CitationTaft v. Bowers, 278 U.S. 470, 49 S. Ct. 199, 73 L. Ed. 460, 1929 U.S. LEXIS 17, 1 U.S. Tax Cas. (CCH) P368, 7 A.F.T.R. (P-H) 8852, 1929-1 C.B. 226, 64 A.L.R. 362, 1929 P.H. P408 (U.S. Feb. 18, 1929)
Brief Fact Summary. Petitioner was given shares of stock by her father. When she sold the stock she did not include as income the difference between the cost to her donor father and the price she received.
Synopsis of Rule of Law. A recipient of capital assets accepts the position of the donor when receiving property subject to gain.
Petitioner, Elizabeth Taft, was given shares of stock of Nash Motors Company by her father in 1921 and 1922. She sold them in 1923 for more than their market value when the gift was made. The I.R.S. demanded income tax on the difference between the cost to the donor and the price received by Petitioner. The District Court held for Petitioner, and the Court of Appeals reversed and held for the I.R.S.
Issue. Should Petitioner be taxed on the gain based on the value when acquired by the donee?
Held. Justice McReynolds issued the opinion for the Supreme Court of the United States in affirming the Court of Appeals and holding that Petitioner should be taxed on the gain based on the value of the stock when acquired by the donor.
Discussion. Points of Law - for Law School Success
The Amendment confers no power upon Congress to define and tax as income without apportionment something which theretofore could not have been properly regarded as income. View Full Point of Law
The Supreme Court noted that Petitioner took the gift knowing the law and she benefited from the increase in value. Further, when the stock was sold she did not receive only gain in value, but it included the original amount as paid by her donor father.