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
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
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.