Arrowsmith et al., Executors, et al. v. Commissioner of Internal Revenue (344 U.S. 6)
U.S. Supreme Court · decided November 10, 1952 · Supreme Court Database (Spaeth)
- Citation
- 344 U.S. 6 · 73 S. Ct. 71
- Docket
- No. 51
- Argued
- October 24, 1952
- Decided
- November 10, 1952
- Term
- October Term 1952
- Vote
- 6–3
- Majority author
- Justice Black
- Issue area
- Federal Taxation
- Disposition
- Affirmed
- Outcome
- Petitioning party lost
- Ideological direction
- Liberal
How the Justices voted
- Majority
- Chief Justice Vinson, Justice Minton, Justice Clark, Justice Burton, Justice Reed, Justice Black (wrote)
- Dissenting
- Justice R. H. Jackson (wrote), Justice Douglas (wrote), Justice Frankfurter
Opinion excerpt
Mr. Justice Black delivered the opinion of the Court. This is an income tax controversy growing out of the following facts as shown by findings of the Tax Court. In 1937 two taxpayers, petitioners here, decided to liquidate and divide the proceeds of a corporation in which they had equal stock ownership. Partial distributions made in 1937, 1938, and 1939 were followed by a final one in 1940. Petitioners reported the profits obtained from this transaction, classifying them as capital gains. They thereby' paid less income tax than would have been required had the income been attributed to ordinary business transactions for profit. About the propriety of these 1937-1940 returns, there is no dispute. But in 1944 a judgment was rendered against the old corporation and against Erederick R. Bauer, individually. The two taxpayers were required to and did pay the judgment for the corporation, of whose assets they were transferees. See Phillips-Jones Corp. v. Parmley, 302 U. S. 233, 235-236. Cf. I. R. C., § 311 (a). Classifying the loss as an ordinary business one, each took a tax deduction for 100% of the amount paid. Treatment of the loss as a capital one would have allowed deduction of a much smaller amount. See I. R. C., § 117 (b), (d) (2) and (e). The Commissioner viewed the 1944 payment as part of the original liquidation transaction requiring classification as a capital loss,…
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