1996

Decided

Monday, May 13, 1996

Advocates

Raymond J. Pikna (Argued the cause for the respondent)

Kent L. Jones (Argued the cause for the petitioner)

Facts of the Case

The IRS filed claims in Bankruptcy Court for taxes, interest, and penalties that accrued when Thomas R. Noland, the trustee of the in-debt First Truck Lines, Inc., sought relief under federal Bankruptcy Code. The Bankruptcy Court held that the claims for taxes and interest were the first priority in the case. Consequently, the court subordinated the penalties, to be adjudicated following the taxes and interest, because the penalties were not financial losses for the IRS. The Court of Appeals affirmed the decision.

Question

May a bankruptcy court subordinate government attempts to collect tax penalties?

Conclusion

Decision: 9 votes for United States, 0 vote(s) against
Legal provision: Bankruptcy Code, Bankruptcy Act or Rules, or Bankruptcy Reform Act of 1978

No. In a unanimous decision, announced by Justice David H. Souter, the Court ruled that giving tax-penalty claims a lower priority than other claims contradicts Congress_ scheme of priorities regarding federal bankruptcy law.

United States v. International Business Machines Corp.

Mon, 05 Jan 2009 16:24:54 +0000

Case Basics

Docket No.

95-591

Petitioner

United States

Petitioner Type

Petitioner

Respondent

International Business Machines Corp.

Respondent Type

Respondent

Heard By

Rehnquist Court (1994-2005)

Decided By

Rehnquist Court (1994-2005)

Opinion

517 U.S. 843 (1996)

Argued

Monday, March 18, 1996

Decided

Monday, June 10, 1996

Advocates

Jeffrey P. Minear (Argued the cause for the petitioner)

James R. Atwood (Argued the cause for the respondent)

Facts of the Case

Pursuant to the Internal Revenue Code, International Business Machines Corporation (IBM) paid a tax on insurance premiums it paid to foreign insurers to insure exports from the U.S. to foreign countries. IBM sought a refund on the tax and filed suit in the Court of Federal Claims when its refund claim was denied by the IRS. IBM contended the tax violated the Export Clause of the U.S. Constitution, which states that "[n]o Tax or Duty shall be laid on Articles exported from any State." The court agreed. The Court of Appeals affirmed.

Question

May the federal government impose a tax on premiums that U.S. businesses pay foreign insurers for risks that could arise in this country?

Conclusion

Decision: 6 votes for International Business Machines Corp., 2 vote(s) against
Legal provision: Article 1, Section 9, Paragraph 5: Export Clause

No. In a 6-2 decision, announced by Justice Clarence Thomas, the Court ruled the tax did violate the Export Clause and was therefore unconstitutional.

Commissioner v. Lundy

Mon, 05 Jan 2009 16:24:44 +0000

Case Basics

Docket No.

94-1785

Petitioner

Commissioner

Petitioner Type

Petitioner

Respondent

Lundy

Respondent Type

Respondent

Heard By

Rehnquist Court (1994-2005)

Decided By

Rehnquist Court (1994-2005)

Opinion

516 U.S. 235 (1996)

Argued

Monday, November 6, 1995

Decided

Wednesday, January 17, 1996

Advocates

Glenn P. Schwartz (Argued the cause for the respondent)

Kent L. Jones (Department of Justice, argued the cause for the petitioner)

Facts of the Case

During 1987, Robert F. Lundy and his wife had $10,131 in federal income taxes withheld from their wages. This amount was substantially more than what the Lundys owed in taxes that year, but they did not file their 1987 tax return when it was due, nor did they file a return or claim a refund of the overpaid taxes in the following 2 1/2 years. In 1990, the Commissioner of Internal Revenue mailed Lundy a notice of deficiency for 1987. Subsequently, the Lundys filed their joint 1987 tax return, which claimed a refund of their overpaid taxes. Lundy also filed a petition in the Tax Court seeking a redetermination of the claimed deficiency and a refund. The Commissioner contended that the Tax Court lacked jurisdiction to award Lundy a refund, arguing that if a taxpayer does not file a tax return before the IRS mails the taxpayer a notice of deficiency, the Tax Court can only award the taxpayer a refund of taxes paid within two years prior to the date the notice of deficiency was mailed. The Tax Court agreed, finding also that 2-year "look-back" period applies. In reversing, the Court of Appeals found that the applicable look-back period in these circumstances is three years and that the Tax Court had jurisdiction to award a refund.

Question

Can the Tax Court award a refund of taxes paid more than two years prior to the date on which the Commissioner of Internal Revenue mailed the taxpayer a notice of deficiency, when, on the date the notice of deficiency was mailed, the taxpayer had not yet filed a return?

Conclusion

Decision: 7 votes for Commissioner, 2 vote(s) against
Legal provision: Internal Revenue Code

No. In a 7-2 opinion delivered by Justice Sandra Day O'Connor, the Court held that in these circumstances a 2-year look-back period applies and the Tax Court lacks jurisdiction to award a refund. Finding that the Tax Court properly applied the 2-year look-back period to Lundy's case, Justice O'Connor noted that Lundy's taxes were withheld from his wages such that they were deemed paid on the date his 1987 tax return was due, which is more than two years prior to the date the notice of deficiency was mailed. The Lundy was thus seeking a refund of taxes paid outside the applicable look-back period. Justices John Paul Stevens and Clarence Thomas filed dissents.

Commissioner Of Internal Revenue v. Schleier

Mon, 05 Jan 2009 16:15:29 +0000

Case Basics

Docket No.

94-500

Petitioner

Commissioner Of Internal Revenue

Petitioner Type

Petitioner

Respondent

Schleier et al.

Respondent Type

Respondent

Heard By

Rehnquist Court (1994-2005)

Decided By

Rehnquist Court (1994-2005)

Opinion

515 U.S. 323 (1995)

Argued

Monday, March 27, 1995

Decided

Wednesday, June 14, 1995

Advocates

Kent L. Jones (on behalf of the Petitioner)

Thomas F. Joyce (on behalf of the Respondents)

Facts of the Case

None

Question

None

Conclusion

Decision: 6 votes for Commissioner Of Internal Revenue, 3 vote(s) against
Legal provision: Internal Revenue Code

None

United States v. Williams

Mon, 05 Jan 2009 16:15:33 +0000

Case Basics

Docket No.

94-395

Petitioner

United States

Petitioner Type

Petitioner

Respondent

Williams

Respondent Type

Respondent

Heard By

Rehnquist Court (1994-2005)

Decided By

Rehnquist Court (1994-2005)

Opinion

514 U.S. 527 (1995)

Argued

Wednesday, February 22, 1995

Decided

Tuesday, April 25, 1995

Advocates

Philip Garrett Panitz (on behalf of the Respondent)

Kent L. Jones (on behalf of the Petitioner)

Facts of the Case

None

Question

None

Conclusion

Decision: 6 votes for Williams, 3 vote(s) against
Legal provision: Internal Revenue Code

None

United States v. Carlton

Mon, 05 Jan 2009 16:23:57 +0000

Case Basics

Docket No.

92-1941

Petitioner

United States

Petitioner Type

Petitioner

Respondent

Carlton

Respondent Type

Respondent

Heard By

Rehnquist Court (1993-1994)

Decided By

Rehnquist Court (1993-1994)

Opinion

512 U.S. 26 (1994)

Argued

Monday, February 28, 1994

Decided

Monday, June 13, 1994

Advocates

Kent L. Jones (on behalf of the Petitioner)

Russell G. Allen (on behalf of the Respondent)

Facts of the Case

None

Question

None

Conclusion

Decision: 9 votes for United States, 0 vote(s) against
Legal provision: Internal Revenue Code

None

United States v. Irvine

Mon, 05 Jan 2009 16:23:54 +0000

Case Basics

Docket No.

92-1546

Petitioner

United States

Petitioner Type

Petitioner

Respondent

Irvine et al.

Respondent Type

Respondent

Heard By

Rehnquist Court (1993-1994)

Decided By

Rehnquist Court (1993-1994)

Opinion

511 U.S. 224 (1994)

Argued

Monday, December 6, 1993

Decided

Wednesday, April 20, 1994

Advocates

Phillip H. Martin (on behalf of the Respondents)

Kent L. Jones (on behalf of the Plaintiff)

Facts of the Case

None

Question

None

Conclusion

Decision: 8 votes for United States, 0 vote(s) against
Legal provision: Internal Revenue Code

None

Commissioner Of Internal Revenue v. Keystone Consolidated Industries, Inc.

Mon, 05 Jan 2009 16:01:10 +0000

Case Basics

Docket No.

91-1677

Petitioner

Commissioner Of Internal Revenue

Petitioner Type

Petitioner

Respondent

Keystone Consolidated Industries, Inc.

Respondent Type

Respondent

Heard By

Rehnquist Court (1991-1993)

Decided By

Rehnquist Court (1991-1993)

Opinion

508 U.S. 152 (1993)

Argued

Monday, February 22, 1993

Decided

Monday, May 24, 1993

Advocates

Christopher J. Wright (on behalf of the Petitioner)

Raymond P. Wexler (on behalf of the Respondent)

Facts of the Case

None

Question

None

Conclusion

Decision: 8 votes for Commissioner Of Internal Revenue, 1 vote(s) against
Legal provision: Internal Revenue Code

None

United States By And Through Internal Revenue Service v. Mcdermott

Mon, 05 Jan 2009 16:01:08 +0000

Case Basics

Docket No.

91-1229

Petitioner

United States By And Through Internal Revenue Service

Petitioner Type

Petitioner

Respondent

Mcdermott et al.

Respondent Type

Respondent

Heard By

Rehnquist Court (1991-1993)

Decided By

Rehnquist Court (1991-1993)

Opinion

507 U.S. 447 (1993)

Argued

Monday, December 7, 1992

Decided

Wednesday, March 24, 1993

Advocates

James A. Feldman (on behalf of the Petitioner)

T. Richard Davis (on behalf of the Respondents)

Facts of the Case

None

Question

None

Conclusion

Decision: 6 votes for United States By And Through Internal Revenue Service, 3 vote(s) against
Legal provision: Internal Revenue Code

None

Bufferd v. Commissioner Of Internal Revenue

Mon, 05 Jan 2009 16:00:58 +0000

Case Basics

Docket No.

91-7804

Petitioner

Bufferd

Petitioner Type

Petitioner

Respondent

Commissioner Of Internal Revenue

Respondent Type

Respondent

Heard By

Rehnquist Court (1991-1993)

Decided By

Rehnquist Court (1991-1993)

Opinion

506 U.S. 523 (1993)

Argued

Monday, November 30, 1992

Decided

Monday, January 25, 1993

Advocates

Kent L. Jones (on behalf of the Respondent)

Stuart Jay Filler (on behalf of the Petitioner)

Facts of the Case

None

Question

None

Conclusion

Decision: 9 votes for Commissioner Of Internal Revenue, 0 vote(s) against
Legal provision: Internal Revenue Code

None

Newark Morning Ledger Co., As Successor To The Herald Co. v. United States

Mon, 05 Jan 2009 16:00:58 +0000

Case Basics

Docket No.

91-1135

Petitioner

Newark Morning Ledger Co., As Successor To The Herald Co.

Petitioner Type

Petitioner

Respondent

United States

Respondent Type

Respondent

Heard By

Rehnquist Court (1991-1993)

Decided By

Rehnquist Court (1991-1993)

Opinion

507 U.S. 546 (1993)

Argued

Tuesday, November 10, 1992

Decided

Tuesday, April 20, 1993

Advocates

Robert H. Bork (on behalf of the Petitioner)

Lawrence G. Wallace (on behalf of the Respondent)

Facts of the Case

None

Question

None

Conclusion

Decision: 5 votes for Newark Morning Ledger Co., As Successor To The Herald Co., 4 vote(s) against
Legal provision: Internal Revenue Code

None

United States v. Hill Et ux.

Mon, 05 Jan 2009 15:52:10 +0000

Case Basics

Docket No.

91-1421

Petitioner

United States

Petitioner Type

Petitioner

Respondent

Hill Et ux.

Respondent Type

Respondent

Heard By

Rehnquist Court (1991-1993)

Decided By

Rehnquist Court (1991-1993)

Opinion

506 U.S. 546 (1993)

Argued

Monday, November 2, 1992

Decided

Monday, January 25, 1993

Advocates

Richard B. Robinson (on behalf of the Respondents)

Kent L. Jones (on behalf of the Petitioner)

Facts of the Case

None

Question

None

Conclusion

Decision: 9 votes for United States, 0 vote(s) against
Legal provision: Internal Revenue Code

None

Commissioner Of Internal Revenue v. Soliman

Mon, 05 Jan 2009 16:01:14 +0000

Case Basics

Docket No.

91-998

Petitioner

Commissioner Of Internal Revenue

Petitioner Type

Petitioner

Respondent

Soliman

Respondent Type

Respondent

Heard By

Rehnquist Court (1991-1993)

Decided By

Rehnquist Court (1991-1993)

Opinion

506 U.S. 168 (1993)

Argued

Monday, October 5, 1992

Decided

Tuesday, January 12, 1993

Advocates

David M. Sokolow (on behalf of the Respondent)

Kent L. Jones (on behalf of the Petitioner)

Facts of the Case

None

Question

None

Conclusion

Decision: 8 votes for Commissioner Of Internal Revenue, 1 vote(s) against
Legal provision: Internal Revenue Code

None

United States v. Burke

Mon, 05 Jan 2009 16:24:19 +0000

Case Basics

Docket No.

91-42

Petitioner

United States

Petitioner Type

Petitioner

Respondent

Burke et al.

Respondent Type

Respondent

Heard By

Rehnquist Court (1991-1993)

Decided By

Rehnquist Court (1991-1993)

Opinion

504 U.S. 229 (1992)

Argued

Tuesday, January 21, 1992

Decided

Tuesday, May 26, 1992

Advocates

Jeffrey P. Minear (on behalf of the Petitioner)

Joseph E. Finley (on behalf of the Respondents)

Facts of the Case

None

Question

None

Conclusion

Decision: 7 votes for United States, 2 vote(s) against
Legal provision: Internal Revenue Code

None

United States v. Thompson/Center Arms Co.

Mon, 05 Jan 2009 16:23:58 +0000

Case Basics

Docket No.

91-164

Petitioner

United States

Petitioner Type

Petitioner

Respondent

Thompson/Center Arms Co.

Respondent Type

Respondent

Heard By

Rehnquist Court (1991-1993)

Decided By

Rehnquist Court (1991-1993)

Opinion

504 U.S. 505 (1992)

Argued

Monday, January 13, 1992

Decided

Monday, June 8, 1992

Advocates

Stephen P. Halbrook (on behalf of the Respondent)

James A. Feldman (on behalf of the Petitioner)

Facts of the Case

None

Question

None

Conclusion

Decision: 5 votes for Thompson/Center Arms Co., 4 vote(s) against
Legal provision: 26 U.S.C. 5821

None

Holywell Corp. v. Smith

Mon, 05 Jan 2009 16:24:18 +0000

Case Basics

Docket No.

90-1361

Petitioner

Holywell Corp. et al.

Petitioner Type

Petitioner

Respondent

Smith et al.

Respondent Type

Respondent

Consolidation

No. 90-1484

Heard By

Rehnquist Court (1991-1993)

Decided By

Rehnquist Court (1991-1993)

Opinion

503 U.S. 47 (1992)

Argued

Wednesday, December 4, 1991

Decided

Tuesday, February 25, 1992

Advocates

Herbert Stettin (on behalf of the Respondents)

Kent L. Jones (on behalf of the Petitioners)

Facts of the Case

None

Question

None

Conclusion

Decision: 9 votes for Holywell Corp., 0 vote(s) against
Legal provision: Internal Revenue Code

None

Indopco, Inc. v. Commissioner Of Internal Revenue

Mon, 05 Jan 2009 16:24:02 +0000

Case Basics

Docket No.

90-1278

Petitioner

Indopco, Inc.

Petitioner Type

Petitioner

Respondent

Commissioner Of Internal Revenue

Respondent Type

Respondent

Heard By

Rehnquist Court (1991-1993)

Decided By

Rehnquist Court (1991-1993)

Opinion

503 U.S. 79 (1992)

Argued

Tuesday, November 12, 1991

Decided

Wednesday, February 26, 1992

Advocates

Richard J. Hiegel (on behalf of the Petitioner)

Kent L. Jones ()

Facts of the Case

None

Question

None

Conclusion

Decision: 9 votes for Commissioner Of Internal Revenue, 0 vote(s) against
Legal provision: Internal Revenue Code

None

United States v. Centennial Savings Bank

Mon, 05 Jan 2009 16:16:07 +0000

Case Basics

Docket No.

89-1926

Petitioner

United States

Respondent

Centennial Savings Bank

Heard By

Rehnquist Court (1990-1991)

Decided By

Rehnquist Court (1990-1991)

Opinion

499 U.S. 573 (1991)

Argued

Tuesday, January 15, 1991

Decided

Wednesday, April 17, 1991

Advocates

John G. Roberts, Jr. (Argued the case for the United States)

Michael F. Duhl (Argued the case for the respondent)

Facts of the Case

Centennial Savings Bank exchanged interests in one set of mortgage loans for another set of mortgage loans of the same market value. The mortgages were worth substantially less at the time they were exchanged than they had been at the time they were acquired, however, and Centennial reported the difference as lost income on its income tax return. In a separate set of transactions, Centennial collected early withdrawal penalties from customers who withdrew their certificates of deposit before they were scheduled. Centennial reported the early withdrawal penalties as "income from the discharge ... of indebtedness," meaning that it did not need to be reported as income under 26 U.S.C. 108(a)(1)(C).

With regard to the exchanged mortgages, the IRS did not allow the deduction, ruling that the properties exchanged had not been "materially different" and that the exchange therefore did not actually produce a reportable loss. With regard to the withdrawal penalties, the IRS ruled that they had to be reported as income. Centennial took the issue to federal District Court, where a judge ruled for the IRS on the mortgage exchange issue but for Centennial on the withdrawal penalty one. The Fifth Circuit Court of Appeals reversed the mortgage exchange holding and upheld the withdrawal penalty holding, siding with Centennial on both issues.

Question

Can a bank list the exchange of properties that have equal fair market value as a loss on its federal Income Tax return if the property it loses is worth significantly less at the time of the exchange than it was when the property was initially acquired? May a bank treat money received from early withdrawal penalties as "income from the discharge ... of indebtedness" under 26 U.S.C. 108(a)(1)(C)?

Conclusion

Decision: 7 votes for Centennial Savings Bank, 2 vote(s) against
Legal provision: Internal Revenue Code

Yes and no. On the exchanged mortgage question, the Supreme Court referred to a companion case, Cottage Savings Association v. Commissioner of Internal Revenue, 499 U.S. 554, decided at the same time, in holding that the mortgages exchanged were "materially different" and could therefore be deducted as losses.

On the question of early withdrawal penalties, however, the Court sided with the IRS. Justice Thurgood Marshall, writing for the majority, stated that income comes from the "discharge ... of indebtedness" only when it is the result of the forgiveness of an obligation to repay assumed by the debtor (in this case the bank) at the outset of the debtor-creditor relationship. Because the early withdrawal fee was stipulated in the contract agreed upon at the outset of the certificate of deposit agreements, its payment was not the forgiveness of any obligation on behalf of the bank but rather the fulfillment of an obligation on behalf of the creditor. The bank was therefore required to list the penalties as income.

Cottage Savings Assoc. v. Commissioner of Internal Revenue

Mon, 05 Jan 2009 16:16:29 +0000

Case Basics

Docket No.

89-1965

Petitioner

Cottage Savings Assoc.

Petitioner Type

Petitioner

Respondent

Commissioner of Internal Revenue

Respondent Type

Respondent

Heard By

Rehnquist Court (1990-1991)

Decided By

Rehnquist Court (1990-1991)

Opinion

499 U.S. 554 (1991)

Argued

Tuesday, January 15, 1991

Decided

Wednesday, April 17, 1991

Advocates

Dennis L. Manes (Argued the case for the petitioner)

Facts of the Case

For tax purposes, Cottage Savings Association exchanged its interests in the mortgages of 252 single family homes with several other savings and loan associations, receiving in return 305 mortgages that, taken together, had the same market value. The fair market value of the mortgages it gave away, however, were worth $2.5 million less than their original value. In accordance with the accounting procedures of the federal regulatory body of savings and loan corporations, the Federal Home Loan Bank Board (FHLBB), Cottage Savings recorded the exchanged properties as "substantially identical" (because they had the same fair market value).

When Cottage Savings filed its federal income tax return, however, it claimed a $2.5 million loss - the difference between the original value of the mortgages it gave away and the current value of the mortgages it received in return. The IRS refused to recognize the difference as a deductible loss, however, because under section 1001(a) of Title 26 of the tax code, the change in a property's value is only taken into consideration when it is realized through the "sale or disposition of [the] property." An exchange of property only constitutes a "disposition" if there is a "material difference" between the properties exchanged. Because Cottage Savings had reported the properties exchanged as "substantially identical," the IRS ruled, a "disposition" could not have taken place and the loss in value could not be deducted. Cottage savings took the issue to a federal Tax Court, which disagreed with the IRS and ruled the deduction permissible. The Sixth Circuit Court of Appeals reversed, however, siding with the IRS.

Question

Can the exchange of properties considered "substantially identical" for accounting purposes under Federal Home Loan Bank Board regulations be considered a "disposition of property" for IRS tax purposes, given that properties exchanged must be materially different to constitute a "disposition" under section 1001(a) of Title 26 of the tax code?

Conclusion

Decision: 7 votes for Cottage Savings Assoc., 2 vote(s) against
Legal provision: Internal Revenue Code

Yes. In a 7-to-2 decision, the Supreme Court held that the definition of "substantially identical" under the FHLBB regulations was intentionally flexible and broad enough to include even properties that were "materially different" for IRS purposes. Justice Thurgood Marshall, in the majority opinion, wrote that exchanged properties are "materially different" if they "embody legally distinct entitlements." The properties involved in this exchange clearly satisfied that test. "Because the participation interests exchanged by Cottage Savings and the other S & L's derived from loans that were made to different obligors and secured by different homes, the exchanged interests did embody legally distinct entitlements. Consequently, we conclude that Cottage Savings realized its losses at the point of exchange."

Portland Golf Club v. Commissioner

Mon, 05 Jan 2009 17:29:55 +0000

Case Basics

Docket No.

89-530

Petitioner

Portland Golf Club

Petitioner Type

Petitioner

Respondent

Commissioner

Respondent Type

Respondent

Heard By

Rehnquist Court (1988-1990)

Decided By

Rehnquist Court (1988-1990)

Opinion

497 U.S. 154 (1990)

Argued

Tuesday, April 17, 1990

Decided

Thursday, June 21, 1990

Advocates

Clifford M. Sloan (on behalf of the Respondent)

Leonard J. Henzke, Jr. (on behalf of the Petitioner)

Facts of the Case

None

Question

None

Conclusion

Decision: 9 votes for Commissioner, 0 vote(s) against
Legal provision: Internal Revenue Code

None

Begier v. IRS

Mon, 05 Jan 2009 17:29:59 +0000

Case Basics

Docket No.

89-393

Petitioner

Begier

Petitioner Type

Petitioner

Respondent

IRS

Respondent Type

Respondent

Heard By

Rehnquist Court (1988-1990)

Decided By

Rehnquist Court (1988-1990)

Opinion

496 U.S. 53 (1990)

Argued

Tuesday, March 27, 1990

Decided

Monday, June 4, 1990

Advocates

Brian J. Martin (on behalf of the Respondent)

Paul J. Winterhalter (on behalf of the Petitioner)

Facts of the Case

None

Question

None

Conclusion

Decision: 9 votes for IRS, 0 vote(s) against
Legal provision: Bankruptcy Code, Bankruptcy Act or Rules, or Bankruptcy Reform Act of 1978

None

Davis v. United States

Mon, 05 Jan 2009 17:30:16 +0000

Case Basics

Docket No.

89-98

Petitioner

Davis

Petitioner Type

Petitioner

Respondent

United States

Respondent Type

Respondent

Heard By

Rehnquist Court (1988-1990)

Decided By

Rehnquist Court (1988-1990)

Opinion

495 U.S. 472 (1990)

Argued

Monday, March 26, 1990

Decided

Monday, May 21, 1990

Advocates

Shirley D. Peterson (on behalf of the Respondent)

Rex E. Lee (on behalf of the Petitioners)

Facts of the Case

None

Question

None

Conclusion

Decision: 9 votes for United States, 0 vote(s) against
Legal provision: Internal Revenue Code

None

United States v. Munoz-Flores

Mon, 05 Jan 2009 17:30:21 +0000

Case Basics

Docket No.

88-1932

Petitioner

United States

Petitioner Type

Petitioner

Respondent

Munoz-Flores

Respondent Type

Respondent

Heard By

Rehnquist Court (1988-1990)

Decided By

Rehnquist Court (1988-1990)

Opinion

495 U.S. 385 (1990)

Argued

Tuesday, February 20, 1990

Decided

Monday, May 21, 1990

Advocates

Judy Clare Clarke (on behalf of the Respondent)

William C. Bryson (on behalf of the Petitioner)

Facts of the Case

None

Question

None

Conclusion

Decision: 9 votes for United States, 0 vote(s) against
Legal provision: Article 1, Section 7, Paragraph 1: Origination Clause

None

United States v. Dalm

Mon, 05 Jan 2009 17:29:47 +0000

Case Basics

Docket No.

88-1951

Petitioner

United States

Petitioner Type

Petitioner

Respondent

Dalm

Respondent Type

Respondent

Heard By

Rehnquist Court (1988-1990)

Decided By

Rehnquist Court (1988-1990)

Opinion

494 U.S. 596 (1990)

Argued

Wednesday, January 10, 1990

Decided

Tuesday, March 20, 1990

Advocates

Robert B. Pierce (on behalf of the Respondent)

Christine A. Desan-Husson (on behalf of the Petitioner)

Facts of the Case

None

Question

None

Conclusion

Decision: 6 votes for United States, 3 vote(s) against
Legal provision: Internal Revenue Code

None

United States v. Goodyear Tire & Rubber Co.

Mon, 05 Jan 2009 17:30:03 +0000

Case Basics

Docket No.

88-1474

Petitioner

United States

Petitioner Type

Petitioner

Respondent

Goodyear Tire & Rubber Co. et al

Respondent Type

Respondent

Heard By

Rehnquist Court (1988-1990)

Decided By

Rehnquist Court (1988-1990)

Opinion

493 U.S. 132 (1989)

Argued

Wednesday, November 1, 1989

Decided

Monday, December 11, 1989

Advocates

Barring Coughlin (on behalf of the Respondent)

Alan I. Horowitz (on behalf of the Petitioner)

Facts of the Case

None

Question

None

Conclusion

Decision: 9 votes for United States, 0 vote(s) against
Legal provision: Internal Revenue Code

None

Commissioner v. Indianapolis Power & Light Co.

Mon, 05 Jan 2009 17:30:04 +0000

Case Basics

Docket No.

88-1319

Petitioner

Commissioner

Petitioner Type

Petitioner

Respondent

Indianapolis Power & Light Co.

Respondent Type

Respondent

Heard By

Rehnquist Court (1988-1990)

Decided By

Rehnquist Court (1988-1990)

Opinion

493 U.S. 203 (1990)

Argued

Tuesday, October 31, 1989

Decided

Tuesday, January 9, 1990

Advocates

Larry J. Stroble (on behalf of the Respondent)

Lawrence G. Wallace (on behalf of the Petitioner)

Facts of the Case

None

Question

None

Conclusion

Decision: 9 votes for Indianapolis Power & Light Co., 0 vote(s) against
Legal provision: Internal Revenue Code

None

Colonial Am. Life Ins. Co. v. Commissioner

Mon, 05 Jan 2009 17:26:38 +0000

Case Basics

Docket No.

88-396

Petitioner

Colonial Am. Life Ins. Co.

Petitioner Type

Petitioner

Respondent

Commissioner

Respondent Type

Respondent

Heard By

Rehnquist Court (1988-1990)

Decided By

Rehnquist Court (1988-1990)

Opinion

491 U.S. 244 (1989)

Argued

Tuesday, April 18, 1989

Decided

Thursday, June 15, 1989

Advocates

Carolyn P. Chiechi (on behalf of Petitioner)

Michael R. Dreeben (on behalf of Respondent)

Facts of the Case

None

Question

None

Conclusion

Decision: 6 votes for Commissioner, 3 vote(s) against
Legal provision: Internal Revenue Code

None

Hernandez v. Commissioner

Mon, 05 Jan 2009 17:26:09 +0000

Case Basics

Docket No.

87-963

Petitioner

Hernandez

Petitioner Type

Petitioner

Respondent

Commissioner

Respondent Type

Respondent

Consolidation

No. 87-1616

Heard By

Rehnquist Court (1988-1990)

Decided By

Rehnquist Court (1988-1990)

Opinion

490 U.S. 680 (1989)

Argued

Monday, November 28, 1988

Decided

Monday, June 5, 1989

Advocates

Thomas W. Merrill (on behalf of the Respondents)

Michael J. Graetz (on behalf of the Petitioners)

Facts of the Case

None

Question

None

Conclusion

Decision: 5 votes for Commissioner, 2 vote(s) against
Legal provision: Internal Revenue Code

None

Commissioner v. Clark

Mon, 05 Jan 2009 17:26:13 +0000

Case Basics

Docket No.

87-1168

Petitioner

Commissioner

Petitioner Type

Petitioner

Respondent

Clark

Respondent Type

Respondent

Heard By

Rehnquist Court (1988-1990)

Decided By

Rehnquist Court (1988-1990)

Opinion

489 U.S. 726 (1989)

Argued

Monday, November 7, 1988

Decided

Wednesday, March 22, 1989

Advocates

Walter B. Slocombe (on behalf of the Respondent)

Alan I. Horowitz (on behalf of the Petitioner)

Facts of the Case

None

Question

None

Conclusion

Decision: 8 votes for Clark, 1 vote(s) against
Legal provision: Internal Revenue Code

None

United States v. Ron Pair Enterprises, Inc.

Mon, 05 Jan 2009 17:26:04 +0000

Case Basics

Docket No.

87-1043

Petitioner

United States

Petitioner Type

Petitioner

Respondent

Ron Pair Enterprises, Inc.

Respondent Type

Respondent

Heard By

Rehnquist Court (1988-1990)

Decided By

Rehnquist Court (1988-1990)

Opinion

489 U.S. 235 (1989)

Argued

Monday, October 31, 1988

Decided

Wednesday, February 22, 1989

Advocates

I. William Cohen (on behalf of the Respondent)

Lawrence G. Wallace (on behalf of the Petitioner)

Facts of the Case

None

Question

None

Conclusion

Decision: 5 votes for United States, 4 vote(s) against
Legal provision: Bankruptcy Code, Bankruptcy Act or Rules, or Bankruptcy Reform Act of 1978

None

Commissioner v. Bollinger

Mon, 05 Jan 2009 17:25:48 +0000

Case Basics

Docket No.

86-1672

Petitioner

Commissioner

Petitioner Type

Petitioner

Respondent

Bollinger

Respondent Type

Respondent

Heard By

Rehnquist Court (1987-1988)

Decided By

Rehnquist Court (1988-1990)

Opinion

485 U.S. 340 (1988)

Argued

Wednesday, January 13, 1988

Decided

Tuesday, March 22, 1988

Advocates

Charles R. Hembree (on behalf of the Respondents)

Alan I. Horowitz (on behalf of the Petitioner)

Facts of the Case

None

Question

None

Conclusion

Decision: 8 votes for Bollinger, 0 vote(s) against
Legal provision: Internal Revenue Code

None

Arkansas Best Corp. v. Commissioner

Mon, 05 Jan 2009 17:25:48 +0000

Case Basics

Docket No.

86-751

Petitioner

Arkansas Best Corp.

Petitioner Type

Petitioner

Respondent

Commissioner

Respondent Type

Respondent

Heard By

Rehnquist Court (1987-1988)

Decided By

Rehnquist Court (1988-1990)

Opinion

485 U.S. 212 (1988)

Argued

Wednesday, December 9, 1987

Decided

Monday, March 7, 1988

Advocates

Vester T. Hughes, Jr. (on behalf of the Petitioner)

Alan I. Horowitz (on behalf of the Respondent)

Facts of the Case

None

Question

None

Conclusion

Decision: 8 votes for Commissioner, 0 vote(s) against
Legal provision: Internal Revenue Code

None