Monday, April 29, 2013

Taft v. Bowers case brief

Taft v. Bowers case brief
278 U.S. 470, 49 S. Ct. 199,73 L. Ed. 460,1929 U.S. 17

CASE SYNOPSIS: Petitioners, donees of stocks, sought certiorari review of the decisions from the Circuit Court of Appeals that reversed judgments in favor of the donees in actions against respondent, the Collector of Internal Revenue, to recover money paid as income taxes because of advancement in the market value of the donees' stocks while owned by the donors.

FACTS: During the calendar years 1921 and 1922, the father of a donee, gave her certain shares of stock then more valuable than when acquired by him. The donee sold them during 1923 for more than their market value when the gift was made. The United States demanded an income tax reckoned upon the difference between cost to the donor and price received by the donee. The donee paid accordingly and sued to recover the portion imposed because of the advance in value while the donor owned the stock. The appellate court reversed the judgment entered in favor of the donee. The judgment was affirmed.

The United States Supreme Court ruled that § 202(2) of the Revenue Act of 1921, where one who purchased shares of stock after February 28, 1913, gave them to another after December 31, 1920, when their market value had increased over the investment, and the donee afterwards sold them at a price still higher, the gain taxable to the donee was the difference between the price realized by him and the price paid by the donor. Congress had power under the Sixteenth Amendment to treat the entire increase in value, when separated from the investment by the sale, as income of the donee.

CONCLUSION: The Court affirmed the judgments.

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