''Commissioner v. Glenshaw Glass Co.'', 348 U.S. 426 (1955), was an important income tax case before the
United States Supreme Court
The Supreme Court of the United States (SCOTUS) is the highest court in the federal judiciary of the United States. It has ultimate appellate jurisdiction over all U.S. federal court cases, and over state court cases that involve a point o ...
. The Court held as follows:
*
Congress
A congress is a formal meeting of the representatives of different countries, constituent states, organizations, trade unions, political parties, or other groups. The term originated in Late Middle English to denote an encounter (meeting of ...
, in enacting income taxation statutes that comprehend "gains or profits and income derived from any source whatever," intended to tax all gain except that which was specifically exempted.
*Income is not limited to "the gain derived from capital, from labor, or from both combined."
:*Although the Court used this characterization in ''
Eisner v. Macomber'', it "was not meant to provide a touchstone to all future gross income questions."
*Instead, income is realized whenever there are "instances of
undeniable accessions to wealth,
clearly realized, and
over which the taxpayers have complete dominion."
:*Under this definition, punitive damages qualify as "income" -- even though they are not derived from capital or from labor.
Facts
Two factually distinct cases were consolidated because they presented the same issue.
*In one case, the
defendant Glenshaw Glass Company had won an award of
punitive damages
Punitive damages, or exemplary damages, are damages assessed in order to punish the defendant for outrageous conduct and/or to reform or deter the defendant and others from engaging in conduct similar to that which formed the basis of the lawsuit. ...
in an
antitrust lawsuit. The defendant did not declare this award as income or pay taxes on it, claiming that it was not subject to taxation. The
Internal Revenue Service brought suit to collect the
tax
A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...
.
*In another case, William Goldman Theatres, Inc. neglected to report punitive damages as income. Again, the
Internal Revenue Service sued to collect the
tax
A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...
.
Opinion of the Court
The Supreme Court, in an opinion by Chief Justice
Earl Warren, held that the award of treble damages was taxable income.
In the opinion, Warren pointed out that the language of section 22(a) (the predecessor of
current section 61(a)) was employed by Congress in order utilize "the full measure of its taxing power," as provided for under the
Sixteenth Amendment. Essentially, Congress, in enacting section 22(a), intended to tax all gains except those specifically exempted.
The Court then held that the amounts received by the taxpayers in this case were "instances of undeniable accessions to wealth, clearly realized, and over which the taxpayers have complete dominion."
This three-part "test" for determining income is broader than the earlier test employed by the Court in ''
Eisner v. Macomber'',
and is to this day the preferred test for identifying gross income.
See also
*
List of United States Supreme Court cases, volume 348
*''
Clark v. Commissioner''
*''
Commissioner v. Indianapolis Power & Light Co.''
*''
Haverly v. United States''
*''
Raytheon Production Corp. v. Commissioner''
References
Further reading
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External links
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{{US16thAmendment
1955 in United States case law
United States Sixteenth Amendment case law
United States Supreme Court cases
United States Supreme Court cases of the Warren Court