Source: http://supreme.nolo.com/us/394/678/case.html
Timestamp: 2019-09-15 10:11:42
Document Index: 75117757

Matched Legal Cases: ['§ 1341', '§ 613', '§ 165', '§ 162', '§ 1341', '§ 1341', '§ 1341', '§ 1341', '§ 1341']

UNITED STATES V. SKELLY OIL CO., 394 U. S. 678 - Volume 394 - 1969 - Full Text - US Supreme Court Center - USSC Cases - Nolo
US Supreme Court Center > Volume 394 > UNITED STATES V. SKELLY OIL CO., 394 U. S. 678 (1969) > Full Text
Held: Under § 1341 of the Internal Revenue Code of 1954, the deduction allowable in the year of repayment must be reduced by the percentage depletion allowance granted respondent in the years of receipt as a result of the inclusion of the later-refunded items in respondent's "gross income from the property" in those years, since Congress did not intend to give taxpayers, and the Code should not be interpreted
During its tax year ending December 31, 1958, respondent refunded $505,536.54 to two of its customers for overcharges during the six preceding years. Respondent, an Oklahoma producer of natural gas, had set its prices during the earlier years in accordance with a minimum price order of the Oklahoma Corporation Commission. After that order was vacated as a result of a decision of this Court, Michigan Wisconsin Pipe Line Co. v. Corporation Comm'n of Oklahoma, 355 U. S. 425 (1958), respondent found it necessary to settle a number of claims filed by its customers; the repayments in question represent settlements of two of those claims. Since respondent had claimed an unrestricted right to its sales receipts during the years 1952 through 1957, it had included the $505,536.54 in its gross income in those years. The amount was also included in respondent's "gross income from the property" as defined in § 613 of the Internal Revenue Code of 1954, the section which allows taxpayers to deduct a fixed percentage of certain receipts to compensate for the depletion of natural resources from which they derive income. Allowable percentage depletion for receipts from oil and gas wells is fixed at 27 1/2% of the "gross income from the property." Since respondent
Section 1341 of the 1954 Code was enacted to alleviate some of the inequities which Congress felt existed in this area. [Footnote 1] See H.R.Rep. No. 1337, 83d Cong., 2d Sess.,
There is some dispute between the parties about whether the refunds in question are deductible as losses under § 165 of the 1954 Code or as business expenses under § 162. [Footnote 3] Although, in some situations, the distinction may have relevance, cf. Equitable Life Ins. Co. of
Nevertheless, the annual accounting concept does not require us to close our eyes to what happened in prior years. For instance, it is well settled that the prior year may be examined to determine whether the repayment gives rise to a regular loss or a capital loss. Arrowsmith
This result does no violence to the annual accounting system. Here, as in Arrowsmith, the earlier returns are not being reopened. And no attempt is being made to require the tax savings from the deduction to equal the
From any natural reading of § 1341, it is apparent that Congress believed the "deduction" in § 1341(a)(2) would be in the amount of the "item" described in § 1341(a)(1). If that understanding is not manifest from the face of the statute and the legislative history, [Footnote 3/3] it is the unavoidable inference from a study of the pre-1954 law which
In prior decisions disallowing what truly were "double deductions," the Court has relied on evident statutory indications, not just its own view of the equities, that Congress intended to preclude the second deduction. In those cases, the taxpayers sought to benefit twice from the same statutory deduction. [Footnote 3/5] In this case, by contrast,
It is clear that the Court has wrought a major transformation of the deduction which has heretofore been allowed and which Congress recognized in § 1341(a)(4). That deduction is permitted because, in the words of § 1341, the item "was included in gross income for a prior taxable year" (emphasis added), not because it was included in taxable income. It is no answer to say that the "annual accounting concept does not require us to close our eyes to what happened in prior years."
S.Rep. No. 1622, supra, n. 2, at 451. See also H.R.Rep. No. 1337, 83d Cong., 2d Sess., A294 (1954).
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