Hort v. Commissioner case
brief
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313 U.S. 28, 61 S. Ct.
757, 85 L. Ed. 1168, 1941 U.S.
CASE SYNOPSIS: Petitioner
taxpayer did not include an amount of money paid to him in
consideration of cancelling a lease as gross income. Instead, he
reported a loss. He sought review of the judgment of the Circuit
Court of Appeals for the Second Circuit affirming a decision
sustaining the determination of a deficiency in income tax by
respondent, the Commissioner of Internal Revenue.
FACTS: The taxpayer contended that money received for cancellation of the lease was capital rather than ordinary income and that it was therefore subject to §§ 101, 111-113, and 117 of the Revenue Act of 1932, 47 Stat. 169, 191, 195-202, and 207, which governed capital gains and losses. Further, he argued that even if that amount had to be reported as ordinary gross income, he had sustained a loss which § 23(e) of the Act authorized him to deduct. The Court disagreed with the taxpayer and affirmed the judgment of the court of appeals. The Court held that the amount received by the taxpayer for cancellation of the lease had to be included in his gross income in its entirety. Section 22(a) of the Act defined gross income to include gains, profits, and income derived from rent, or gains or profits and income derived from any source whatever. The rent paid prior to cancellation was gross income, just as subsequent payments if the lease had never been cancelled would have been included. The consideration received for cancellation of the lease was not a return of capital. The disputed amount was a substitution for rental payments, and it was regarded as ordinary income.
CONCLUSION: The Court affirmed the judgment of the Board of Tax Appeals sustaining the determination of a deficiency in income tax.
FACTS: The taxpayer contended that money received for cancellation of the lease was capital rather than ordinary income and that it was therefore subject to §§ 101, 111-113, and 117 of the Revenue Act of 1932, 47 Stat. 169, 191, 195-202, and 207, which governed capital gains and losses. Further, he argued that even if that amount had to be reported as ordinary gross income, he had sustained a loss which § 23(e) of the Act authorized him to deduct. The Court disagreed with the taxpayer and affirmed the judgment of the court of appeals. The Court held that the amount received by the taxpayer for cancellation of the lease had to be included in his gross income in its entirety. Section 22(a) of the Act defined gross income to include gains, profits, and income derived from rent, or gains or profits and income derived from any source whatever. The rent paid prior to cancellation was gross income, just as subsequent payments if the lease had never been cancelled would have been included. The consideration received for cancellation of the lease was not a return of capital. The disputed amount was a substitution for rental payments, and it was regarded as ordinary income.
CONCLUSION: The Court affirmed the judgment of the Board of Tax Appeals sustaining the determination of a deficiency in income tax.
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