Helvering v. Midland Mut Life Ins Co, No. 257

CourtUnited States Supreme Court
Writing for the CourtBRANDEIS
PartiesHELVERING, Com'r of Internal Revenue, v. MIDLAND MUT. LIFE INS. CO. *
Docket NumberNo. 257
Decision Date15 February 1937

300 U.S. 216
57 S.Ct. 423
81 L.Ed. 612
HELVERING, Com'r of Internal Revenue,

v.

MIDLAND MUT. LIFE INS. CO.*

No. 257.
Argued Jan. 7, 1937.
Decided Feb. 15, 1937.

Page 217

Messrs. Homer S. Cummings, Atty. Gen., and David E. Hudson, of Washington, D.C., for petitioner.

Mr. Wm. Marshall Bullitt, of Louisville, Ky., for respondent.

[Argument of Counsel from pages 217-219 intentionally omitted]

Page 220

Mr. Justice BRANDEIS delivered the opinion of the Court.

Since 1921, the Revenue Acts have made this provision for taxing the income of life insurance companies.1 The gross income is limited to that 'received during the taxable year from interest, dividends, and rents.' Upon the net income, ascertained by making prescribed deductions, the tax under the act here applicable is 12 per cent.2 The general provisions of the Revenue Acts concerning capital 'gains and losses' and 'bad debts' are not applicable to life insurance companies.3

In 1930, the Midland Mutual Life Insurance Company of Ohio caused to be foreclosed several mortgages on real estate given to secure loans which were in default. It was the only bidder; its bid was accepted; the property was conveyed to it; and in no case was there redemption. At each foreclosure sale the company had bid an amount which included interest as well as the principal. The interest so bid, aggregating on the foreclosed mortgages $5,456.99, was not included in the company's income tax return. The Commissioner of Internal Revenue decided that this interest was taxable and, accordingly, determined a deficiency in the company's income tax for 1930. His determination was approved by the Board of Tax Appeals. The Circuit Court of Appeals reversed the decision of the Board, 83 F.(2d) 629. We granted certiorari because of conflict with Helvering v. Missouri State Life

Page 221

Ins. Co., 78 F.(2d) 778, and National Life Ins. Co. v. United States, 4 F.Supp. 1000.

The following additional facts stipulated were adopted by the Board of Tax Appeals as its findings: The company kept its books on a 'calendar year' 'cash receipts and disbursements' basis, entering only payments of interest actually made to it during the year. Upon its acquiring title to the foreclosed properties, the investments were transferred on its books from the mortgage loan account to the real estate account and were carried thereon as assets at amounts which were equal to the principal of the loans secured by the mortgages plus any disbursements made for taxes, court costs, attorneys fees or insurance premiums. The amount of interest included in the bids on foreclosure was not carried on the books as part of the cost of the properties or as an asset. Nor was it entered on the books or likewise treated as income. All of the properties here involved were located in states where a period of redemption from foreclosure is allowed. The company issued to its representatives having charge of foreclosures in those states general instructions to bid on its behalf such sums as would enable the company to realize no loss on account of its investment in case of redemption. The bids here involved were made pursuant to those instructions, without regard to the then actual value of the mortgage property.4

Page 222

The company introduced evidence that the fair market value of the properties was, at the dates of foreclosure and of acquiring title, less than the amount of the principal due on the mortgages. This evidence was deemed by the Board immaterial; and it accordingly made no finding as to fair market value.5

First. The company contends that it did not 'receive' the $5,456.99 (or any part thereof) either in cash or in property; and, hence, that it was not 'gross income.' Confessedly no interest was received in cash. The company insists that none was received in property. It argues that its bid may not be taken as conclusive evidence of the value of the property, invoking Ballentyne v. Smith, 205 U.S. 285, 27 S.Ct. 527, 51 L.Ed. 803; that the Board's refusal to consider the evidence as to value requires us to hold that the real estate acquired on foreclosure was of a fair value less than the amount of the principal of the mortgage debt; that the proceeds of a mortgage sale must be applied first to the satisfaction of the principal before income may be held received, citing Doyle v. Mitchell Bros. Co., 247 U.S. 179, 185, 38 S.Ct. 467, 62 L.Ed. 1054, and that since the value did not equal the principal, there were no proceeds of the sales applicable to the interest, hence, no taxable income. In support of this argument, the company points to the fact that it did not, on its books, treat the delinquent interest as income; did not, directly or indirectly, carry the

Page 223

interest as part of the cost of the properties or as an asset; and did not include the interest as an asset in its annual statement or in its reports to insurance departments.

The arguments rest upon a misconception. The terms 'interest,' 'dividends,' and 'rents,' employed in the statute simply and without qualification or elaboration, were plainly used by Congress in their generic meanings, as broadly descriptive of certain kinds of 'income.' Compare Lynch v. Hornby, 247 U.S. 339, 344, 38 S.Ct. 543, 62 L.Ed. 1149; Helvering v. Stockholms Enskilda Bank, 293 U.S. 84, 86, 55 S.Ct. 50, 51, 79 L.Ed. 211. We cannot say that Congress did not intend to include in its definition a case like the present merely because the taxpayer received a credit rather than money or other tangible property. Compare Raybestos-Manhattan, Inc., v. United States, 296 U.S. 60, 62, 64, 56 S.Ct. 63, 64, 65, 80 L.Ed. 44, 102 A.L.R. 111. A receipt of interest is taxable as income whether paid in cash or by a credit. Compare Old Colony Trust Co. v. Commissioner, 279 U.S. 716, 49 S.Ct. 499, 73 L.Ed. 918; United States v. Boston & Maine R.R., 279 U.S. 732, 49 S.Ct. 505, 73 L.Ed. 929. This credit, it is true, was not entered on the taxpayer's books as interest or as an asset. But bookkeeping entries, though in some circumstances of evidential value, are not determinative of tax liability. Compare Doyle v. Mitchell Bros. Co., 247 U.S. 179, 187, 38 S.Ct. 467, 62 L.Ed. 1054. The intent to use the full extent of power being clearly evident, we must not confine the legislation within narrower forms than the statutory language would indicate. Compare Irwin v. Gavit, 268 U.S. 161, 166, 45 S.Ct. 475, 69 L.Ed. 897; Helvering v. Stockholms Enskilda Bank, supra, 293 U.S. 84, 89, 55 S.Ct. 50, 52, 79 L.Ed. 211.

Second. The company argues that uncontradicted evidence shows the fair market value of the mortgaged properties to have been less than the principal of the debts and that therefore the interest paid was not income within the meaning of the act. A mortgagee who, at foreclosure sale, acquires the property pursuant to a bid of the principal and accrued interest is, as purchaser and grantee, in a position no different from that of a

Page 224

stranger who acquires the property on a bid of like amount. It is true that the latter would be obliged to pay in cash the amount of his bid, while the formality of payment in cash is ordinarily dispensed with when the mortgagee acquires the property on his own bid. But the rights acquired qua purchaser are the same in either case; and, likewise, the legal effect upon the mortgage debt is the same. In each case the debt, including the interest accrued, is paid. Where the stranger makes the purchase, the debt is discharged by a payment in cash; where the mortgagee purchases the property, the...

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115 practice notes
  • Helvering v. Stuart, Nos. 49 and 48
    • United States
    • United States Supreme Court
    • November 16, 1942
    ...to their 'full measure.' Helvering v. Clifford, 309 U.S. 331, 334, 60 S.Ct. 554, 556, 84 L.Ed. 788; Helvering v. Midland Ins. Co., 300 U.S. 216, 223, 57 S.Ct. 423, 425, 81 L.Ed. 612, 108 A.L.R. 436; Douglas v. Willcuts, 296 U.S. 1, 9, 56 S.Ct. 59, 62, 80 L.Ed. 3, 101 A.L.R. 391; Irwin v. Ga......
  • Second Ave. Holdings, LLC v. Latimer (In re Latimer), Bankruptcy No. 11–00223–BGC7.
    • United States
    • U.S. Bankruptcy Court — Northern District of Alabama
    • March 26, 2013
    ...benefit and hardship would have to be set off, the one against the other, and a balance ascertained. Landis v. North American Co., supra.300 U.S. at 216, 57 S.Ct. 377. In Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), the Court ......
  • Hardee v. U.S., No. 84-79
    • United States
    • United States Courts of Appeals. United States Court of Appeals for the Federal Circuit
    • May 11, 1983
    ...Helvering v. Clifford, 309 U.S. 331, 334, 60 S.Ct. 554, 556, 84 L.Ed. 788 (1940). See also Helvering v. Midland Mutual Life Ins. Co., 300 U.S. 216, 223, 57 S.Ct. 423, 425, 81 L.Ed. 612 (1937); Douglas v. Willcuts, 296 U.S. 1, 9, 56 S.Ct. 59, 62, 80 L.Ed. 3 (1935); Irwin v. Gavit, 268 U.S. 1......
  • Second Ave. Holdings, LLC v. Latimer (In re Latimer), Case No.: 11-00223-BGC7
    • United States
    • United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Northern District of Alabama
    • March 26, 2013
    ...and hardship would have to be set off, the one against the other, and a balance ascertained. Landis v. North American Co., supra.Page 11300 U.S. at 216. In Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976), the Court recognized the qualified power of a federal tr......
  • Request a trial to view additional results
115 cases
  • Helvering v. Stuart, Nos. 49 and 48
    • United States
    • United States Supreme Court
    • November 16, 1942
    ...to their 'full measure.' Helvering v. Clifford, 309 U.S. 331, 334, 60 S.Ct. 554, 556, 84 L.Ed. 788; Helvering v. Midland Ins. Co., 300 U.S. 216, 223, 57 S.Ct. 423, 425, 81 L.Ed. 612, 108 A.L.R. 436; Douglas v. Willcuts, 296 U.S. 1, 9, 56 S.Ct. 59, 62, 80 L.Ed. 3, 101 A.L.R. 391; Irwin v. Ga......
  • Second Ave. Holdings, LLC v. Latimer (In re Latimer), Bankruptcy No. 11–00223–BGC7.
    • United States
    • U.S. Bankruptcy Court — Northern District of Alabama
    • March 26, 2013
    ...benefit and hardship would have to be set off, the one against the other, and a balance ascertained. Landis v. North American Co., supra.300 U.S. at 216, 57 S.Ct. 377. In Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), the Court ......
  • Hardee v. U.S., No. 84-79
    • United States
    • United States Courts of Appeals. United States Court of Appeals for the Federal Circuit
    • May 11, 1983
    ...Helvering v. Clifford, 309 U.S. 331, 334, 60 S.Ct. 554, 556, 84 L.Ed. 788 (1940). See also Helvering v. Midland Mutual Life Ins. Co., 300 U.S. 216, 223, 57 S.Ct. 423, 425, 81 L.Ed. 612 (1937); Douglas v. Willcuts, 296 U.S. 1, 9, 56 S.Ct. 59, 62, 80 L.Ed. 3 (1935); Irwin v. Gavit, 268 U.S. 1......
  • Second Ave. Holdings, LLC v. Latimer (In re Latimer), Case No.: 11-00223-BGC7
    • United States
    • United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Northern District of Alabama
    • March 26, 2013
    ...and hardship would have to be set off, the one against the other, and a balance ascertained. Landis v. North American Co., supra.Page 11300 U.S. at 216. In Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976), the Court recognized the qualified power of a federal tr......
  • Request a trial to view additional results

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