Dean v. Commissioner
187 F.2d 1019 (3d Cir. 1951)

  • Dean and his wife owned a corporation. When the corporation was having some financial trouble, the Deans transferred ownership of their house to the corporation.
    • They continued to live in the house.
  • The IRS found that the fair rental value of the house should be included in Dean's gross income.
    • Basically, the IRS was saying that the corporation was letting Dean live there for free, and so the rent Dean wasn't paying was like getting income from the corporation.
  • The Tax Court found for the IRS. Dean appealed.
  • The Appellate Court affirmed.
    • The Appellate Court found that the house was legally the property of the corporation. So when the corporation let Dean live there rent free, that constituted a gain for Dean, and should be considered gross income.
      • The fact that Dean owned the corporation was immaterial.
  • Contrast this case to Helvering v. Independent Life Ins. Co. (292 U.S. 371 (1934)).
    • In Independent, the corporation was using the building they owned for their own office, and they did not have to pay taxes on what they would have earned had they rented out the building to someone else.