Monday, April 29, 2013

Helvering v. Horst case brief

Helvering v. Horst case brief
311 U.S. 112, 61 S. Ct. 144, 85 L. Ed. 75, 1940 U.S.

CASE SYNOPSIS: Petitioner Commissioner of Internal Revenue sought certiorari review of a judgment from the United States Court of Appeals for the Second Circuit, which reversed an order from the Board of Tax Appeals sustaining petitioner's determination of a deficiency in income tax against respondent taxpayer.

FACTS: Respondent, the owner of negotiable bonds, detached from the bonds negotiable interest coupons shortly before their due date and delivered them as a gift to his son who in the same year collected them at maturity. Petitioner ruled that under § 22 of the Revenue Act of 1934, 48 Stat. 686, the interest payments were taxable, in the years when paid, to respondent donor who reported this income on the cash receipts basis. The court of appeals reversed an order sustaining the tax. The sole issue on appeal was whether the gift of the coupons during respondent donor's taxable year, delivered to the donee and later in the year paid at maturity, was the realization of income taxable to respondent.

ANALYSIS:The United States Supreme Court reversed and held that the deficiency was properly assessed against respondent because when respondent gave the gift of the coupons, he separated his right to interest payments from his investment and procured the payment of the interest to his donee and enjoyed the economic benefits of the income in the same manner and to the same extent as though the transfer were of earnings.

CONCLUSION: The Court reversed and held that the deficiency was properly assessed against respondent.

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