North American Oil Consolidated v. Burnet

286 U.S. 417 (1932)

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Nature of the Case

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Facts

D held property owned by the U.S. A suit was instituted to oust D from the property. A receiver was appointed to manage the property and to retain all income until the suit was decided or settled. D got the judgment on the suit in 1917, and the income that was earned from the property in 1916 was given to it; that was $171,979.22. The government kept up the appeals process and eventually in 1922 the laws suit was settled in D's favor. D put the income into an amended return for 1916, which was filed in 1918. The IRS was auditing D's books in 1917 and based on that suit eventually in 1927 decided to increase the amounts due in 1917 by the monies paid to D by the receiver. The board held that the profits were taxable in 1916 based on cash basis accounting and the appeals court held they were taxable in 1917 regardless of whether D's books were cash or accrual. The Supreme Court granted certiorari.