DOBSON
v.
COMMISSIONER OF INTERNAL REVENUE
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Recoveries from a compromised claim for rescission of stock purchases are not taxable as capital gains because they do not constitute a 'sale or exchange' of a capital asset.
Taxpayers sought to treat recoveries from claims against a company, demanding rescission of stock purchases, as capital gains. These claims arose afte…
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Mr. Justice Jackson delivered the opinion of the Court.
Petition for rehearing in two of the four cases decided together on December 20,1943 states that these contained an issue not present and not considered in the main case. In these two cases the Tax Court held that recoveries by these taxpayers in 1939 did constitute taxable income. It held, also, that the recovery was taxable as ordinary income, despite taxpayer’s contention that it should be taxed as capital gain under § 117 of the Internal Revenue Code. This contention, the petition says, presents questions of law to be determined by this Court, rather than of fact finally to be determined by the Tax Court.
The weakness of taxpayers’ position lies in the fact that not every gain growing out of a transaction concerning capital assets is allowed the benefits of the capital gains tax provision. Those are limited by definition to gains from “the sale or exchange” of capital assets. Internal Revenue Code § 117 (2), (3), (4), (5).
We certainly cannot say that the items in question were as matter of law proceeds of the “sale or exchange” of a capital asset. Harwick asserted a claim, and the three other taxpayers involved in these cases filed suit, against the National City Company, demanding rescission of their purchases of stock. Their claims were compromised or admitted; the taxpayers seek to link the recoveries resulting therefrom with their prior sales of the stock, which resulted in losses. The Tax Court did not find as matter of fact, and we decline to say as matter of law, that such a transaction is a “sale or exchange” of a capital asset-in the accepted meaning of those terms. Cf. Helvering v. Flaccus Leather Co., 313 U. S. 247; Fairbanks v. United States, 306 U. S. 436. In Helvering v. Hammel, 311 U. S. 504; Electro-Chemical Engraving Co. v. Commissioner, 311 U. S. 513; Helvering v. Nebraska Bridge Supply & Lumber Co., 312 U. S. 666, on which petitioners rely, we held as matter of law that losses resulting from a sale were not to be denied the benefits of the capital losses provisions because the sale was a forced or involuntary one, as upon foreclosure. Those cases are no aid to petitioners here.
Petition for rehearing is denied.
Mk. Justice Douglas dissents.
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Muschany v. United States, 324 U.S. 49 (U.S. 1945)…recently this [*58] Court restated the rules relating to the weight to be given fact determinations by inferior judicial or quasi-judicial bodies. United States v. Bethlehem Steel Corp., 315 U. S. 289, 297-98; Dobson v. Commissioner, 320 U. S. 489, 321 U. S. 231. Therefore this case comes before this Court without any suggestion of fraud or unfairness such as would justify holding the contracts invalid. Since these matters are not before us, we need express no opinion on this aspect of the case. The federa…
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Limericks, Inc. v. Commissioner of Internal Revenue, 165 F.2d 483 (5th Cir. 1948)…5 Cir., 150 F. 2d 917. Gregory v. Helvering, 293 U.S. 465, 55 S.Ct. 266, 79 L.Ed. 596, 97 A.L.R. 1355; Higgins v. Smith, 308 U.S. 473, 60 S.Ct. 355, 84 L.Ed. 406. Dobson v. Commissioner, 320 U.S. 489, 64 S.Ct. 239, 88 L.Ed. 248, rehearing denied, 321 U.S. 231, 64 S.Ct. 495, 88 L.Ed. 691; Commissioner v. Court Holding Co., 324 U.S. 331, 65 S.Ct 707, 89 L.Ed. 981.…
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Harriss v. Commissioner of Internal Revenue, 143 F.2d 279 (2d Cir. 1944)…ss profit or loss. In any event, the question whether the Texas farm was a capital asset was clearly one of fact and the findings of the Tax Court, which were supported by substantial evidence before it, are binding upon us, Dobson v. Commissioner, 321 U. S. 231, 64 S.Ct. 495, and must be affirmed. The next claim by the taxpayer is that certain transactions in cotton futures found by the Tax Court to have resulted in profits of $36,373.50 in the year 1934 were not assessable as profits during that year ina…
Previewing 3 of 24 citing cases — full citator treatment, depth of discussion, and citing context are member features.
Join FLexlaw to unlock all legal intelligenceAuthorities Cited
- Helvering v. Hammel et ux., 311 U.S. 504 (U.S. 1941)
- Fairbanks v. United States, 306 U.S. 436 (U.S. 1939)
- Helvering v. William Flaccus Oak Leather Co., 313 U.S. 247 (U.S. 1941)
- Electro-Chemical Engraving Co., Inc. v. Commissioner of Internal Revenue, 311 U.S. 513 (U.S. 1941)
- City Co. of N.Y., Inc. v. Stern, 312 U.S. 666 (U.S. 1941)