Commissioner v. Glenshaw Glass Co.
348 U.S. 426 (1955)

  • Glenshaw won an antitrust lawsuit and received punitive damages. Separately, Goldman Theaters won a different antitrust lawsuit and also received punitive damages.
    • In neither case was the money reported as gross income.
  • The IRS sued to collect taxes on the income.
    • The IRS argued that damage awards should be considered gross income.
    • Glenshaw and Goldman argued that the definition of gross income in 26 U.S.C. 22(a) (now 61(a)) didn't explicitly state that damage awards were gross income, so therefore they couldn't be included.
      • The US Supreme Court had previously ruled that "income is the return to labor, capital, or both combined," and Glenshaw argued that there was no labor or capital involved in winning an antitrust lawsuit. (in Eisner v. Macomber (252 U.S. 189 (1920)).
  • The US Tax Court found for Glenshaw and Goldman. The IRS appealed.
  • The Appellate Court affirmed in both cases. The IRS appealed.
  • The US Supreme Court reversed and found that the damage awards were gross income.
    • The US Supreme Court looked to the 16th Amendment and found there was no constitutional bar to collecting taxes on damage awards.
    • The Court looked to the plain language of 22(a), and found that Congress intended to tax all gains except those specifically exempted.
      • 22(a) didn't explicitly state that damage awards were taxable, but it also didn't say that they weren't.
      • The definition of gross income in 22(a) included a clause that said, "...or gains or profits and income derived from any source whatever." The Court interpreted that to mean that Congress wanted to use the "full measure of its taxing power" and tax everything it possibly could.
      • The idea that everything is income unless otherwise indicated is a reversal of Eisner.