Helvering v. Ohio Leather Co., 317 U.S. 102 (1942)

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Helvering v. Ohio Leather Co.

No. 40

Argued October 21, 1942
Decided November 9, 1942 *
317 U.S. 102

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE SIXTH CIRCUIT

Syllabus

1. A corporation claiming a credit under § 26(c)(2) of the Revenue Act of 1936 in the computation of the tax imposed by that Act on undistributed profits has the burden of showing compliance with the exact terms of the Section. P. 106.

2. The obligation of the taxpayer’s contract in each of these cases, to pay a specified portion of the earnings of the taxable year upon indebtedness was only that payment should be made on or before a certain date subsequent to the close of the taxable year, and a credit in computing the tax on undistributed profits was not allowable under § 26(c)(2) of the Revenue Act of 1936, since the contract did not require the specified portion of earnings "to be paid within the taxable year" or "to be irrevocably set aside within the taxable year" within the meaning of the Section. P. 107.

3. That a taxpayer with such a contract might be constrained by prudent business judgment or by the possibility of fiduciary liability to refrain from using the portion of earnings involved or actually to set it aside is immaterial. Nor is it material that anticipatory payment were in fact made within the taxable year. P. 107.

4. Section 43 of the Revenue Act of 1936 is inapplicable here, since the question is not whether the taxpayers made payment, either on a cash or on an accrual basis, within the taxable year, but whether their contracts required them to pay or to "irrevocably set aside" within the taxable year. P. 108.

5. That the interpretation of a tax deduction statute in accordance with its plain meaning produces harsh results is a matter for Congress, and not the courts. P. 110.

6. The legislative history of § 26(c)(2) does not support the contention that the Section embraces the contracts involved here. P. 110.

124 F.2d 360, 397, reversed.

Certiorari, 316 U.S. 651, to review the affirmance of decisions of the Board of Tax Appeals (No. 41, 41 B.T.A. 1273) redetermining tax deficiencies.