Historical tax case | Commissioner c. Glenshaw Glass Co. – Income Tax


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Commissioner c. Glenshaw Glass Co., 348 United States 426 | March 28, 1955 | Chief Justice Warren | Case No. 199

Short summary:

The case before the Supreme Court involves two separate cases, consolidated for oral argument before the Court of Appeals for the Third Circuit and heard en banc: Commissioner v. Glenshaw Glass Co. and Commissioner v. William Goldman Theaters, Inc. The Court of Appeals for the Third Circuit issued a single opinion, affirming separate Tax Court rulings in favor of the Taxpayers.

Glenshaw Glass Co.: The Glenshaw Glass Company (Glenshaw) was engaged in a protracted dispute with Hartford-Empire Company (Hartford), which manufactures equipment used by Glenshaw in its glass bottle and container manufacturing business. Glenshaw, in addition to other claims, sought exemplary damages for fraud and treble damages for injury to its business due to Hartford’s violation of federal antitrust laws. In December 1947, the parties settled all outstanding litigation – Hartford paid Glenshaw approximately $800,000, of which $324,529.94 was payment of punitive damages for fraud and antitrust violations. Glenshaw did not report this portion of the settlement as gross income for the corresponding tax year. The commissioner cited a deficiency worth the full amount of the settlement, less legal fees, against Glenshaw.

William Goldman Theaters, Inc.: William Goldman Theaters, Inc. (Goldman), which operated movie theaters, sued Loew’s, Inc., alleging a violation of federal antitrust laws and claiming treble damages. After determining that a breach had occurred, it was determined that Goldman suffered lost profits equal to $125,000 and was entitled to treble damages worth $375,000. Goldman reported $125,000 as gross income but did not report the remaining $250,000 as gross income, saying the latter part was punitive damages and therefore not taxable under IRC § 22(a) (1939).

The Supreme Court granted the motion for certiorari of the Commissioner of Internal Revenue (Commissioner) because of the frequency with which related issues arise and the different treatment by lower courts of Supreme Court decisions related to the subject.

Key issue:

Should money received as exemplary damages for fraud or as a punitive two-thirds portion of an antitrust treble recovery be reported by a taxpayer as gross income under IRC § 22 ( a) (1939)?

Main operation:

Yes, money received as exemplary damages for fraud and as a punitive two-thirds portion of an antitrust treble recovery must be reported by the recipient taxpayer as gross income under IRC § 22 (a) (1939).

Main points of law:

  • The Court has repeatedly recognized that the language used by Congress in IRC § 22(a) (1939) – “gains or profits and income from whatever source” – was intended to exercise the full extent of its taxing power.
    SeeHelvering versus Clifford309 U.S. 331, 334 (1940); Helvering c. Midland Mutual Life Ins. Co.300 US 216, 223 (1937); Douglas v. Willcuts296 US 1, 9 (1935); Irwin vs. Gavit268 US 161, 166 (1925).
    • The Court gave a liberal interpretation to this broad formulation in recognition of Congress’s intention to tax all gains except those specifically exempt. Commissioner c. Jacobsen336 US 28, 49 (1949); Helvering v Stockholms Enskilda Bank293 US 84, 87-91 (1934).

  • The qualification by the Court of gross income as
    Eisener v. Macomber as “gain from capital, labor or both combined” was not intended to be a benchmark, but was context specific, and the context is distinct from that of the present case. 252 US 189 (1920).

  • The disputed recoveries led to undeniable increases in wealth, were clearly realized and were entirely under the control of the taxpayers – insofar as the disputed recoveries compensate for damages actually suffered, they are taxable.

  • Re-enactment of IRC § 22(a) (1939), without any amendments, following the decision of the Board of Tax Appeals that punitive damages were not taxable in Highland Farms Corp. vs. Commissioneris at best an unreliable clue – especially without any evidence that Congress had the
    Highland Farms Corp. decision before it at the time the decision to reinstate IRC § 22(a) (1939) was made. 42 BTA 1314 (1940).

  • The simplification of the IRC’s 1954 definition of gross income was not intended to affect its broad scope.

  • In the process of statutory interpretation, the starting point is always the plain meaning of the statute. Here, the ordinary meaning of IRC § 22(a) (1939) indicates the intention of Congress to enforce the taxing power over all constitutionally taxable revenue – this includes the recoveries at issue, for to conclude otherwise would be in direct contradiction with the statute. clear language.


This case emphasizes the breadth of Congress’s taxing powers and reiterates some of the various forms of revenue within the jurisdiction of Congress. In addition, the case touches on the many instances in which the Court has liberally construed Congress’s taxing powers, reiterating the need for explicit exemptions within the IRC to support claims that specific forms of income is tax exempt.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.



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