United States Supreme Court Cases & Opinions

U.S. Supreme Court

Healy v. Commissioner, 345 U.S. 278 (1953)

Healy v. Commissioner

Argued December 12, 1952

Decided April 6, 1953*

345 U.S. 278

Syllabus

An individual taxpayer received a salary from a closely held corporation and reported it in full in his income tax return for the year in which it was received. In a subsequent year, it was determined that the salary was excessive, and the taxpayer was required as transferee to make payments on tax deficiencies of the corporation for prior years.

Held: the taxpayer's income tax for the year in which he received the excessive salary may not be recomputed so as to exclude from his income for that year that part of his salary held to be excessive and which resulted in his transferee liability. Pp. 345 U. S. 279-285.

(a) Having received the salary under a "claim of right," the taxpayer was required to report it as income and to pay a tax thereon. Pp. 345 U. S. 281-282.

(b) Funds are held under a "claim of right" within the meaning of North American Oil v. Burnet, 286 U. S. 417, when received and treated by a taxpayer as belonging to him, even though the claim may subsequently be found invalid. P. 345 U. S. 282.

(c) That the receipt of the excessive portion of the salary resulted in transferee liability as a "constructive trustee" does not prevent application of the "claim of right" doctrine. Pp. 345 U. S. 282-283.

(d) Nor can the salary be treated as money received subject to a "restriction on its use" within the scope of the "claim of right" doctrine, even though the facts which ultimately gave rise to the transferee liability were in existence at the end of the taxable year. Pp. 345 U. S. 283-284.

(e) A different result is not required by the fact that, in this particular case, an inequity might result from requiring the taxpayer to treat as income an amount which eventually turned out not to be income. Pp. 345 U. S. 284-285.

194 F.2d 662, affirmed.

191 F.2d 536, reversed.

Page 345 U. S. 279

No. 76. The Tax Court held that the petitioners' income for a prior year should be recomputed to their advantage. 16 T.C. 200. The Court of Appeals reversed. 194 F.2d 662. This Court granted certiorari. 344 U.S. 811. Affirmed, p. 345 U. S. 285.

No. 138. The Tax Court held that respondent's income for a prior year should be recomputed to his advantage. 11 T.C. 174. The Court of Appeals affirmed. 194 F.2d 536. This Court granted certiorari. 34 U.S. 813. Reversed, p. 345 U. S. 285.