Sunday, May 12, 2013

United States v. Skelly Oil Co. case brief

United States v. Skelly Oil Co. case brief
394 U.S. 678, 89 S. Ct. 1379, 22 L. Ed. 2d 642, 1969 U.S.

CASE SYNOPSIS: Petitioner government filed an application for a writ of certiorari and appealed from the United States Court of Appeals for the Tenth Circuit, which reversed an earlier judgment in petitioner's favor and which held that under I.R.C. § 1341 (1954) respondent taxpayer should be allowed to deduct the full amount of money that it had refunded to its customers.

FACTS: Respondent taxpayer filed a claim against petitioner government after petitioner disallowed its claim for a refund. Respondent had refunded money to customers for overcharges during a six-year period. Respondent claimed an unrestricted right to its sales receipts during those same six years and included the full amount that it refunded in its gross income in those years. Respondent attempted to deduct the full amount, but petitioner objected and assessed a deficiency. The court of appeals reversed the district court's judgment and ruled in respondent's favor. Petitioner appealed. After granting certiorari, the court reversed and remanded the cause. The court held that respondent's taxes had to be computed under I.R.C. § 1341(a)(4) (1954). The court held that the statutory language did not require that respondent be allowed a deduction for the full amount that it had refunded to its customers because Congress had not intended to give respondent a deduction for refunding money that was not taxed when received; therefore, the full amount of repayment could not, under the circumstances of the case, be allowed as a deduction.

CONCLUSION: Upon petitioner government's application for certiorari, the court reversed an earlier judgment for respondent taxpayer and held that petitioner properly disallowed respondent's attempt to deduct the full amount of money that it had refunded to its customers because there was no congressional intent under the tax code to give respondent a deduction for refunding money that was not taxed when received. The cause was remanded.

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