Burnet v. Sanford & Brooks Co.
282 U.S. 359 (1931)

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U.S. Supreme Court

Burnet v. Sanford & Brooks Co., 282 U.S. 359 (1931)

Burnet v. Sanford & Brooks Company

No. 31

Argued December 5, 8, 1930

Decided January 5, 1931

282 U.S. 359

Syllabus

1. In its income tax returns for 1913-16, the taxpayer included in gross income for each year payments received in that year under a dredging contract with the United States and deducted for each year expenditures made by the taxpayer during that year in performing the contract. The sum of the expenditures exceeded the sum of the payments received. The work was abandoned, and, in 1920, as the result of a suit on the contract for breach of warranty, the taxpayer received from the United States as compensatory damages an amount equal to such excess. It did not appear that the taxpayer ever filed returns on the accrual basis, or otherwise sought the benefit of the statutory provision in that regard or of Treasury regulations which, with respect to certain long-term contracts, allowed report of all receipts and expenditures on account of a particular contract in the year in which the work was completed, or report each year of the estimated profit corresponding to estimated expenditures of that year.

Held:

(1) That, under the Revenue Act of 1918, the money received in 1920 was properly included by the Commissioner as part of the gross income for that year in ascertaining the taxable income for that year. P. 282 U. S. 363.

(2) That a judgment in effect eliminating this money from the 1920 computation upon the condition that the taxpayer amend the earlier returns by omitting therefrom the deductions of related expenditures, was erroneous. P. 282 U. S. 362et seq.

2. Receipts from the conduct of a business enterprise are to be included in the taxpayer's return as a part of gross income, regardless of whether the particular transaction results in net profit. P. 282 U. S. 364.

3. The excess of gross income over deductions in this case does not any the less constitute net income for the taxable period because the taxpayer, in an earlier period, suffered net losses in its business which were in some measure attributable to expenditures made to produce the net income of the later period. Id.

Page 282 U. S. 360

4. The familiar and practical system of taxing annually the net income resulting from all transactions within the tax year, rather than the gains derived from particular transactions, is sustained by the Sixteenth Amendment. P. 282 U. S. 365.

35 F.2d 312 reversed.

Certiorari, 281 U.S. 707, to review a judgment reversing an order of the Board of Tax Appeals which sustained an assessment of income and profits taxes.

Page 282 U. S. 361

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