Commissioner of Internal Revenue v. Glenshaw Glass Company, No. 199

CourtUnited States Supreme Court
Writing for the CourtWARREN
PartiesCOMMISSIONER OF INTERNAL REVENUE, Petitioner, v. GLENSHAW GLASS COMPANY and William Goldman Theatres, Inc
Decision Date28 March 1955
Docket NumberNo. 199

348 U.S. 426
75 S.Ct. 473
99 L.Ed. 483
COMMISSIONER OF INTERNAL REVENUE, Petitioner,

v.

GLENSHAW GLASS COMPANY and William Goldman Theatres, Inc.

No. 199.
Argued Feb. 28, 1955.
Decided March 28, 1955.
Rehearing Denied May 9, 1955.

See 349 U.S. 925, 75 S.Ct. 657.

Solicitor General, Simon E. Sobeloff, Washington, D.C., for petitioner.

Page 427

Mr.Max Swiren, Chicago, Ill., for respondent Glenshaw Glass Co.

Mr. Samuel H. Levy, Philadelphia, Pa., for respondent Wm. Goldman Theatres, Inc.

Mr. Chief Justice WARREN delivered the opinion of the Court.

This litigation involves two cases with independent factual backgrounds yet presenting the identical issue. The two cases were consolidated for argument before the Court of Appeals for the Third Circuit and were heard en banc. The common question is whether money received as exemplary damages for fraud or as the punitive two-thirds portion of a treble-damage antitrust recovery must be reported by a taxpayer as gross income under § 22(a) of the Internal Revenue Code of 1939.1 In a single opinion, 211 F.2d 928, the Court of Appeals affirmed the Tax Court's separate rulings in favor of the taxpayers. 18 T.C. 860; 19 T.C. 637. Because of the frequent recurrence of the question and differing interpretations by the lower courts of this Court's decisions bearing upon the problem, we granted the Commissioner of Internal Revenue's ensuing petition for certiorari. 348 U.S. 813, 75 S.Ct. 50.

The facts of the cases were largely stipulated and are not in dispute. So far as pertinent they are as follows:

Commissioner v. Glenshaw Glass Co.—The Glenshaw Glass Company, a Pennsylvania corporation, manufactures glass bottles and containers. It was engaged in protracted litigation with the Hartford-Empire Company, which manufactures machinery of a character used by Glenshaw. Among the claims advanced by Glenshaw

Page 428

were demands for exemplary damages for fraud2 and treble damages for injury to its business by reason of Hartford's violation of the federal antitrust laws.3 In December, 1947, the parties concluded a settlement of all pending litigation, by which Hartford paid Glenshaw approximately $800,000. Through a method of allocation which was approved by the Tax Court, 18 T.C. 860, 870 872, and which is no longer in issue, it was ultimately determined that, of the total settlement, $324,529.94 represented payment of punitive damages for fraud and antitrust violations. Glenshaw did not report this portion of the settlement as income for the tax year involved. The Commissioner determined a deficiency claiming as taxable the entire sum less only deductible legal fees. As previously noted, the Tax Court and the Court of Appeals upheld the taxpayer.

Commissioner v. William Goldman Theatres, Inc.—William Goldman Theatres, Inc., a Delaware corporation operating motion picture houses in Pennsylvania, sued Loew's, Inc., alleging a violation of the federal antitrust laws and seeking treble damages. After a holding that a violation had occurred, William Goldman Theatres, Inc., v. Loew's Inc., 3 Cir., 150 F.2d 738, the case was remanded to the trial court for a determination of damages. It was found that Goldman had suffered a loss of profits equal to $125,000 and was entitled to treble damages in the sum of $375,000. William Goldman Theatres, Inc., v. Loew's, Inc., D.C., 69 F.Supp. 103, affirmed 3 Cir., 164 F.2d 1021, certiorari denied 334 U.S. 811, 68 S.Ct. 1016, 92 L.Ed. 1742. Goldman reported only $125,000 of the recovery as gross income and claimed that the $250,000

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balance constituted punitive damages and as such was not taxable. The Tax Court agreed, 19 T.C. 637, and the Court of Appeals, hearing this with the Glenshaw case, affirmed. 211 F.2d 928.

It is conceded by the respondents that there is no constitutional barrier to the imposition of a tax on punitive damages. Our question is one of statutory construction: are these payments comprehended by § 22(a)?

The sweeping scope of the controverted statute is readily apparent:

's 22. Gross income

'(a) General definition. 'Gross income' includes gains, profits, and income derived from salaries, wages, or compensation for personal service * * * of whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from interest, rent, dividends, securities, or the transaction of any business carried on for gain or profit, or gains or profits and income derived from any source whatever. * * *' (Emphasis added.)4

This Court has frequently stated that this language was used by Congress to exert in this field 'the full measure of its taxing power.' Helvering v. Clifford, 309 U.S. 331, 334, 60 S.Ct. 554, 556, 84 L.Ed. 788; Helvering v. Midland Mutual Life Ins. Co., 300 U.S. 216, 223, 57 S.Ct. 423, 425, 81 L.Ed. 612; Douglas v. Willcuts, 296 U.S. 1, 9, 56 S.Ct. 59, 62, 80 L.Ed. 3; Irwin v. Gavit, 268 U.S. 161, 166, 45 S.Ct. 475, 69 L.Ed. 897. Respondents contend that punitive damages, characterized as 'windfalls' flowing from the culpable conduct of third parties, are not within the scope of the section. But Congress applied no limitations as to the source of taxable receipts, nor restrictive

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labels as to their nature. And the Court has given a liberal construction to this broad phraseology in recognition of the intention of Congress to tax all gains except those specifically exempted. Commissioner v. Jacobson, 336 U.S. 28, 49, 69 S.Ct. 358, 369, 93 L.Ed. 477; Helvering v. Stockholms Enskilda Bank, 293 U.S. 84, 87—91, 55 S.Ct. 50, 51—53, 79 L.Ed. 211. Thus, the fortuitous gain accruing to a lessor by reason of the forfeiture of a lessee's improvements on the rented property was taxed in Helvering v. Bruun, 309 U.S. 461, 60 S.Ct. 631, 84 L.Ed. 864....

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1065 practice notes
  • Francisco v. U.S., No. 00-1802
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • February 5, 2001
    ...the full measure of its taxing power...." Helvering v. Clifford, 309 U.S. 331, 334 (1940); see also Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 432 (1955) ("The definition of gross income has been simplified, but no effect upon its present broad scope was intended."). Given the breadt......
  • United States v. Nesline, Civ. A. No. M-79-1768.
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Maryland)
    • July 12, 1984
    ...345 (1969); United States v. Calamaro, 354 U.S. 351, 359, 77 S.Ct. 1138, 1143, 1 L.Ed.2d 1394 (1957); Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 431, 75 S.Ct. 473, 476, 99 L.Ed. 483 (1955). The government also contends that, since Treas.Reg. § 301.6503(c)-1(b) is of relatively long s......
  • Cameron v. IRS, Civ. No. F 84-37.
    • United States
    • United States District Courts. 7th Circuit. United States District Court of Northern District of Indiana
    • September 25, 1984
    ...rejected an argument, based on Eisner, that the Code's definition of income is limited to gain in Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 75 S.Ct. 473, 99 L.Ed. 483 (1955). The Court specifically stated that the "income as gain" definition of Eisner "was not meant to provide a tou......
  • N. Cal. Small Bus. Assistants Inc. v. Comm'r, 153 T.C. No. 4
    • United States
    • United States Tax Court
    • October 23, 2019
    ...is dicta, * * * and the Supreme Court itself has placed its decision in Eisner into context. Notably, in C.I.R. v. Glenshaw Glass Co., 348 U.S. 426, 430-431, 75 S. Ct. 473 (1955), the Supreme Court explained that the characterization of income in Eisner served a useful purpose for distingui......
  • Request a trial to view additional results
1057 cases
  • Francisco v. U.S., No. 00-1802
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • February 5, 2001
    ...the full measure of its taxing power...." Helvering v. Clifford, 309 U.S. 331, 334 (1940); see also Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 432 (1955) ("The definition of gross income has been simplified, but no effect upon its present broad scope was intended."). Given the breadt......
  • United States v. Nesline, Civ. A. No. M-79-1768.
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Maryland)
    • July 12, 1984
    ...345 (1969); United States v. Calamaro, 354 U.S. 351, 359, 77 S.Ct. 1138, 1143, 1 L.Ed.2d 1394 (1957); Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 431, 75 S.Ct. 473, 476, 99 L.Ed. 483 (1955). The government also contends that, since Treas.Reg. § 301.6503(c)-1(b) is of relatively long s......
  • Cameron v. IRS, Civ. No. F 84-37.
    • United States
    • United States District Courts. 7th Circuit. United States District Court of Northern District of Indiana
    • September 25, 1984
    ...rejected an argument, based on Eisner, that the Code's definition of income is limited to gain in Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 75 S.Ct. 473, 99 L.Ed. 483 (1955). The Court specifically stated that the "income as gain" definition of Eisner "was not meant to provide a tou......
  • N. Cal. Small Bus. Assistants Inc. v. Comm'r, 153 T.C. No. 4
    • United States
    • United States Tax Court
    • October 23, 2019
    ...is dicta, * * * and the Supreme Court itself has placed its decision in Eisner into context. Notably, in C.I.R. v. Glenshaw Glass Co., 348 U.S. 426, 430-431, 75 S. Ct. 473 (1955), the Supreme Court explained that the characterization of income in Eisner served a useful purpose for distingui......
  • Request a trial to view additional results
5 firm's commentaries
1 books & journal articles
  • The grantor trust rules: An exploited mismatch.
    • United States
    • The Tax Adviser Vol. 52 Nbr. 11, November 2021
    • November 1, 2021
    ...Did We Get Here?" (2) This discussion disregards the alternate valuation date provided for under Sec. 2032. (3) See Glenshaw Glass Co., 348 U.S. 426 (4) See New York Trust Co. v. Eisner, 256 U.S. 345 (1921), and its progeny. (5) In addition to its more obvious purpose: preserving gain for i......

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