Sunday, November 24, 2013

Commissioner of Internal Revenue v. Sunnen case brief

Commissioner of Internal Revenue v. Sunnen case brief summary
333 U.S. 591 (1948)

Petitioner Commissioner of Internal Revenue challenged a decision from the United States Circuit Court of Appeals for the Eighth Circuit affirming a portion of a tax court judgment favorable to respondent taxpayer and reversing the portion of the judgment adverse to him.

The taxpayer was an inventor-patentee and president of a corporation engaged in the manufacture and sale of patented machines. The taxpayer entered into several agreements whereby the corporation was licensed to manufacture and sell devices on which the taxpayer had applied for patents. In return, the corporation agreed to pay the taxpayer a royalty. At various times, the taxpayer assigned to his wife all his right, title, and interest in the various license agreements.

The tax court held that certain royalties paid to the wife were part of the taxpayer's taxable income but that other royalties paid to his wife were not. The tax court held that a prior determination by the board of tax appeals applied to bar adjudication of the matter.


  • The United States Supreme Court granted certiorari and reversed the judgment. 
  • The Court held that collateral estoppel should not have been applied by the tax court to perpetuate the viewpoint of the assignment. 
  • The Court explained that the transactions between the taxpayer and his wife were simply a reallocation of income within the family group, a reallocation that did not shift the incident of income tax liability.
The United States Supreme Court reversed the tax court's decision because as long as the taxpayer actually earned the income or was the source of the right to receive and enjoy the income, he remained taxable.

Recommended Supplements for Civil Procedure

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