Commissioner of Internal Revenue v. Jacobson (336 U.S. 28)
U.S. Supreme Court · decided January 17, 1949 · Supreme Court Database (Spaeth)
- Citation
- 336 U.S. 28 · 69 S. Ct. 358
- Docket
- No. 32
- Argued
- November 8, 1948
- Decided
- January 17, 1949
- Term
- October Term 1948
- Vote
- 7–2
- Majority author
- Justice Burton
- Issue area
- Federal Taxation
- Disposition
- Reversed and remanded
- Outcome
- Petitioning party won
- Ideological direction
- Liberal
How the Justices voted
- Majority
- Chief Justice Vinson, Justice Burton (wrote), Justice R. H. Jackson, Justice Frankfurter, Justice Black, Justice Rutledge (wrote a concurrence), Justice Murphy
- Dissenting
- Justice Douglas, Justice Reed (wrote)
Opinion excerpt
Mr. Justice Burton delivered the opinion of the Court. This decision applies the federal income tax to gains derived by a debtor from his purchase of his own obligations at a discount and his consequent control over their discharge. It presents the specific question whether a solvent natural person, in straitened financial circumstances, must include in his gross income for federal income tax purposes the difference between (1) the face amount of his personal indebtedness as the maker of secured bonds, originally issued by him at face value for cash, and (2) a lesser amount paid by him for their purchase. The debtor’s obligations were not unpaid balances of purchase prices which could be readjusted by the discharge of the obligations. The proceeds of the obligations were not traced into identifiable losses offsetting the debtor’s realized gains from the discharge of these obligations. Each seller knew that the bonds he sold were being bought by or for the maker of them. In each sale the bondholder sought to minimize his probable loss by getting as much as possible, directly or indirectly, from the maker of the bonds as the one available purchaser of them. The maker of the bonds, at the same time, sought to reduce his obligations as much as possible by buying the bonds as cheaply as he could. While each seller thus knew that he was receiving from the maker of the bonds less…
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