Brief Fact Summary. Wood was president of the American Woolen Company. The company adopted a resolution wherein they would pay the tax obligations of Wood and other officers.
Synopsis of Rule of Law. The discharge of a taxpayer’s obligation by a third party is equivalent to direct receipt by the taxpayer.
Issue. Were the taxes paid by the company additional income of Wood?
Held. Chief Justice Taft issued the opinion for the Supreme Court of the United States affirming the lower court and holding that the taxes paid were income to Wood.
Concurrence. A separate opinion of Justice McReynolds is omitted from the text.
Discussion. The Supreme Court notes that Wood and other employees received a direct benefit when their tax obligation was discharged by the company. Wood received a benefit in exchange for his services to the company. This was clearly a taxable gain.