Kieselbach v. Commissioner of Internal Revenue, No. 184

CourtUnited States Supreme Court
Writing for the CourtREED
Citation317 U.S. 399,63 S.Ct. 303,87 L.Ed. 358
Docket NumberNo. 184
Decision Date04 January 1943
PartiesKIESELBACH et al. v. COMMISSIONER OF INTERNAL REVENUE

317 U.S. 399
63 S.Ct. 303
87 L.Ed. 358
KIESELBACH et al.

v.

COMMISSIONER OF INTERNAL REVENUE.

No. 184.
Argued Dec. 11, 1942.
Decided Jan. 4, 1943.

Page 400

Mr. Harry Friedman, of Washington, D.C., for petitioners.

Mr. Arnold Raum, of Washington, D.C., for respondent.

Mr. Justice REED delivered the opinion of the Court.

This writ of certiorari was granted limited to a single narrow point in the law of income taxes. 317 U.S. 612, 63 S.Ct. 41, 87 L.Ed. —-. The sum in question was received as part of the compensation in a condemnation proceeding instituted by the City of New York. Payment was made several years after the actual taking. The issue concerns the nature of that portion of the payment which is called 'interest' by the Greater New York Charter and which the owner must receive, in addition to the value of the property fixed as of the time of the taking, to produce, when actually paid, the full equivalent of that value. Was this portion a capital gain or ordinary income?

The writ was granted because of conflict upon the point between this case below, Commissioner v. Kieselbach et al., 3 Cir., 127 F.2d 359 and Seaside Improvement Co. v. Commissioner, 2 Cir., 105 F.2d 990.

The taxpayers owned a piece of realty in the City of New York. In December, 1932, that city's Board of Estimate passed a resolution which directed that upon January 3, 1933, the title in fee to a large part of the parcel would vest in the city. The condemnation proceeding, of which the resolution was a part, was pursuant to Sec. 976

Page 401

of the Greater New York Charter, as amended by Laws 1932, c. 391, § 1, which provides in part as follows: 'Upon the date of the entry of the order granting the application to condemn, or of the filing of the damage map in the proceeding, as the case may be, or upon such subsequent date as may be specified by resolution of said board, the city of New York shall become and be seized in fee of or of the easement, in, over, upon or under, the said real property described in the said order or damage map, as the board of estimate and apportionment may determine, the same to be held, appropriated, converted and used to and for such purpose accordingly. Interest at the legal rate upon the sum or sums to which the owners are justly entitled upon the date of the vesting of title in the city of New York, as aforesaid, from said date to the date of the final decree shall be awarded by the court as part of the compensation to which such owners are entitled.' The city took possession on the date named in the resolution and received all rents thereafter accruing. The Supreme Court of New York entered its final decree in the proceedings on March 31, 1937. It was for $73,246.57 and was stated to be the just compensation which the owners were entitled to receive. Payment was made on May 12, 1937. It has been stipulated that: 'The amount of said payment was computed by adding to the principal amount of $58,000.00, interest thereon as provided by Section 976 of the Greater New York Charter, in the sum of $15,246.57, computed at the rate of 6% per annum from January 3, 1933, to May 12, 1937, or a total of $73,246.57.'1

Page 402

We accept as a fact that the $58,000, principal amount just referred to, was as petitioners allege, an award to them. We assume it was the value on January 3, 1933, of this property then taken by the city.

Section 22 of the Revenue Act of 1936, c. 690, 49 Stat. 1648, 1657, 26 U.S.C.A.Int.Rev.Acts, page 825, contains the general definition of gross income. It reads as follows:

'(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. * * *'

The taxpayers' basis on the condemned property was around $42,000. In their original return the difference between the basis and the total sum received was treated as capital gain and only a percentage was returned as income pursuant to Sec. 117, 26 U.S.C.A. Int.Rev.Acts, page 873.2 The Commissioner assessed a deficiency on the portion of the award computed as interest on the ground that such portion was ordinary income.

Page 403

The Board of Tax Appeals, 44 B.T.A. 279, reversed the Commissioner and the Circuit Court of Appeals, 127 F.2d 359, in turn, held with the Commissioner.

We agree with the Court of Appeals. The sum paid these taxpayers above the award of $58,000 was paid because of the failure to put the award in the taxpayers' hands on the day, January 3, 1933, when the property was taken. This additional payment was necessary to give the owner the full equivalent of the value of the property at the time it was taken. Whether one calls it interest on the value or payments to meet the constitutional requirement of just compensation, amendment 5, is immaterial. It is income under Sec. 22, paid to the taxpayers in lieu of what they might have earned on the sum found to be the value of the property on the day the property was taken. It is not a capital gain upon an asset sold under Sec. 117. The sale price was the $58,000.3

The property was turned over in January, 1933, by the resolution. This was the sale...

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104 practice notes
  • Spangler v. CIR, No. 18178
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • 16 Octubre 1963
    ...however, that this is a wrong which the court can correct when determining plaintiff's tax liability. 5 Kieselbach v. Commissioner, 317 U.S. 399, 403-405, 64 S.Ct. 41, 87 L.Ed. 497 (1943); Filippini v. United States, 318 F.2d 841, 844 n. 2 (9th Cir., 1963), affirming 200 F.Supp. 286, 289 (N......
  • Eggleston v. State of Colo., Civ. A. No. 82-K-2144
    • United States
    • United States District Courts. 10th Circuit. United States District Court of Colorado
    • 30 Mayo 1986
    ...(property which is transferred after the attachment of a federal tax lien remains burdened by the lien); Michigan, 317 U.S. 338, 340, 63 S.Ct. at 303. Additionally, since the bank did not obtain a confession of judgment against Levy until April, 1984, its claim based on the judgment was inc......
  • Kovacs v. Comm'r of Internal Revenue, Nos. 5617–90 to 5620–90.
    • United States
    • United States Tax Court
    • 24 Febrero 1993
    ...filed a timely petition with this Court. Section 61(a)(4) provides that gross income includes “interest”. See Kieselbach v. Commissioner, 317 U.S. 399, 403–404 (1943); Tiefenbrunn v. Commissioner, 74 T.C. 1566, 1572 (1980); Smith v. Commissioner, 59 T.C. 107, 111–113 (1972); Wheeler v. Comm......
  • De Bruhl v. State Highway and Public Works Commission, No. 98
    • United States
    • North Carolina United States State Supreme Court of North Carolina
    • 26 Febrero 1958
    ...answer to the question is, Yes. The view of the United States Supreme Court is illustrated by Kieselbach v. Commissioner of Int. Revenue, 317 U.S. 399, 63 S.Ct. 303, 87 L.Ed. 358; Brooks-Scanlon Corp. v. United States, 265 U.S. 106, 44 S. Ct. 471, 68 L.Ed. 934; and Seaboard Air Line R. Co. ......
  • Request a trial to view additional results
104 cases
  • Spangler v. CIR, No. 18178
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • 16 Octubre 1963
    ...however, that this is a wrong which the court can correct when determining plaintiff's tax liability. 5 Kieselbach v. Commissioner, 317 U.S. 399, 403-405, 64 S.Ct. 41, 87 L.Ed. 497 (1943); Filippini v. United States, 318 F.2d 841, 844 n. 2 (9th Cir., 1963), affirming 200 F.Supp. 286, 289 (N......
  • Eggleston v. State of Colo., Civ. A. No. 82-K-2144
    • United States
    • United States District Courts. 10th Circuit. United States District Court of Colorado
    • 30 Mayo 1986
    ...(property which is transferred after the attachment of a federal tax lien remains burdened by the lien); Michigan, 317 U.S. 338, 340, 63 S.Ct. at 303. Additionally, since the bank did not obtain a confession of judgment against Levy until April, 1984, its claim based on the judgment was inc......
  • Kovacs v. Comm'r of Internal Revenue, Nos. 5617–90 to 5620–90.
    • United States
    • United States Tax Court
    • 24 Febrero 1993
    ...filed a timely petition with this Court. Section 61(a)(4) provides that gross income includes “interest”. See Kieselbach v. Commissioner, 317 U.S. 399, 403–404 (1943); Tiefenbrunn v. Commissioner, 74 T.C. 1566, 1572 (1980); Smith v. Commissioner, 59 T.C. 107, 111–113 (1972); Wheeler v. Comm......
  • De Bruhl v. State Highway and Public Works Commission, No. 98
    • United States
    • North Carolina United States State Supreme Court of North Carolina
    • 26 Febrero 1958
    ...answer to the question is, Yes. The view of the United States Supreme Court is illustrated by Kieselbach v. Commissioner of Int. Revenue, 317 U.S. 399, 63 S.Ct. 303, 87 L.Ed. 358; Brooks-Scanlon Corp. v. United States, 265 U.S. 106, 44 S. Ct. 471, 68 L.Ed. 934; and Seaboard Air Line R. Co. ......
  • Request a trial to view additional results

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