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Nash v. United States, 398 U.S. 1 (1970)
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General SummaryThis case is from a collection containing the full text of over 16,000 Supreme Court cases from 1793 to the present. The body of Supreme Court decisions are, effectively, the final interpretation of the Constitution. Only an amendment to the Constitution can permanently overturn an interpretation and this has happened only four times in American history.
Nash v. United States, 398 U.S. 1 (1970)
Nash v. United States No. 678 Argued April 21, 1970 Decided May 18, 1970 398 U.S. 1
CERTIORARI TO THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
Syllabus
Petitioners were members of a partnership that reported its income on the accrual method and used the reserve method of accounting for bad debts provided in § 166(c) of the Internal Revenue Code, permitting a taxpayer to take a current deduction for the amount of accounts receivable that it is estimated will become worthless in later years. Petitioners formed corporations and transferred partnership assets, including the net worth of the accounts receivable (the face value less the amount of the reserve), to the corporations in exchange for the corporations’ stock. The transfer was within the terms of § 351 of the Code, which provides that no gain or loss shall be recognized if property is transferred to a corporation in exchange for stock, if after the exchange the transferors are in control of the corporation. The Commissioner of Internal Revenue determined that the partnership should have included in income the amount of the bad debt reserve because the partnership no longer needed the reserve account. Petitioners paid the deficiencies assessed and sued for refunds. The District Court allowed recovery, but the Court of Appeals reversed.
Held: The so-called tax benefit rule, that recovery of an item that has produced an income tax benefit in a prior year is to be added to income in the year of recovery, is not applicable here, as the partnership, although its business terminated and it had no "need" for the reserve, received no gain as a result of the transaction, and there was thus no "recovery" of the benefit of the bad debt reserve. Pp. 3-5.
414 F.2d 627, reversed.
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Chicago: U.S. Supreme Court, "Syllabus," Nash v. United States, 398 U.S. 1 (1970) in 398 U.S. 1 398 U.S. 2. Original Sources, accessed November 24, 2024, http://originalsources.com/Document.aspx?DocID=RJM8XSC8ZX17ESP.
MLA: U.S. Supreme Court. "Syllabus." Nash v. United States, 398 U.S. 1 (1970), in 398 U.S. 1, page 398 U.S. 2. Original Sources. 24 Nov. 2024. http://originalsources.com/Document.aspx?DocID=RJM8XSC8ZX17ESP.
Harvard: U.S. Supreme Court, 'Syllabus' in Nash v. United States, 398 U.S. 1 (1970). cited in 1970, 398 U.S. 1, pp.398 U.S. 2. Original Sources, retrieved 24 November 2024, from http://originalsources.com/Document.aspx?DocID=RJM8XSC8ZX17ESP.
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